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Business Organizations

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Business Organizations ... Disadvantages Unlimited personal liability ... and liability A limited partnership is one in which only one partner is a ... – PowerPoint PPT presentation

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Title: Business Organizations


1
Business Organizations
  • Chapter 8

2
  • Standard 14
  • Students will understand that Entrepreneurs are
    people who take the risks of organizing
    productive resources to make goods and services.
    Profit is an important incentive that leads
    entrepreneurs to accept the risks of business

3
FOUR TYPES OF MARKET STRUCTURESHOMEWORK
4
Business Organizations
  • A business organization is an establishment
    formed to carry on a commercial enterprise.
  • In other words, a business organization is a
    company, or firm.

5
Sole Proprietorship
  • A sole proprietorship is a business owned and
    managed by a single individual
  • Owner is the company

6
Sole Proprietorship
  • Advantages
  • Ease of start up
  • Relatively few regulations
  • Sole receiver of profit
  • Full control
  • Easy to discontinue
  • Disadvantages
  • Unlimited personal liability
  • Limited access to resources
  • Lack of LONGEVITY

7
Partnerships - 3 TYPES
  • A partnership is a business organization owned by
    two or more persons who agree on a specific
    division of responsibilities and profits
  • 1. General partnership is one in which the
    members share equally in both responsibility and
    liability
  • 2. Limited partnership is one in which only one
    partner is a general partner (the others
    contribute only money)

8
3. LLPS
  • LIMITED LIABILITY PARTNERSHIPS
  • LLPS ALL PARTNERS HAVE LIMITED PERSONAL
    LIABILITY
  • ATTORNEYS, ACCOUNTANTS, DENTISTS, PHYSICIANS CAN
    REGISTER AS LLPS

9
Partnerships
  • Advantages
  • Ease of start up
  • Shared decision making and specialization
  • Larger pool of capital
  • Taxation Individual pays income tax but business
    does not
  • Disadvantages
  • Unlimited liability for at least 1 General
    Partner
  • Potential for conflict

10
Corporation
  • A corporation is any business or firm that is a
    legal entity which is publicly owned and traded
    through stock.
  • A stock is a certificate of ownership in a
    corporation

11
Corporation
  • Advantages
  • -stockholders
  • -limited liability
  • -corporation
  • -many resources
  • Easy to raise capital
  • -longevity
  • Disadvantages
  • -stockholders
  • -loss of control by owners
  • -double taxation (dividends/capital gains)
  • -corporation
  • -difficulty and expense of start-up
  • -more Gov. regulations

12
  • Horizontal mergers merger between two companies
    selling similar or compatible products larger
    market share
  • Vertical mergers two companies that bought and
    sold products merge - efficiency
  • Conglomerates when a corporation becomes large
    by purchasing other corporations. Think
    breakfast cereals

13
TYPES OF TRADED CORPS.
  • PRIVATELY / CLOSELY HELD SELL STOCK TO SELECT
    FEW (FAMILY MEMBERS, EMPLOYEES TO MOTIVATE
    SALESONLY BOUGHT AND SOLD THROUGH THE COMPANY
    THINK WAFFLE HOUSE
  • PUBLICLY HELD CAN BUY OR SELL STOCK THROUGH A
    BROKER ON THE OPEN MARKET (STOCK EXCHANGE, EX
    NYSE, AMEX, NASDAQ)

14
Organization Description Advantages Disadvantages Examples
SOLE PROPRIETORSHIP OWNED MANAGED BY SINGLE INDIVIDUAL, USUALLY SMALLER COS, REQUIRES LICENSE, REGISTER NAME, STATE PERMIT, 75 OWNER GETS ALL PROFIT, EASY TO START UP OR STOP, FEW GOV. REGS, FULL CONTROL UNLIMITED PERSONAL LIABILITY (OWNER LEGALLY BOUND TO PAY BUS. DEBTS), IF FAILS, OWNER MAY HAVE TO SELL PERSONAL PROPERTY TO COVER DEBTS, LIMITED RESOURCES, LACK OF LONGEVITY LAWN CARE, NAIL SALON, HAIR SALON,
PARTNERSHIP OWNED BY 2 OR MORE PERSONS DIVIDE RESPONSES/ PROFITS GENERAL MOST COMMON, BOTH PARTNERS SHARE EQUAL RESPONSIBILITY/LIABILITY LIMITED ONLY 1 PARTNER (GEN.)HAS UNLIMITED PERSONAL LIABILITY BUT CONTROLS BUS, OTHER PARTNERS (LIMITED)ARE INVESTORS BUT DONT ACTIVELY MANAGE BUS. LLPS ALL PARTNERS HAVE LIMITED PERSONAL LIABILITY 7 EASY TO START, FEW GOV. REGS., SHARED DECISION MAKING, SPECIALIZATION, MORE CAPITAL, PARTNERS PAY INCOME TAX BUT BUS. ITSELF IS NOT TAXED ON INCOME POTENTIAL FOR CONFLICT, UNLESS LLP AT LEAST 1 PARTNER HAS UNLIMITED LIABILITY, DOCTORS, LAWYERS, SMALL RETAIL STORES, FARMS, CONSTRUCTION COS, FAMILY BUSINESS ATTORNEYS, ACCOUNTANTS, DENTISTS, PHYSICIANS CAN REGISTER AS LLPS
CORP LEGAL ENTITY (BEING) OWNED BY INDIV. STOCKHOLDERS 20 STOCKHOLDERS HAVE LIMITED LIABILITY DEBTS, TRANSFERABLE OWNERSHIP, EASY CAPITAL, LONGEVITY DOUBLE TAXATION -TAXES ON INCOME/DIVIDENDS/CAPITAL GAINS),EXPENSIVE/DIFFICULT TO START UP(CHARTER), MORE GOV. REGULATIONS (REPORTS), OWNERS MAY LOSE CONTROL TO MANAGERS, MICROSOFT, IBM, COCA COLA
15
FOUR TYPES OF MARKET STRUCTURES FOUR TYPES OF MARKET STRUCTURES FOUR TYPES OF MARKET STRUCTURES FOUR TYPES OF MARKET STRUCTURES FOUR TYPES OF MARKET STRUCTURES
MOST COMPETITIVE LEAST COMPETITIVE
PERFECT COMPETITION MONOPOLISTIC COMPETITION OLIGOPOLY MONOPOLY
HOW EASY IS IT FOR SELLERS TO ENTER MARKET? Sellers enter exit EASILY lower start up costs FEW BARRIERS TO ENTRY DIFFICULT TO ENTER, higher start up costs VERY DIFFICULT TO ENTER MARKET, high start up costs
WHAT TYPE OF PRODUCTS ARE SOLD? IDENTICAL PRODUCTS SIMILAR BUT NOT IDENTICAL MUST DIFFERENTIATE BUILD BRAND LOYALTY SIMILAR OR IDENTICAL ONE MAJOR PRODUCT, NO VARIETY or SUBSTITUTES
HOW MUCH CONTROL DO SELLERS HAVE OVER PRICES? NONE results in LOWER PRICES FOR BUYERS who are WELL INFORMED, SUPPLY DEMAND DETERMINE PRICE SOME/ SLIGHT CONTROL BUT COMPETITION DRIVES PRICES WHICH VARY DUE TO DIFFERENTIATION (STORE, DESIGN, QUALITY) MORE CONTROL AS ONE LEADER SETS PRICE, INTERDEP-ENDENCE, PRICE LEADERSHIP PRICE WARS, COLLUSION TOTAL CONTROL BY SELLER MEANS HIGHER PRICES FOR BUYER
HOW MANY SELLERS ARE COMPETING IN THE MARKET? LARGE OF SELLERS BUYERS MANY BUYERS AND SELLERS FEW LARGE SELLERS DOMINATE MARKET 3-4 LGST PRODUCE 70-80 ONE SINGLE SELLER
GIVE EXAMPLES agricultural (peaches, apples) JEANS (GAP VS ABERCROMBIE), SOFT DRINKS, COMPUTER GAMES CELL PHONES, AIRLINES, AUTOS, CEREAL PUBLIC UTILITIES (WATER, SEWER)
16
Review terms
  • Know these termsa) Equilibrium b)
    Horizontal/vertical mergerc) Resource allocation
    d) Price floor/ceilinge) Price system f)
    Collusiong) Cartel h) Differentiationi) Trusts
    j) Sherman Anti-trust Actk) Types of legal
    monopoliesl) Types of market structuresm) Types
    of business organizationsn) Taft/Roosevelt o)
    Rent Controlp) Black market q) Search costs
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