3.1 Business Organizations

Economic Institutions

• Persons and Organizations that use or represent the Factors of Production• Business Organization• Profit seeking enterprise that serves as

the main link between scarce resources and consumer satisfactions• Compete with each other

Sole Proprietorship

•What is it?•How big are they?•Are they profitable?

Sole Proprietorship - Formation

• Is it difficult to start one?•What do I do?•Yeah, but I bet there’s lots of red tape and fees and stuff, right? Right?

Sole Proprietorship – Ask Yourself

• What is the goal of my business?• What am I going to sell?• Where is my headquarters going to be?• Where am I going to get my products?• What type of consumers am I going to

target?

Sole Proprietorship - Strengths

• Easy to start!• Relatively easy to manage!• You don’t have to share!• You don’t have to pay business income

taxes!• It feels good to be your own boss!• When you want to quit, you can just quit!

Sole Proprietorship - Weaknesses

• UNLIMITED LIABILITY!!!!• Tough to get that money!• Size• How do I run this thing again?•Why doesn’t anyone want to work for

me?

Partnerships

•What is it?•Are they profitable?•Are there different types?

Partnership –Formation

•Seems like it’d be easy to start… I think?•There’s probably some legal mumbo jumbo involved I bet.

Partnership- Ask Yourself

•Who is involved with your company?• How is the deal going to be drawn up?• How will decision be made?•What is your business going to sell?•Who is your business going to target?

Partnership – Strengths

• Similar to Sole Proprietorships• Yeah but what are the differences? I’m

sure there are some right?

Partnership - Weaknesses

•Who’s in charge here?• Limited Partnership = Limited

Liability

• Ugh! I can’t stand that guy!

Corporations

• I bet there is a bunch of those!•What exactly is it?

Corporations – Formation

• Seems like a suit and tie kind of thing• Incorporate•What’s that stock thing all about?

Corporations – Structure

•Who owns the company?•Can I? That’s a pretty big

commitment…•Where does stock play in?

Corporations – Ask Yourself

• CEO – Mr. Elder• Stock Holders – Each of you has

purchased one share of stock guess who has the other 50 percent of shares!• Elect a Board of Directors (3 people)• Now what happens?

Corporations – Strengths

• Super Easy to Raise Capital• We want winners!• LIMITED LIABILITY• We’ll be around forever, and ever, and

ever, and ever…

Corporations- Weaknesses

• Hope you have boat loads of cash!• Can you hear me now?• Ugh taxes!• That government is always steppin’ on

my toes!