A A business organizationbusiness organization is an is an establishment formed to carry on establishment formed to carry on

commercial enterprise. commercial enterprise.

Today in ClassToday in Class

Take out your foldable.Take out your foldable.Look over your study guide for unit 2 test – Look over your study guide for unit 2 test –

10/22/1510/22/15Also, make sure you have a “Types of Also, make sure you have a “Types of

Businesses Graphic Organizer”Businesses Graphic Organizer”Today – turn in foldable & Notes on Today – turn in foldable & Notes on

FranchiseFranchise

1. Sole proprietorships1. Sole proprietorships2. Partnerships2. Partnerships3. Corporations3. Corporations4. Franchise4. Franchise

Types of Business Organizations

Sole ProprietorshipsSole Proprietorships(Business owned by one (Business owned by one

person.)person.)

Sole ProprietorshipsSole Proprietorships(Business owned by one (Business owned by one

person.)person.)

Oldest and most common type of business Oldest and most common type of business organizationorganization

Advantages of Sole Advantages of Sole ProprietorshipsProprietorships

profits stay profits stay w/ ownerw/ owner pride of pride of ownershipownership complete complete controlcontrol

Easy to startEasy to start little little government government regulationregulation lower taxeslower taxes

Disadvantages of Sole Disadvantages of Sole ProprietorshipsProprietorships

Unlimited liabilitylimited lifedifficult to raise moneyrisk of loss not sharedSole proprietorships have limited Sole proprietorships have limited

access to resources, such as physical access to resources, such as physical capital.capital.

Human capital can also be limited, Human capital can also be limited, because no one knows everything.because no one knows everything.

PartnershipsPartnershipsA business owned by two or more people.A business owned by two or more people.

PartnershipsPartnershipsA business owned by two or more people.A business owned by two or more people.

Examples: Lawyers, accountants, Examples: Lawyers, accountants,

Advantages of PartnershipsAdvantages of PartnershipsEasy to startEasy to startlittle government little government

regulationregulationnot difficult to raise fundsnot difficult to raise fundscombination of skillscombination of skills

Disadvantages of Disadvantages of PartnershipsPartnerships

Unlimited liabilityUnlimited liabilityprofits sharedprofits sharedlimited lifelimited lifedisagreementsdisagreements

Types of PartnershipsTypes of PartnershipsPartnerships fall into three categories:Partnerships fall into three categories: General PartnershipGeneral Partnership, ,

where partners share equally in both where partners share equally in both responsibility and liability.responsibility and liability.

Limited PartnershipLimited Partnership where only one partner is required to be a general where only one partner is required to be a general

partner, or to have unlimited personal liability for partner, or to have unlimited personal liability for the firm. the firm.

Limited Liability PartnershipLimited Liability Partnership A newer type of partnership where all partners are A newer type of partnership where all partners are

limited partners.limited partners.

CorporationsCorporations

A A corporationcorporation is a legal entity, or being, is a legal entity, or being, owned by individual stockholders. Treated as owned by individual stockholders. Treated as an individual by governmentan individual by government

To start a corporation, you must file for a To start a corporation, you must file for a state license, known as a state license, known as a certificate ofcertificate of incorporation.incorporation.

Corporations sell shares of stock (ownership) Corporations sell shares of stock (ownership) to raise money for the business.to raise money for the business.

Advantages of a corporationAdvantages of a corporation

Easy to raise Easy to raise moneymoneylimited liabilitylimited liabilityspecialized specialized managementmanagementunlimited lifeunlimited liferisks are sharedrisks are shared

Disadvantages of IncorporationDisadvantages of Incorporation

Difficult to startDifficult to startlimited activitieslimited activitiesless direct controlless direct controlgovernment regulatedgovernment regulateddouble taxationdouble taxation

A business franchise is a semi-independent business that pays fees to a parent company in return for the

exclusive right to sell a certain product or service in a given area.

Business FranchisesBusiness Franchises

Franchisers develop Franchisers develop products and products and business systems, business systems, then local franchise then local franchise owners help to owners help to produce and sell produce and sell those products. those products.

Franchises allow Franchises allow owners a degree of owners a degree of control, as well as control, as well as support from the support from the parent company.parent company.

Advantages and Disadvantages Advantages and Disadvantages of Business Franchisesof Business Franchises

Advantages of Advantages of Business FranchisesBusiness FranchisesManagement training and Management training and

supportsupportStandardized qualityStandardized quality

National advertising National advertising programsprograms

Financial assistanceFinancial assistanceCentralized buying powerCentralized buying power

Disadvantages of Disadvantages of Business FranchisesBusiness FranchisesHigh franchising fees and High franchising fees and

royaltiesroyaltiesStrict operating standardsStrict operating standardsPurchasing restrictionsPurchasing restrictionsLimited product lineLimited product line

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A cooperative is a business organization owned and operated by a group of individuals for their shared benefit.

CooperativesCooperatives

Consumer/Service CooperativesConsumer/Service Cooperatives Retail outlets owned and operated by consumers Retail outlets owned and operated by consumers

are called are called consumer cooperativesconsumer cooperatives, or purchasing , or purchasing cooperatives. Consumer cooperatives sell their cooperatives. Consumer cooperatives sell their goods to their members at reduced prices.goods to their members at reduced prices.

Nonprofit OrganizationsNonprofit Organizations

Trade AssociationsTrade AssociationsNonprofit organizations that promote the Nonprofit organizations that promote the interests of particular industries are called interests of particular industries are called trade associationstrade associations..

Labor UnionsLabor UnionsA A labor unionlabor union is an organized group of is an organized group of workers whose aim is to improve working workers whose aim is to improve working conditions, hours, wages, and fringe conditions, hours, wages, and fringe benefits. benefits.

Institutions that function like business organizations, but do not operate for profits are nonprofit organizations. Nonprofit organizations

are exempt from federal income taxes.