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Business OrganizationsBusiness OrganizationsSECTION 1: Sole ProprietorshipsSECTION 2: PartnershipsSECTION 3: CorporationsSECTION 4: Other Forms of Organizations

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Objectives:Objectives:What are the advantages of establishing a

sole proprietorship?What are the disadvantages of establishing a

sole proprietorship?

Sole ProprietorshipsSole ProprietorshipsSECTION 1

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Advantages to a sole proprietorship:Advantages to a sole proprietorship:easy to start up full control of the business by the owner exclusive rights to profits by the owner

Sole ProprietorshipsSole ProprietorshipsSECTION 1

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Disadvantages to a sole Disadvantages to a sole proprietorship:proprietorship:unlimited liability by the owner sole responsibility of the owner to operate

the business limited growth potential for the business lack of longevity of the firm

Sole ProprietorshipsSole ProprietorshipsSECTION 1

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Objectives:Objectives:How do general partnerships and limited

partnerships differ?What are the advantages of organizing a

partnership?What are the disadvantages of organizing a

partnership?

PartnershipsPartnershipsSECTION 2

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Differences between general Differences between general partnerships and limited partnerships:partnerships and limited partnerships:General partnerships:

Partners have equal decision-making authority. Each partner has unlimited liability.

Limited partnerships: Partners join as investors. Partners have in inactive role in decision making. Partners have limited liability.

PartnershipsPartnershipsSECTION 2

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Advantages of a partnership:Advantages of a partnership:easy to formallow specialization lets partners share decision making shares business losses between partners

PartnershipsPartnershipsSECTION 2

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Disadvantages of a partnership:Disadvantages of a partnership:unlimited liability by partnerspotential for conflict among partners lack of business longevity

PartnershipsPartnershipsSECTION 2

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Objectives:Objectives:How is a corporation formed, and what are

the characteristics of a corporation?How is a corporation organized?How do stocks and bonds differ?What are the advantages and disadvantages

of organizing a corporation?

CorporationsCorporationsSECTION 3

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To form a corporation:To form a corporation:Submit an application for the articles of

incorporation and obtain a corporate charter.

CorporationsCorporationsSECTION 3

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Information required by the articles Information required by the articles of incorporation:of incorporation: the name and purpose of the proposed corporation the address of the corporate headquarters the method of fundraising to be used by the

corporation the amount of money the corporation expects to raise the names and addresses of the major corporate

officers the intended life of the corporation

CorporationsCorporationsSECTION 3

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Characteristics of a corporation:Characteristics of a corporation: legally distinct from its owners treated as an individual—can own property,

hire workers, pay taxes, sue and be sued, and make and sell products

CorporationsCorporationsSECTION 3

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Corporate structure:Corporate structure: sometimes owned by shareholders headed by a board of directors to make decisions run by corporate officers—CEO, president, vice

presidents, etc.—who carry out decisions made by the board

made up of department heads and other employees to perform day-to-day tasks

CorporationsCorporationsSECTION 3

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Differences between stocks and bonds:Differences between stocks and bonds:Stocks:

represent ownership of the firms issued as shares

Bonds: used to raise money issued as a certificate in exchange for money

borrowed from an investor

CorporationsCorporationsSECTION 3

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Advantages of organizing a Advantages of organizing a corporation: corporation: limited liability separation of ownership from managementease of raising capital longevity

CorporationsCorporationsSECTION 3

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Disadvantages of organizing a Disadvantages of organizing a corporation: corporation: costly and difficult to obtain a corporate

charternumber of government regulations to follow slow decision-making process

CorporationsCorporationsSECTION 3

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Objectives:Objectives:How do vertical combinations differ from

horizontal and conglomerate combinations?Why might a business owner decide to open a

franchise?What is the customer’s role in a cooperative?How does a nonprofit organization differ from

other types of business organizations?

Other Forms of OrganizationsOther Forms of OrganizationsSECTION 4

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Difference between vertical combinations and Difference between vertical combinations and horizontal and conglomerate combinations:horizontal and conglomerate combinations:Vertical combinations—two or more

companies involved in different production phases of the same good or service

Horizontal combinations—two or more companies produce the same good or service

Conglomerate combinations—two or more companies produce unrelated products

Other Forms of OrganizationsOther Forms of OrganizationsSECTION 4

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Benefits of opening a franchise to a Benefits of opening a franchise to a business owner:business owner:A business owner can reduce the overall costs

associated with starting a business because: employee training is often provided by parent

company advertising is sometimes paid for by parent

company it can use the parent company’s name

Other Forms of OrganizationsOther Forms of OrganizationsSECTION 4

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The customer’s role in a cooperative:The customer’s role in a cooperative:owns a share in the business shares the expense of running the business

Other Forms of OrganizationsOther Forms of OrganizationsSECTION 4

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Differences between a nonprofit Differences between a nonprofit organization and other types of organization and other types of business organizations:business organizations:not focused on financial gain income not taxed by the government

Other Forms of OrganizationsOther Forms of OrganizationsSECTION 4

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1.1. Why is a sole proprietorship the easiest type of business to establish?

2.2. How does forming a partnership solve many of the problems that are associated with sole proprietorships?

3.3. Compare stocks and corporate bonds. How do corporations raise money through stocks and bonds?

4.4. Legally, how is a corporation treated as an individual?

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5.5. Explain how vertical combinations differ from horizontal combinations. Describe how Andrew Carnegie created a vertical combination.

6.6. How do nonprofit organizations differ from other forms of business organizations?

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