Download Business Organizations - Greater Atlanta Christian Schools

Business
Organizations
Sole Proprietorship
 A business that is owned and managed
by one individual who receives all the
profits and bears all the losses.
 Most common form of business
organization BUT the smallest in size.
Sole Proprietorship
Benefits
 Easy to start and go out
of business
 Control over profits and
business operations
 Pride of ownership
 Personal freedom
 Lower taxes – no
corporate taxes
 Easy to manage/flexible
Costs
 Unlimited liability – owner
responsible for all losses
and debts
 Difficulty in raising
financial capital – banks
don’t like to lend to small
business
 Management knowledge
may be limited
 Size and efficiency
 Difficult to attract qualified
employees
 Limited Life
Partnership
 A business that is owned and managed
by two or more individuals who receive
all the profits and bear all the losses.
 General
All partners are responsible
 Limited
One partner is NOT active in daily
business but gave money to start the
business
Partnership
Benefits
 Easier to raise financial
capital
 Partners may combine
managerial skills
 Personal satisfaction
 Lower taxes – no
corporate income tax
 Ease of establishment
 Ease of efficiency
 Easier to attract qualified
workers
Costs
 Unlimited liability
 Shared profits
 Possible conflicts
between partners
 Possible instability
after death of a
partner
 Limited life
Corporation
 A business that is owned and operated
by stockholders and has rights and
responsibilities as if it were a person
 90% of all businesses
 Organized and recognized by law
 Can buy, sell, enter into contracts, and
be sued
 Harder to start – need permission from
the government
Corporation
Benefits
 Limited liabilitycorporation NOT owners
are responsible for debt
 Greater financial capital –
stocks, bonds
 Unlimited life
 Specialized management
 Ease of transferring
ownership - stock
Costs
 Increased taxation
 Difficulty in starting
 May be larger, more
bureaucratic than
other forms of
business
 Increased
governmental control
Mergers
 Merger – a combination of two or more
businesses to form a single firm
Reasons for merging
 Efficiency
 Standardize procedures; volume purchases;
effective use of advertising
 Eliminate rivals
 Royal Caribbean Cruises acquired Celebrity Cruise
Lines in 1997 and doubled in size
 * may be blocked by FTC – Staples not allowed to
acquire Office Depot
 Lose corporate identity
 ValuJet merged with AirWays to form Airtran
Holdings Corp. after 1996 Everglades crash killing
110 people
Types of Mergers
 Horizontal


2 or more firms produce the same kind of product
join forces
Ex: merger of two banks (Wachovia and First
Union)
 Vertical


Firms involved in different steps of
manufacturing/marketing come together
Ex: merger of a steel company and a car
manufacturer
Conglomerates
 Firm that has at least 4 businesses, each
making unrelated products, none of which is
responsible for a majority of sales
 Form out of corporations that become so large
through mergers and acquisitions
 Main reason: Diversification – “don’t put all
your eggs in one basket” philosophy
 Ex: KFC fast-food restaurant; fruit and veggie
processor Del Monte and Heublin – wine
producer and distributor
Multinationals
 Corporation that has manufacturing or
service operations in a number of
different countries
 Tax Status: Likely to pay taxes in each
country it has operations in
Multinationals Cont.
 Strengths
Help spread new technology worldwide
 Generate new jobs in areas where jobs are
needed
 Produce tax revenues for host country
 Weaknesses
 b/c large and powerful, influence political life
in host nation
 May exploit the economy of host nation by
paying workers low wages, by exporting
scarce natural resources, or by adversely
interfering with the development of local
business
 Takes away jobs at home

Non-Profit Organization
 Work to make the best use of scarce
resources.
 Non profit organizations do not seek
financial gain for their members
Cooperatives
 Voluntary association of people formed
to carry on some kind of economic
activity that will benefit its members



Consumer
Service
Producer
Labor Unions
 Organization formed to work for its
members’ interests in various
employment matters
 Negotiate with management for better
pay, working conditions, vacation, etc.
Professional Associations
 Group of people in a specialized
occupation that works to improve the
working conditions, skill levels, and
public perceptions of the profession
 Teachers/Professors
 Lawyers
Business Associations
 Organize to promote their collective
interest
 Chamber of Commerce – (most cities
and towns have) promotes the welfare
of its members and the community
 Better Business Bureau – help to protect
the consumer, provides information on
companies
Government
 Direct Role – produces and distributes
goods and services to people
 National defense
 Police, fire, schools, courts, etc.
 Indirect Role – acts as an umpire to
make sure the market economy operates
by the rules
 Public utilities – no competition = gov.
regulation
 Financial aid
 Social Security