Download Forms of Business Organization

Types of Businesses
Interactive Whiteboard: Four Corners
•
In your group, name two advantages and two
disadvantages of your type of business
organization
• How easy is it to start?
• How easy is it to make decisions?
• How easy is it to raise money?
• Who gets to keep the money?
• Is there anything unique about it?
•
Use pages 212-221
Types of Business Ownership
•
Sole Proprietorship
•
Partnership
•
Corporation
• Conglomerate
•
Franchises
Sole Proprietorships
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Sole proprietorships are the smallest form of
business, and they are owned and operated by
one person.
•
Sole proprietorships are easy to start because
they have almost no requirements except for
occasional business licenses and fees.
•
Advantages include: easy to start, relatively
simple to manage, keep all the profits, no
separate business income taxes, satisfaction
of owning a business, and easy to end.
•
Disadvantages include: unlimited liability,
difficult to raise financial capital,
inefficiency if enough personnel are not hired
or enough inventory stocked, possibly limited
managerial experience, difficulty attracting
qualified employees, and limited life.
Partnerships
•
Partnerships are owned by two or more people.
•
Partnerships may be general or limited.
•
Partnerships are easy to start; start-up
usually consists of drawing up papers to
specify the arrangement between the partners.
•
Advantages of partnerships include: easy to
start, easy to manage, lack of special taxes,
financial capital attracted more easily than
proprietorships, and operations are more
efficient due to slightly larger size.
•
Disadvantages of general partnerships include:
each partner is fully responsible for the acts
of all other partners, limited partners may
lose their initial investment if the business
fails, limited life, and the potential for
conflict between partners.
Corporations
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Corporations are recognized as separate legal
entities with all the rights of an individual.
•
Corporations file for permission to form from
the national or state government, which grants
a charter specifying the number of shares of
stock that may be sold.
•
Stock may be common or preferred.
•
Advantages of corporations include: ease of
raising financial capital, limited liability
for owners, directors can hire professional
managers to run the company, unlimited life,
and ease of transfer of ownership.
•
Disadvantages of corporations include: double
taxation, difficulty and expense of getting a
charter, shareholders (owners) have little say
in how the business is run, and more
government regulation.
Funding Corporations
•
Corporations are split into shares of stock
•
What exactly are stocks?
•
Stock – the capital raised by a corporation
through selling shares of ownership
•
What is diversification?
• Diversification - the practice of spreading
your investments around so that your
exposure to any one type of asset is limited
Franchises
•
In a franchise, the franchisee rents or leases
the name, business profile, and way of doing
business from the owner, or franchisor.
•
Advantages to the franchisee include national
advertising, instant access to a successful
product line, and professional advice when
needed.
•
Advantages to the franchisor include the
ability to expand the business without excess
financial risk or liabilities, the income
brought in by the initial franchise payment
and monthly royalty fees, and a franchisee who
is highly motivated to make the franchise
work.
Conglomerate
•
A conglomerate is a combination of two or more
corporations engaged in entirely different
businesses that fall under one corporate
group, usually involving a parent company and
many subsidiaries
Conglomerate
•
GE
• Appliances
• Power and water
• Oil and gas
• Energy management
• Aviation
• Healthcare
• Transportation
• Capital
Conglomerate
•
Walt Disney Corporation
• Walt Disney Studios
• TV
• ABC
• ESPN
• A&E
• ABC Family
• Publishing
• Merchandising
• Music
• Theater
• 14 theme parks