Download Chapter 3.1 notes - Effingham County Schools

Chapter 8.1 notes
Business Organization
Sole Proprietorship
 a business run by one person
 smallest type of business organization
 most numerous but least profitable
Advantages of a Sole Proprietorship
 ease of start-up
 ease of management
 owner gets all the profits
 taxes paid only on the owner’s personal
income
 psychological satisfaction of owning
one’s business/ having control
 ease of closing the business
Disadvantages of a sole proprietorship






owner has unlimited liability – owner is
personally and fully responsible for all
losses and debts of the business
Limited funds
owner may not be able to hire enough
personnel or keep inventory
limited managerial experience
hard to attract qualified employees
business has limited life – firm legally
ceases to exist when the owner dies or sells
the business.
Example
 Mary Kay Ash – Mary Kay Inc.
 Was passed up for a promotion,
decided to start own business to reward
women
 By 2005 was a global company with $2
billion in sales
Assignment
 Pg. 231 #’s 2-5
 Write the question!
Chapter 8.2 notes
Partnerships
Partnerships
 business jointly owned by two or
more persons.
 Types:
 general partnership – all partners
are responsible for the mgmt and
financial obligations
 limited partnership – at least one
partner is not active in the daily
running of the business.
Cont’d
 Limited liability partnership (LLP) –
all partners are limited and not
responsible for debts or liabilities of
other partners
Advantages of a Partnership
 ease of start-up
 ease of mgmt
 lack of special taxes
 easier to raise capital through bank
loans or new partner
 larger size aids efficient operations
 easier to attract talented employees
Disadvantages
 Unlimited liability - partners are
responsible for the acts of every
partner except in a limited
partnership
 limited life - if a partner leaves or dies
it must be dissolved and reorganized
 potential for conflict
Examples
 Law firms
 Accounting firms
 Doctors offices
 Interesting fact: most partnerships bring
in less than $25,000 a year
8.3/8.4 notes
Corporations



A business owned by stock-holders
Stockholders/shareholders – investors
who become owners of the firm
If profitable, may pay dividends
Advantages of a corporation
 ease of raising capital
 professionals usually run firm
 owners have limited liability
 Unlimited life of corp.
 Easy to transfer ownership (buying/selling
stock)
Disadvantages of a corporation
 Start-up cost/effort
 Little control of business
 double taxation
 subject to gov’t regulation
Business Consolidation
 Horizontal merger – produce same
product
Ex: two banks; Reebok and
Adidas
 Vertical merger – different steps of
production
Ex: car co and tire co;
 Conglomerate – 4 or more merge that
are unrelated
Franchise
 Business that licenses rights to sell it’s
products to individual owners
 Examples: McDonald’s, KFC/Taco Bell,
Subway
Advantages
 Provides good training and products
 Pays for advertising
Disadvantages
 Can be expensive
 Share profits
 Have to follow rules
Non-profit Organization
 Aims to benefit society
 Examples: schools, churches, Salvation
Army, Red Cross
Cooperatives
 Operated for benefit of owners who are
also customers
 3 Types: Consumer, Producer, Service
Word bank for Quiz on Ch. 8!!!!
Sole proprietorship
Partnership
Corporation
Stock
Cooperative
Conglomerate
Franchise
Unlimited liabililty
Unlimited life
Multinational
Bond
Non-profit organization
Horizontal merger
Vertical merger
Limited liability