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Transcript
Business Organizations Chapter 3 Types of Business Organization • Three ways modern businesses are organized • Proprietorship- A business owned and ran by an individual • Partnership- Unincorporated business owned by two or more people who share the profits and responsibility for debts • Corporation- Form of Business organization recognized by law as a separate legal entity • Major difference is the liability to the owners • Liability- responsibility for the all debts and losses of the business Proprietorship • Also known as a Sole Proprietorship • Advantages • • • • Easy to start Owner can rapidly respond to business needs Owner keeps profits, doesn’t have to share with anyone Business is exempt from income tax • Disadvantages • Owner has unlimited liability • Difficulty raising financial capital • Limited Life- Business ceases to exists when owner sells, quits or dies Partnership • General Partnership – All partners are responsible for the management and financial obligations of the business • Limited Partnership- At least one owner is not active in the running of the business. Limited partner has limited liability for the debts and obligations of the business Partnership (cont.) • Advantages• Ease of start-up • Easy to manage • Lack of taxes on the partnership • Easier to raise financial capital • More efficient to operate • Easier to attract employees (Talent) Partnership (cont.) • Disadvantages• Each partner is responsible for the acts of all the other partners • Limited partners responsibility is limited by their investment in their firm • Limited life- if the partner dies or leaves, the partnership needs to be dissolved • Have to work with others (Good and Bad) Corporations • Corporation- form of business organization recognized by law as a separate legal entity • Allows the Corporation to buy and sell property, enter legal agreements and to sue or be sued • Formed by filing documents with the federal and state government. • Formed when company receives a Charter Corporation (cont.) • Charter- government document that gives permission to create a corporation • States company’s name, address, purpose and other features • States the number of shares of stock that can be sold to investors Corporation (cont.) • Corporate structure• Types of stockCommon stock- voting stock 1 vote per share Preferred stock- Non voting stock, but receives dividends before common stock holders. Also get investment back before common shareholders. • Have many officers, usually to handle different areas of the corporation. Corporation (cont.) • Advantages• Limited liability for shareholders • Can hire professional managers • Unlimited Life• Easy to raise capital• They can sell more stock • Issue bonds Corporation (cont.) • Disadvantages• Have to keep detailed sales and expense records. • Double Taxation • More difficult to get a charter and to start up • Have a large disconnect between owners and managers • More government regulation Business Growth and Expansion “If your business isn’t growing, it is dying” - J.J. McClatchy Ways to Grow • Reinvestment- Putting money back into your business • Mergers- Combining two or more companies to make a single firm Reinvesting • Track expenses with Income statement • Estimate company’s net income • Track testable ways to grow your business Mergers • Horizontal merger- Combination of two or more firms producing the same product • Vertical Merger- combination of two firms involved in the different stages of the manufacturing or marketing Mergers (cont.) Mergers (cont.) • Can grow a business rapidly • Ability to control price of resources better • Improve efficiency Mergers (cont.) • Conglomerates- Firm with four or more businesses making unrelated products with no single business responsible for a majority of its sales • Multinational- Corporation producing and selling without regard to national boundaries and whose business activities are located in several different countries Non-Profit Organizations (NPO) • Non-Profit Organization- operates like a business but does not seek financial gain Types of N.P.Os • Community organizations- Churches, schools, hospitals, welfare groups, adoption agencies • Cooperative- meant to perform some economic benefit for its members. Can be consumer, service or producer driven. Types of N.P.Os • Labor unions- An organization of workers formed to represent its members interests in various employment matters • Participates in Collective bargaining- Negotiation between union and company representatives over pay, benefits, and other related job matters. Types of N.P.Os • Professional associations- NPO of professional or specialized workers seeking to improve working conditions, skill level and public perception of its profession. • Business associations- associations to promote and benefit it’s member businesses Types of N.P.Os • Government agencies- plays an NPO role in the economy • Direct role- USPS, FDIC all compete with private companies for services • Indirect- regulating and industry or granting money for benefits.
