Sole

Proprietorship

TYPES OF BUSINESS
ORGANIZATION

Partnerships
(Limited/Gen)

Corporations

Non-profits

SOLE PROPRIETORSHIP- 72% OF

BUSINESSES

Advantages of sole
proprietorships
Ease of start up
Ease of Management
You keep all profits
You do not have to pay any

Economic Weakness of sole

proprietorship:
Unlimited Liability: you have total
responsibility for all debts and liabilities of
the company
Difficulty in raising financial capital

business taxes

Limited size and efficiency

Psychological advantages

Limited managerial experience

Ease of exit

Limited Life

STOP AND THINK

If you started your own business what would it be?
What are some of the 4 Factors of production you would need.
2 examples for each
Land

Labor

Capit
al

Entrepreneur

9% OF BUSINESSES

PARTNERSHIPS
Two major types of partnerships:
General Partnership: (most common type) all partners are
responsible for management and the financial responsibilities
of the partnership.
Limited Partnership: at least one partner is not active in the
day to day running of the business. They have limited liability.
Articles of Partnership: contract between partners spelling
out the rules of partnership.
Dividing profit
Dividing responsibility
Admitting new partners
Buying out partners

PARTNERSHIPS
Advantages of Partnerships:

Disadvantages of Partnerships

Ease of establishment

Unlimited liability

Ease of Management: each partner

Limited partner is only responsible

has different things to offer

for his initial investment. He has

No special business taxes

limited liability.

Easier to raise financial capital

Limited Life

Larger than sole proprietorship

Conflict between partners

Easier to attract qualified

workers

WHAT FITS BEST WITH EACH

BUSINESS??? TELL ME WHY!!!

CORPORATIONS- 20% OF BUSINESS

74%-PROFITS

CORPORATION- SET UP
Incorporate: to form a corporation.
Charter: a document granted by the state giving a
corporation the right to do business
Stock: shares of ownership in the corporation
Stockholders (shareholders): owners of stock.
Reasons to own stock:
Dividends: share of corporate profits paid to stockholders
Speculation: buy in hope that price of stock will increase.

STOCK

CORPORATION- OWNERSHIP
Common Stock is a basic share of ownership in a corporation
Have voting rights in the management of the company
In reality they turn over voting rights to someone else with a proxy: giving
someone else the right to vote your share of stock.
Preferred Stock:
Non voting shares of ownership
Guaranteed dividend
Liquidation benefit: If corporation goes out of business they are ahead of
common stockholders in getting back money.
Board of Directors: duty to direct the corporations business by setting
board policies and goals
Elected by common stockholders
Hires a professional management team to run day to day activities.
(CEO, CFO.)

CORPORATIONS
Advantages of a corporation:
Ease of raising financial capital
(main advantage)
Selling stock to investors
Selling bonds: a written
promise to repay a loan on a
specific date
Principal: the amount
borrowed
Interest: the price paid for the
use of anothers money
Borrowing money from banks.
Ability to hire
Limited liability
Unlimited life
Ease of transferring
ownership:. Buying and selling
stock is easy and is done millions of
times a day

Disadvantages of a
corporation:
Start up expenses are high.
Stockholders (owners) have a
limited
Profits are taxed
Corporations are subject to
more government regulations
than sole proprietors or partners

DARE TO COMPARE
Using the interwoven circles list the similarities and
differences between Sole Proprietorships, Partnerships, and
Corporations

NON-PROFITS: WE DONT LIKE

$$$ WE JUST WANT TO MAKE
YOU

WHO IS HERE TO HELP???

Community and Civic organizations
Cooperatives- REI
Consumer- Sams Club
Labor, Professional and Business Organizations
Labor Unions- organization of workers formed to represent its members interests in
varying employment matters. Collective bargaining
Professional Associations- a group of people in a specialized field that work to
improve their working conditions.
Business associations
Chamber of Commerce- promote economic growth of the community
Better Business Bureau- cops for businesses

MERGERS AND ACQUISITIONS

5 Reasons to merge- Make money faster, Increase
efficiency, Acquire new product lines, Catch up or eliminate
rivals, Lose a company identity.

Horizontal Merger- when two or more companies that

product the same kind of product join forces.
Vertical merger- when two or more firms that are at
different steps of manufacturing process join together.
Conglomerates- is a firm that has at least four businesses,
each making unrelated products.

BE A THINKER NOT A STINKER

With a neighbor develop 2 examples of each type of merger
Vertical
Horizontal
Conglomerate
Why would companies ever want to merge????

SUMMARY
With a partner:
Use two real organizations and design the following:
A vertical merger
A horizontal merger
Conglomerate