Bell RingerWhich of the following lists includes all

of the U.S. market structures?

A. Monopoly, Oligopoly, Imperfect Competition, Perfect Competition

B. Perfect Competition, Monopolistic Competition, Monopoly, Oligopoly

C. Oligopoly, Monopolistic Competition, Monopoly, Economies of Scale

D. Economies of Scale, Natural Monopoly, Monopolistic Competition, Monopoly

Bell Ringer February 13th Think about all the different stores in Jackson. There are many types including restaurants, clothing stores, hobby stores, supply stores, general stores, and money saving stores.

Are all the stores in Jackson structured the same (owned/created the same way)?

If yes, how are they structured? If not, how do they differ?

Brainstorm two examples that demonstrate your above answers.

Bell Ringer February 13th

What is the term?

Clues: This term is on the word wall. This term has seven syllables. It is made of two words. This term is an establishment of

selling products to consumers. This term has multiple types within

it.

Business Organizations

Chapter 8

Sole Proprietorships

Section 1

Learning Objectives

Explain the characteristics of sole proprietorships.

Analyze the advantages of a sole proprietorship.

Analyze the disadvantages of a sole proprietorship.

Agree/Disagree - Write it down1. Sole proprietorships can only be owned by

one person.

2. Sole proprietorships make up only 15% of all businesses in the United States.

3. You have to get a business degree in order to start your own business.

4. Most sole proprietorships fail due to lack of freedom to do what the owner wants with the business.

Sole Proprietorship Business Organization – an

establishment formed to carry on commercial enterprise

Sole Proprietorship – a business owned and managed by a single individual 75% of ALL businesses 6% of all U.S. sales

Advantages of Sole Proprietorships Easy to Establish & Start-up (inexpensive)

Few Regulations Appropriate codes related to business

ex. health codes (food) Zoning laws may prohibit out-of-house businesses

Keep ALL profits Doesn’t have to share with stockholders or pay

special taxes Complete Control

Run it how they want to…no one else has a vote Easy to Discontinue

Disadvantages of Sole Proprietorships Unlimited Personal Liability

Liability – legal obligation to pay debts If the business fails, owner may have to sell

property to cover any debt and obligations Ex. If you take out a loan for a piece of needed

equipment, you still have to pay the loan back no matter what

Limited Access to Resources Everything comes out of you own pocket/savings May not have all the training to run every aspect

of business Ex. Really good at cutting grass, but not so good at

keep track of bills/taxes/loans/profit (paperwork in general)

Disadvantages of Sole Proprietorships Lack of Permanence

Cannot depend on someone else to maintain business Ex. If the owner dies, retires, looses interest, gets sick,

or moves – the business ceases to exist Short-term Employees

Employees are hard to keep because there is a lack of security and/or advancement

Lack of fringe benefits Fringe Benefits – payment other than wages or salary

Ex. Paid vacation, retirement payments, health insurance, etc.

Create a comparable chart.

Using your notes and a partner,

fill in this chart for each type of business that we discuss.

CAN BE USED ON YOUR TEST!

RecapProprietorships Partnerships Corporations Franchises

Characteristics

Advantages

Disadvantages

Notes

Proprietorships Partnerships Corporations Franchises

Characteristics

•One owner•75% of all U.S. Businesses

Advantages

•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue

Disadvantages

•Unlimited personal liability•Limited resources•Lack of permanence

Notes

•Owner is responsible for making all decisions

Bell Ringer February 14th

If you started your own business, would you do it by yourself or get a partner to help? Why?

What kind of business would you start? Why?

Agree/Disagree - Write it down1. Sole proprietorships can only be owned by

one person.

2. Sole proprietorships make up only 15% of all businesses in the United States.

3. You have to get a business degree in order to start your own business.

4. Most sole proprietorships fail due to lack of freedom to do what the owner wants with the business.

Agree/Disagree 1. Partnerships can have more than two people

in them.

2. There are multiple types of partnerships.

3. All partners share responsibilities equally no matter what.

4. Partnerships have to pay special taxes that other businesses don’t have to pay.

Partnership

Section 2

Learning Objectives

Compare & contrast the different types of partnerships

Analyze the advantages of partnerships

Analyze the disadvantages of partnerships

Partnership What is it?

Business organization owned by two or more persons who agree on a specific division of responsibilities and profits

Three Types General Partnership – Doctors, Accountants, Lawyers

Partners share equally in both responsibility & liability Limited Partnership

Only one partner is required to be a general partner One (or more) person(s) invests money while the other

runs it Limited Liability Partnership – Attorneys, Physicians,

Dentists All partners are limited partners (only invest)

Advantages of Partnerships Ease of Start-up

Articles of partnership legalize responsibilities & rights

Shared Decision Making & Specialization Split responsibilities, strengths, & skills

Larger Pool of Capital More physical & human capital (money & skills) More advantages to employees

Room for advancement (Lawyers can become partners eventually)

Taxation No special taxes on business, just taxation on income

(profits)

Disadvantages of Partnerships Unlimited Liability (excludes LLP)

General partners could lose everything One partner’s actions affect all partners

Limited partners only lose initial investment

Potential for Conflict Partnership agreements address technical & legal

aspects Partners must communicate openly & resolve

conflicts

Proprietorships Partnerships Corporations Franchise

Characteristics

•One owner•75% of all U.S. Businesses

Advantages

•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue

Disadvantages

•Unlimited personal liability•Limited resources•Lack of permanence

Notes

•Owner is responsible for making all decisions

Proprietorships Partnerships Corporations Franchise

Characteristics

•One owner•75% of all U.S. Businesses•6% of all U.S. sales

• 2 or more partners•General•Limited•Limited Liability

Advantages

•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue

•Easy to start-up•Shared decision making•Larger resource pool•Taxation

Disadvantages

•Unlimited personal liability•Limited resources•Lack of permanence

•Unlimited liability•Potential conflict

Notes

•Owner is responsible for making all decisions

•Pick partners carefully•Create articles of partnership

Recap

Assignment – Use same paper Complete #1-8 on page 193

Read Page 189 Answer #1-3

Closing Describe one advantage & disadvantage of a

partnership.

Corporations

Section 3

Corporations What is it?

Legal entity, or being, owned by individual stockholders Stock – certificate of ownership in a

corporation Dividends – portion of profits paid out to

stockholders

Entity Identity separate from that of its owners’

identities Regarded as an individual for legal

purposes Pays taxes, engages in business, makes

contracts, sues and gets sued

Corporations 20% of all U.S. Businesses Sell 90% of all U.S. products Generate 70% of all U.S. net income

earned

Corporations

TypesClosely Held Corporations (Private)

Stock is sold to few people (family members) which is rarely sold but passed on within families

Publicly Held CorporationsStock is sold on an open market to anyone

Corporation Structure

• Corporation owners

Stockholders

Advantages

Limited Liability for Owners (stockholders)Can only lose the amount of money invested – no more

Transferable OwnershipSell their stocks whenever they want to in order to get their investment back

Advantages

Ability to attract Capital Selling stocks raises money to buy

more capital Selling bonds

formal contract to repay borrowed money plus interest

Long Life Business doesn’t end when owners

die because it’s transferable

Disadvantages

Expensive & difficult to start Certificate of incorporation – need

legal counsel

Double Taxation Corporations pay taxes on their

income/profit Stockholders/owners pay taxes on

their income/profit

Disadvantages

Potential Loss of Control by Founders

More Regulations & Legal Requirements Annual meetings, Keep records of

everything, Quarterly & Annual Reports to Securities & Exchange Commission (SEC)

Mergers – More Efficient Corporations Horizontal Merger

Joining two or more businesses in the same market Could result in a monopoly Ex: Chrysler & Daimler Benz merged into DaimlerChrysler

Vertical Merger Joining two or more businesses in different stages of

producing the same good or service Ex: Iron Ore Manufacturing, Steel Mill, Ship Manufacturing join

into one company. Everything to make a ship is now in one firm.

Conglomerates Joining more than three businesses that make completely

different products or services Ex: Procter & Gamble – Downy, Cascade, Old Spice, Oral-B,

Puma, Iams, Tide, Pringles, Luvs, Pepto-Bismol, Puffs, Vicks, Gillette

Proprietorships Partnerships Corporations Franchise

Characteristics

•One owner•75% of all U.S. Businesses

• 2 or more partners•General•Limited•Limited Liability

Advantages

•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue

•Easy to start-up•Shared decision making•Larger resource pool•Taxation

Disadvantages

•Unlimited personal liability•Limited resources•Lack of permanence

•Unlimited liability•Potential conflict

Notes

•Owner is responsible for making all decisions

•Pick partners carefully•Create articles of partnership

Proprietorships Partnerships Corporations Franchise

Characteristics

•One owner•75% of all U.S. Businesses•6% of all U.S. sales

• 2 or more partners•General•Limited•Limited Liability

•Entity•Stockholders•Private or Public•20% businesses•Sell 90% products•70% net income earned

Advantages

•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue

•Easy to start-up•Shared decision making•Larger resource pool•Taxation

•Limited liability for owners•Transferable owners•Growth ability•Long life

Disadvantages

•Unlimited personal liability•Limited resources•Lack of permanence

•Unlimited liability•Potential conflict

•Expensive/difficult start-up•Double Taxation•Founder loses control•More regulations

Notes

•Owner is responsible for making all decisions

•Pick partners carefully•Create articles of partnership

•More potential for growth but loses personal touch

Recap

Bell Ringer

Name the three different ways to combine a corporation and

describe how they are different.

Please, use complete sentences.

Other Organizations

Section 4

Business Franchises What is it?

A semi-independent business that pays fees to a parent company (franchisers) in return for the exclusive right to sell a certain product or service in a given area.

Examples: Fast Food Chains – McDonald’s, Burger King, Sonic,

Wendy’s Restaurants – Chili’s, Olive Garden, Cheddar’s, TGIF’s Mall Stores – Kay Jeweler’s, Aeropostale, Sunglass Hut Gas Stations – BP, Shell, Love’s Truck Stop

Advantages of Franchises Built-in Reputation Management Training and Support

Allows inexperienced owners to be successful Standardized Quality

Follow certain rules/guidelines & provide certain products

National Advertising Program National campaigns paid by franchisers

Financial Assistance Some franchisers provide loans to start business

Centralized Buying Power Franchisers buy products in bulk and pass on savings

Disadvantages of Franchises Franchise Owner Sacrifices Some Freedom

Must follow franchiser’s guidelines High Franchising Fees & Royalties

Franchisers charge high fees for the right to use their name

Franchisers charge franchises for part of profits (royalties)

Strict Operating Standards Includes: hours of operation, dress codes,

operating procedures Purchasing Restrictions

Must buy products & supplies from the franchiser Limited Product Line

Only offer products approved by franchiser

Nonprofit Organizations Institution that functions much like a business

in order to benefit society, but does not operate for the purpose of generating profits

Operate with partial government support Exempt from income taxes Usually provide services rather than goods

Types Professional Organizations – NEA & American Medical

Association Business Associations – Better Business Bureau Trade Associations – American Marketing Association Labor Unions

Proprietorships

Partnerships Corporations Franchise

Characteristics

•One owner•75% of all U.S. Businesses

• 2 or more partners•General•Limited•Limited Liability

•Entity•Stockholders•Private or Public•20% businesses•Sell 90% products•70% net income earned

Advantages

•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue

•Easy to start-up•Shared decision making•Larger resource pool•Taxation

•Limited liability for owners•Transferable owners•Growth ability•Long life

Disadvantages

•Unlimited personal liability•Limited resources•Lack of permanence

•Unlimited liability•Potential conflict

•Expensive/difficult start-up•Double Taxation•Founder loses control•More regulations

Notes

•Owner is responsible for making all decisions

•Pick partners carefully•Create articles of partnership

•More potential for growth but loses personal touch

Proprietorships

Partnerships Corporations Franchise

Characteristics

•One owner•75% of all U.S. Businesses•6% of all U.S. sales

• 2 or more partners•General•Limited•Limited Liability

•Entity•Stockholders•Private or Public•20% businesses•Sell 90% products•70% net income earned

•Exclusive rights to sell a particular good/service•Semi-independent

Advantages

•Easy to start-up•Few regulations•Keep ALL profits•Complete control•Easy to discontinue

•Easy to start-up•Shared decision making•Larger resource pool•Taxation

•Limited liability for owners•Transferable owners•Growth ability•Long life

•Built-in Reputation•Management Training/Support•National Advertising Program•Financial Assistance•Centralized Buy Power

Disadvantages

•Unlimited personal liability•Limited resources•Lack of permanence

•Unlimited liability•Potential conflict

•Expensive/difficult start-up•Double Taxation•Founder loses control•More regulations

•Lack of Owner Freedom•High Franchising Fees•Strict Operating Standards•Purchasing Restrictions•Limited Product Line

Notes

•Owner is responsible for making all decisions

•Pick partners carefully•Create articles of partnership

•More potential for growth but loses personal touch

•Includes most food places, gas stations, mall stores, etc.

Recap

Bell Ringer

In a publicly held corporation

A. Stockholders rarely trade their stocks

B. A large number of stockholders can buy and sell stock

C. Stocks are not usually traded with the public

D. Family members are excluded from holding stock

Bell Ringer

If a limited partnership fails, who is personally liable for the debts?

A. Anyone who works for the partnership

B. All of the partners

C. Only the general partner

D. Only the limited partner