Think-Write-Pair-Share

1. What businesses would you like to see open in Stockton?

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U2, S1-BusinessL.O.: Understand Entrepreneurship and mergers. Compare and contrast business organizations. E.Q.: How does each type of business address the challenges of starting and running a business?

•Entrepreneur: Ambitious leader who combines land, labor, and, capital to create and market new goods or services.

•Someone must be willing to take the risk of starting a business. •My Def.: [Leave space to fill in your own definition] •Examples:[Leave space to fill in examples]

Entrepreneurship !!

Think-Write-Pair-Share2.If you started your own business what would it be?!3.What are some of the 4 Factors of production you would need.!

At least 1 example for each

LandLabor

Capital Entrepreneur

FORMS OF BUSINESS ORGANIZATIONS

Economics-Biba S. Kavass 2011

1. Sole Proprietorship !

2. Partnership !

3.Corporation

•Sole-Proprietorship: a business owned by a single individual. !

•The most common form of business in the U.S. •[Leave room to write advantages/disadvantages (or paste if you completed the notes in class)]

Forms of Business !!

Think-Write-Pair-Share

4. What do you think you would like about running your own business?!5.What do you think you wouldn’t like?

Sole Proprietorship - Advantages

Economics-Biba S. Kavass 2011

● Easiest form of business to start – only need license and pay fees.!

● Management simple – only you have to make decisions.!

● Owner does not have to share profits.!● Business is exempt from any tax on business income

– only tax on income owner receives from business.!● Easy to get out of business.!● Pride of ownership and being one’s own boss.

Sole Proprietorship - Disadvantages

Economics-Biba S. Kavass 2011

● Owner of business has unlimited liability.!

● Difficulty of raising financial capital.!

● Size and efficiency – limited by capital.!

● Limited managerial experience.!

● Difficulty in attracting qualified employees.!

● Limited life – once owner passes, business folds.

Forms of Business cont’dPartnership: Business jointly owned by two or more persons that share responsibility for operations and all profits or losses.!General Partnership – all partners are responsible for management and financial obligations.!Limited Partnership – at least one partner is not active in daily operations and has limited responsibility for debts of business.

Partnerships- Advantages

Economics-Biba S. Kavass 2011

● Ease of startup – just need partnership agreement!

● Ease of management – “two heads better than one”!

● Only pay personal income tax from profits – no

business income tax!

● Can attract financial capital easier

Partnerships- Disadvantages

Economics-Biba S. Kavass 2011

● In General Partnership, each partner responsible for acts of other partners.!

!● Limited life – when a partner leaves/dies,

partnership must be dissolved.!!● Potential for conflict between partners

Forms of Business cont’dCorporation: A legal entity, or ‘being’, that is owned by individual stockholders.

Stockholder/Shareholder: Someone who owns stock in a company.Stock: Part ownership in a corporation.

▪Two Types:▪Privately Held Corporations: Few people

own stock in the company.▪Publicly Owned Corporations: Many

shareholders buy and sell stock on the open market.

Corporation - Advantages

Economics-Biba S. Kavass 2011

● Ease of raising financial capital.!

● Limited liability for owners!

● Unlimited life – business remains even if owners

leave!

● Ease of transferring ownership – just sell your stock

Corporation - Disadvantages

Economics-Biba S. Kavass 2011

● Double taxation of corporate profits – taxed first as corporate profit – taxed second as personal income to individuals!

● Difficulty and expense of getting a corporate charter!● Shareholders have little voice in how business is run!● Subject to more government regulations than other

forms of business

Think-Write-Pair-Share

6. Which form of business is the following?:!Justin, Austin, and Mattaio have been close friends since high school, and even went to college together. All three boys graduated last year; Justin with a degree in Computer Science, Austin with a degree in Graphic Design, and Mattaio with a degree in Business Administration. All three are “computer geeks” and have worked part-time through high school and college fixing computer problems. Each has approximately $50,000 in savings for this business venture. They have been talking about starting a computer company (JAM Computer Solutions) in their local town to help businesses and individuals with computer problems or those who need help developing and designing web sites. In doing research, Justin found that there are only two other computer companies in their town of 100,000 people, and neither one will do both web design and computer hardware/software troubleshooting.

Think-Write-Pair-Share

7. Which form of business is the following?:!Marlin Hatfield, who is married and 27, just completed his fifth year as a journeyman carpenter with John Casey Homebuilders, a small homebuilder 25 miles from his hometown. Marlin has just received an inheritance of $100,000 from his favorite aunt. During the past five years, Marlin has been able to purchase many of the tools and equipment that he needs to be a good finish carpenter. He has not been satisfied working for John the past couple of years and has talked with his wife about starting his own business (M and K Fine Carpentry). Marlin’s wife, Katherine, agrees that in order to be happy, Marlin may want to open his own business. She fully supports Marlin. Katherine graduated from the local university with a degree in accounting and works for a local accounting firm.

Think-Write-Pair-Share

8. Which form of business is the following?:!Demitri and Roland have decided to combine their talents and open a competitive Cheer and Dance business. Demitri’s expertise is the business side. He has a degree in Business Administration with a minor in Entrepreneurship; while Roland has a degree in Sports Management and has been coaching the local high school cheerleading team, while his wife has been coaching the school’s dance team. The problem is that Roland does not have as much capital to invest. In fact, they are having a little trouble figuring out how they will be able to get the startup capital for the business. Some of their friends/relatives might be willing to invest in the firm. There are no other competitive Cheer and Dance companies in the area. They have found a building to lease at $4,000 per month and expect that utilities and water will cost approximately $350 per month. Liability insurance has been estimated to be $1,000 per month, due to possible injuries. Demitri, Roland and Roland’s wife will do all the coaching and will also do all the paper work.

Think-Write-Pair-Share

9. Which form of business is the following?:!Craig and Carol knew that they wanted more out of life. Craig works as an inspector for the city health department, which involves inspecting restaurants and food service establishments to see whether they are operating according to local laws. Carol worked as an insurance agent for the first 10 years of their marriage and is a stay-at-home mom. Their home is paid for and their oldest daughter received scholarships to attend their local state university. Their son Charles is a senior in high school. Neither Craig nor Carol has much experience in owning or operating a small business, yet this is what they want to do when their son graduates from high school. They have been frugal and have saved over $200,000 for this venture. Craig will not be quitting his job for a while. This will leave Carol with the responsibility of running the business.

Forms of Business cont’dFranchise: A semi-independent business that pays fees to a parent company.

Advantages of Franchises:Management: Franchiser will provide training and experience.Standardized Quality

Example: A Big Mac in Stockton is the same as a Big Mac in Sacramento.

AdvertisingBuying Power: Buying in bulk helps franchises save money.

Forms of Business cont’dDisadvantages of Franchises:

High fees: Franchises pay a share of their earnings to the parent company.Strict Standards: Must follow the rules of the parent company.Limited Product Line: Can only offer approved products.

•Merger: Two or more companies join together into one company. !

•Reasons: •Growth: smaller companies join together to form a larger company. • Decrease Competition •Move into new geographic or product areas.

Mergers !!

Horizontal Merger

Economics-Biba S. Kavass 2011

Combine 2 or more firms that produce the same kind of product.

Delta Airlines

Northwest Airlines Delta

Airlines

Mergers cont’d!

Vertical Merger

Economics-Biba S. Kavass 2011

Brings together firms involved in different stages of manufacturing or marketing – to protect against loss of suppliers.

Lumber Yard

Baseball Bat Company

Rapid Trucking

Mergers cont’d!

Conglomerate

Economics-Biba S. Kavass 2011

Firm that has at least 4 businesses, each making unrelated products and none responsible for a majority of its sales – main reason is diversification.

Mergers cont’d!

Multinational Corporation

Economics-Biba S. Kavass 2011

Corporation that has manufacturing or service operations in a number of different countries.

WorkforceMore than 285,000 team members worldwide

Operating Facilities!Express: 1,057 stations; 10 air express hubs!Ground: 32 ground hubs; over 500 pickup/delivery terminals!Freight: Approximately 470 service centers!Office:  Nearly 2,000 locations!!Air Operations684 aircraft; more than 375 airports served worldwide

● An organization that works in a businesslike way to promote the collective interests of its members rather than to seek financial gain.!

● Uses volunteers to perform useful services with minimal expense!

● Includes schools, churches, hospitals, welfare groups, aid agencies, etc.!

● Important to our economic system because many times fill a gap that is not covered by businesses or the government.

Non-Profit!Organizations