Types of Business Organization

Sole
Proprietorship
Partnerships
TYPES OF BUSINESS (Limited/Gen)
ORGANIZATION
Corporations
Non-profits
SOLE PROPRIETORSHIP- 72% OF BUSINESSES
Advantages of sole Economic Weakness of sole
proprietorship:
proprietorships
Unlimited Liability: you have total

Ease of start up
responsibility for all debts and liabilities of the
Ease of Management
company
You keep all profits
Difficulty in raising financial capital
You do not have to pay any 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
Entrepreneur
Capital
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 has Limited partner is only responsible for
different things to offer his initial investment. He has limited
No special business taxes 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:  Disadvantages of a corporation:
Ease of raising financial capital

(main advantage)  Start up expenses are high.
 Selling stock to investors
 Stockholders (owners) have a
 Selling bonds: a written promise to
repay a loan on a specific date limited
 Principal: the amount borrowed
 Interest: the price paid for the use  Profits are taxed
of another’s money
 Borrowing money from banks.  Corporations are subject to more
Ability to hire
government regulations than sole
Limited liability
Unlimited life proprietors or partners
Ease of transferring ownership:.
Buying and selling stock is easy and is
done millions of times a day
DARE TO COMPARE
 Using the interwoven circles list the similarities and differences between
Sole Proprietorships, Partnerships, and Corporations
NON-PROFITS: WE DON’T LIKE $$$
WE JUST WANT TO MAKE YOU
WHO IS HERE TO HELP???
 Community and Civic organizations

 Cooperatives- REI
 Consumer- Sam’s Club
 Labor, Professional and Business Organizations

 Labor Unions- organization of workers formed to represent its member’s 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????
1 2 3 4 5
SUMMARY
 With a partner:
 Use two real organizations and design the following:
 A vertical merger
 A horizontal merger
 Conglomerate

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Sole

Unlimited Liability: you have total

taxes Limited size and efficiency

Psychological advantages Limited managerial experience

Ease of exit Limited Life

 If you started your own business what would it be?

Two major types of partnerships:

Articles of Partnership: contract between partners spelling out the rules

Advantages of Partnerships: Disadvantages of Partnerships

Easier to raise financial capital Limited Life

Larger than sole proprietorship Conflict between partners

Easier to attract qualified workers

 Incorporate: to form a corporation.

Reasons to own stock:

 Common Stock is a basic share of ownership in a corporation

Elected by common stockholders

Advantages of a corporation:  Disadvantages of a corporation:

Ease of raising financial capital

 Community and Civic organizations

 Labor, Professional and Business Organizations

 5 Reasons to merge- Make money faster, Increase efficiency, Acquire

 Conglomerates- is a firm that has at least four businesses, each

 With a neighbor develop 2 examples of each type of merger

 Why would companies ever want to merge????

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