chapter 8.1 notes business organization. sole proprietorship a business run by one person smallest...
TRANSCRIPT
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Chapter 8.1 notes
Business Organization
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Sole Proprietorship
a business run by one person smallest type of business organization most numerous but least profitable
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Advantages of a Sole Proprietorshipease of start-upease of managementowner gets all the profitstaxes paid only on the owner’s personal
incomepsychological satisfaction of owning
one’s business/ having controlease of closing the business
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Disadvantages of a sole proprietorship owner has unlimited liability – owner is
personally and fully responsible for all losses and debts of the business
Limited funds owner may not be able to hire enough
personnel or keep inventory limited managerial experience hard to attract qualified employees business has limited life – firm legally
ceases to exist when the owner dies or sells the business.
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Example
Mary Kay Ash – Mary Kay Inc.Was passed up for a promotion,
decided to start own business to reward women
By 2005 was a global company with $2 billion in sales
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Assignment
Pg. 231 #’s 2-5 Write the question!
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Chapter 8.2 notes
Partnerships
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Partnerships business jointly owned by two or
more persons. Types: general partnership – all partners
are responsible for the mgmt and financial obligations
limited partnership – at least one partner is not active in the daily running of the business.
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Cont’d
Limited liability partnership (LLP) – all partners are limited and not responsible for debts or liabilities of other partners
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Advantages of a Partnership
ease of start-upease of mgmtlack of special taxeseasier to raise capital through bank
loans or new partnerlarger size aids efficient operationseasier to attract talented employees
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Disadvantages
Unlimited liability - partners are responsible for the acts of every partner except in a limited partnership
limited life - if a partner leaves or dies it must be dissolved and reorganized
potential for conflict
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Examples
Law firmsAccounting firmsDoctors officesInteresting fact: most partnerships bring
in less than $25,000 a year
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8.3/8.4 notes
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Corporations
A business owned by stock-holders Stockholders/shareholders – investors
who become owners of the firm If profitable, may pay dividends
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Advantages of a corporation
ease of raising capital professionals usually run firm owners have limited liability Unlimited life of corp. Easy to transfer ownership (buying/selling
stock)
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Disadvantages of a corporation
Start-up cost/effort Little control of business double taxation subject to gov’t regulation
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Business Consolidation
Horizontal merger – produce same product Ex: two banks; Reebok and Adidas
Vertical merger – different steps of production Ex: car co and tire co;
Conglomerate – 4 or more merge that are unrelated
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Franchise
Business that licenses rights to sell it’s products to individual owners
Examples: McDonald’s, KFC/Taco Bell, Subway
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Advantages
Provides good training and productsPays for advertising
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Disadvantages
Can be expensiveShare profitsHave to follow rules
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Non-profit Organization
Aims to benefit societyExamples: schools, churches, Salvation
Army, Red Cross
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Cooperatives
Operated for benefit of owners who are also customers
3 Types: Consumer, Producer, Service
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Word bank for Quiz on Ch. 8!!!!Sole proprietorshipPartnershipCorporationStockCooperativeConglomerateFranchiseUnlimited liabililtyUnlimited lifeMultinational BondNon-profit organizationHorizontal mergerVertical mergerLimited liability