SWBAT explain the differences between the business

organizations SWBAT compare the strengths

and weaknesses of the partnership

Organizations that represent the factors of production

A profit-seeking enterprise that serves as the main link between scare resources and consumer satisfactions. Ex. Farms,

drugstores, clothing stores, law firms, computer manufacturers

A business owned and run by one person

Most numerous Smallest in size Collectively have only

a fraction of the total sales of all businesses

Most profitable (1/4 of all business profits)

Easiest to start up Gov’t licenses Fees by gov’t

Lemonade stand, lawn-mowing business, restaurant, etc.

Home or from an office space

1. Ease of starting one 2. Ease in management 3. Enjoy profits without having to share

them with others Does not have to pay business taxes

(separate legal entity, only individual income taxes)

Psychological (“Own boss freedom”) Can leave the business if he owner

decides to, no legal or tax considerations

1. “Unlimited liability”- responsible for everything

2. Difficulty in raising financial capital- money to set up business

3. Size and Efficiency inventory

4. Limited Managerial Experience Ex. Great inventor, little business sense

5. Difficulty attracting highly qualified employees Fringe benefits, reputation

6. Limited Life

A business owned by 2 or more persons

7% of all business organizations in the US

Small fraction of total business sales and profits

GENERAL PARTNERSHIP= all partners are responsible for the management and financial obligations of the business

LIMITED PARTNERSHIP= at least one partner is not active in the daily running of the business (contribute financially)

1. Ease of establishment (costs minimal over several partnerships)

2. Ease of management 3. Lack of special taxes (only a special

schedule) 4. Attract financial capital more than

proprietorships 5. Larger size, more efficiency (law or

medicine) 6. Attract top talent (specialized services)

1. Each partner is fully responsible for the acts of all other partners (choose carefully) Limited partnership has limited liability- if

business fails, only lose the original investment

2. Limited life Agreement

3. Conflict b/w partners

A form of business organization recognized by law as a separate legal entity having all the rights of an individual

Can buy and sell property, enter into legal contract, sue and be sued

90% of business is done by corporations

Must file for permission from nat. gov’t Charter

Purpose Name, address Specifies number of stock, or ownership parts

of the firm Sold to investors known as stockholders or

shareholders

**If profitable, shareholders could receive a dividend- a check representing a portion of the earnings/profits

Investor becomes and owner an has certain ownership rights Depends on type of STOCK

COMMON STOCK- basic ownership- one vote for each share owned elect the BOARD OF DIRECTORS whose duty is to direct the corporation's business by setting broad policies and goals. The board also hires a professional management team to run the business on a daily basis

PREFERRED STOCK- non voting ownership of the corp. Get investment back before common stockholders- can’t elect BOD

1. Ease of raising financial capital Stocks Bonds- written promise to repay later (interest)

2. Hire best management 3. Provides limited liability for its owners

Bankruptcy- court-granted permission to not pay some or all of its debts. Investors only lose initial investment

4. Unlimited life 5. Ease of transferring ownership

1. Difficulty and expense of getting a charter

2. Shareholders have little say after voting the BOD

3. Separate legal entity- has to pay taxes just like private individuals. Detailed records of REVENUES- or all receipts

from sales, etc. Detailed records of expenses

4. More gov’t regulation Stock- SEC Take-overs

Work in a business like way to make best of scarce resources

DO NOT seek financial gain for members

Provides goods and services with other rewards: Improving educational

standards Caring for the sick Helping those in need

Legally incorporated to take advantaged of unlimited life feature

Do not issue stock, pay dividends, or pay income taxes

Often produce revenues and expenses, but they keep surpluses to further the work (Value of products hard to meaure)

Adoption agencies, youth clubs

Voluntary association of people formed to carry on some kind of econ activity that will benefit its members

3 classes

Buys bulk amounts Food and clothing

Offer members products for lower prices

Services Insurance, credit

(Credit union)

Helps members sell their products

Farmers Ocean-Spray

What kind of business would you open NOW? Why?