CHAPTER 8
Businesses
8.1 Entrepreneurs
8.2 Sole Proprietorships and Partnerships
8.3 Corporations and Other Organizations
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CONTEMPORARY ECONOMICS: LESSON 8.1
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Consider
CHAPTER 8
Businesses
 Why do some people want to call themselves “boss”?
 Why start a business if most new businesses don’t last
five years?
 What does your summer lawn-mowing operation have in
common with General Motors?
 What do Corp. or Inc. in a company’s name tell you about
how the owners treat debt?
 How could it be possible that most U.S. businesses have
no paid employees?
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Objectives
LESSON 8.1
Entrepreneurs
 Understand the role of the entrepreneur
in a market economy.
 Differentiate entrepreneurs from people
who perform a limited entrepreneurial
role.
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Key Terms
LESSON 8.1
Entrepreneurs
 financial capital
 innovation
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Role of Entrepreneurs
Profit-seeker
Risk-taker
Visionary
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Entrepreneurs and
Creative Change
Introduce new products
Improve quality of existing products
Introduce new production methods
Introduce new ways of doing business
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Financing the Business
Financial capital is the money needed
to start or expand the business.
Sources of financing
Banks
Venture capitalists
Savings
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Profit Attracts Competitors
Other businesses will enter the market
and try to duplicate the success of the
original entrepreneur
The pursuit of profit can lead to a chain
of events that creates new and better
products, higher quality, and lower prices
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Who Isn’t an Entrepreneur?
Invention, innovation, and entrepreneurs
Managers and entrepreneurs
Stockholders and entrepreneurs
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LESSON 8.2
Objectives
Sole Proprietorships
and Partnerships
 Describe the advantages and
disadvantages of sole proprietorships.
 Describe the advantages and
disadvantages of partnerships.
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LESSON 8.2
Key Terms
Sole Proprietorships
and Partnerships
 sole proprietorship
 liability
 partnership
 general partnership
 limited partnership
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Sole Proprietorship
Sole proprietorship—simplest form of
business organization; a firm that is
owned and managed by one person, but
sometimes hires workers.
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Who Is a Sole Proprietor?
About three quarters of all businesses in
the United States are owned by sole
proprietors.
Nearly all sole proprietorships are small.
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Distribution of Sole
Proprietorships Based on
Annual Sales
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Distribution of Sole
Proprietorships by Industry
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Advantages of
Sole Proprietorships
Easy to start
Few government regulations
Complete control
Owner keeps all profit
Lower taxes
Pride of ownership
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Disadvantages of
Sole Proprietorships
Unlimited personal liability
Difficulty raising financial capital
Limited life
Difficulty finding and keeping good
workers
Unlimited responsibility
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Partnerships
A partnership involves two or more
individuals who agree to contribute
resources to the business in return for a
share of the profit.
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Types of Partnerships
General partnership—partners share
both in the responsibility for running the
business and in any liability from its
operation
Limited partnership—at least one
partner is required to be a general
partner
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Advantages
of Partnerships
Easy to start
Few government regulations
Shared decision making and increased
specialization
Greater ability to raise financial capital
More able to attract and retain workers
Lower taxes
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Disadvantages
of Partnerships
Unlimited personal liability
Limited life of the business
Partners may disagree
Profits must be shared
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LESSON 8.3
Objectives
Corporations and
Other Organizations
 Describe how a corporation is established.
 Understand why the corporate form is favored
by large businesses.
 Recognize other types of organizations
businesspeople use to accomplish their goals.
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LESSON 8.3
Key Terms
Corporations and
Other Organizations




corporation
articles of incorporation
private corporation
publicly traded
corporation
 S corporation
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 limited liability
company (LLC)
 limited liability
partnership (LLP)
 cooperative
 not-for-profit
organizations
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Incorporating
A corporation is a legal entity with an
existence that is distinct from the people
who organize it, own it, and run it.
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Comparing
Corporations
with Sole
Proprietorships
and Partnerships
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Articles of Incorporation
Articles of incorporation are a written
application to a state seeking permission
to form a corporation
A charter offers the legal authorization to
organize a business as a corporation
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Types of Corporations
Private corporation
Publicly traded corporation
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Advantages
of Incorporation
Easier to raise financial capital
Limited liability
Unlimited life
Specialized management
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Disadvantages
of Incorporation
Difficult and costly to start
More regulated
Owners have less control
Double taxation
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Other Organizations
Hybrid businesses
Cooperatives
Not-for-profit organizations
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Hybrid Businesses
S corporation combines the limited liability
protection of the corporate form with the single
taxation feature of a partnership
Limited liability company (LLC) combines
the limited feature of the corporation with the
single-tax provisions of a partnership
Limited liability partnership (LLP) has the
advantages of an LLC and is more easily
converted from an existing partnership
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Cooperatives
A cooperative is a group of people who
pool their resources to buy and sell more
efficiently than they could independently.
Consumer cooperative—a retail business
owned and operated by some or all of its
customers in order to reduce costs
Producer cooperative—producers join
forces to buy supplies and equipment and to
market their output
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Not-for-Profit Organizations
Not-for-profit organizations engage in
charitable, educational, humanitarian,
cultural, professional, and other activities,
often with a social purpose.
Revenues typically include some
combination of voluntary contributions
and service charges.
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