Micro Econ / Business Organizations
1. Business Organizations – this will tell how many owners there are in a
business or company. There are three types of business organizations. (1)
Sole Proprietorship (2) Partnership (3) Corporation. Each has several
advantages & disadvantages.
2. Sole Proprietorship – this would be any company or business that is owned
by ONE PERSON. In the United States 73% of all businesses are Sole
Proprietorships. So there are many of these one owner businesses.
However Sole Proprietorships only generated 5% of the money/ revenue in
the United States. They don’t make much of the money.
3. Advantages of a Sole Proprietorship ( one owner business) (1) Full Control –
do whatever you want (2) Keep all the Profit / money – do not have to
share it with anyone (3) Easy Start Up – it’s not difficult to start a one
owner business (4) Fast Decision Making – don’t have to ask anyone about
what to do. (5) Little Government Control (6) Lower Tax Rate
4. Disadvantages of a Sole Proprietorship (one owner business) (1) Unlimited
Liability – the one owner has to pay all the expenses /bills & do all the work
/take care of all the problems (2) Little Capital – not much money to work
with (3) Little Growth – the business will most likely never be big with only
one owner. (4) Little Longevity – the business will most likely have a limited
life span. When the one owner goes broke, retires, or dies that will most
likely be the end of the business.
5. Partnership – this would be when two or more people share ownership in a
business. In the United States PARTNERSHIPS make up 8% of all businesses.
Partnerships generated 8% of the money/ revenue made in the United
States.
6. Advantages of a Partnership – (two or more people sharing ownership) (1)
More Capital – more money to work with (2) More Growth – the business
can be bigger because it has more capital. (3) Limited Liability – have
partners who share in the expenses / bills & in the workload / problems. (4)
Easy Start Up (5) Lower Tax Rate (6) Less Government Control.
7. Disadvantages of a Partnership – (two or more people share ownership) (1)
Conflict – partners start fighting / arguing with each other. (2) Share Profits
– share money (3) Share Control – must talk with partners before making
decisions. (4) Little Longevity – the business will most likely end when the
partnership breaks up. (5) Unlimited Liability – partnerships could also have
unlimited liability if one partner is given more responsibility for running
everything. A Silent Partner is a person who only invests capital / money in
the business trying to make a profit. The Silent Partner does not try to make
many decisions or do much of the work in running the day to day
operations of the business.
8. Corporation – (is thought of as being a very large business with many
hundreds, thousands or even millions of people sharing ownership) the
owners of a Corporation are called Stockholders.
The word Stock means having part ownership in a Corporation.
Corporations make up 19% of all the businesses in the United States.
Corporations generated 87% of all the money/ revenue made in the United
States. They make by far the most money compared to the other business
organizations.
9. A group of people stockholders called The Board of Directors control of a
Corporation. The Board of Directors are elected to the board by the
stockholders. The stockholders get one vote for each share of stock that
they own. ( 10 shares = 10 votes / 100 shares = 100 votes / 1,000 shares =
1,000 votes ) The people who own the largest amount of the company’s
stock generally vote for themselves to be on the Board of Directors. When a
person dies the company’s stock is most often given to the person’s family.
But it can go to anyone that the deceased person wants to have it.
10.CEO of the Corporation – this is the person that The Board of Directors
chooses to run the day to day operations of the business. It could be a
member of the board or another person that is hired and paid wages to run
the company for the Board of Directors.
11.Advantages of a Corporation – (large business owned by stockholders) (1)
Lots of Capital / Money to work with. (2) Lots of Growth – the business
could become very large (3) Limited Liability – stockholders only risk the
amount of stock that they buy. (4) Longevity – corporations that do well
could be around for a very long time. (5) Easy way for stockholders to make
money ( Dividends) make money without having to do any of the work
“Silent Partner”
12.Disadvantages of a Corporation ( large business owned by stockholders) (1)
Very Little to No Control over the Corporation – The Board of Directors run
the corporation ( all the other stockholders are just trying to make a profit)
(2) Lots of Government Regulation (3) Difficult to Start Up (4) Very Slow
Decision Making – must have Board of Director meetings to make changes.
(5) Share Dividends / Profit with many people (6) Double Taxation – the
government collects taxes twice on the dividends / profits made by a
corporation. Government makes the company pay taxes on the dividends /
profits and then makes the stockholders pay taxes on the dividends /
profits. “Double Taxation” (7) Conflict – when the Board of Directors are
arguing / fighting with each other. When one group of stockholders tries to
take over control; of the corporation from another group of stockholders
……. This is called a “CORPORATE TAKEOVER”.
You can take control by owning more stock than the other person / people.