Chapter 8: Business
Organizations
Section 1: Starting a
Business
Think about starting a business:
• Would you want to go at it on your own or go into business with
someone else?
• How would you tell people about your business? (be specific)
Remember
• Anyone who takes a risk to start a business is an entrepreneur
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Must decide what to sell
Gather elements to start business
Learns about laws, regulations, tax codes
Small business incubators (gov’t agencies) help provide low rent buildings,
advice on starting a new business
Remember
• Elements of business operation
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Expenses:
Advertising:
Record keeping:
Risk:
Remember
• Receipts: records to keep track of sales and expenses
• Inventory: ready supply of goods necessary for operation of business
• Start up: process of starting a business
Chapter 8 Section 2: Sole
Proprietorships and Partnerships
Think
• Have you ever had an assignment to independently and thought,
“This would be so much easier if someone was here to help.”?
• Or, have you paired up with a friend to do a project and wished you
would have done it on your own? Why?
Remember:
• Sole proprietorship: business owned by one person
• Proprietor: Person who owns a business
• Assets: all items legally owned by business
• Partnership: business owned and operated by 2 or more people
• Limited partnership: arrangement where one or more of the people
involved have limited liability, but do not get to make management
decisions
• Joint venture: temporary partnership created for a specific purpose
Remember:
• Advantages of a Sole Proprietorship
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Owner gets all profits
Owner makes all decisions
Business is less complicated
Fewer gov’t regulations
Lower taxes
Easy to obtain credit
Remember:
• Disadvantages of a Sole Proprietorship
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Responsible for all losses
Unlimited liability
Owner must sell personal assets to pay bills for business
No help in making decisions
Time consuming
Rely on own funds
If owner dies, goes bankrupt, or is unable to work- business will fail
Remember:
• Advantages of Partnership
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Losses are shared
More efficient than sole proprietorships
Each partner brings skills
Fewer gov’t regulations
Lower taxes
More capital from multiple partners
Able to borrow money
Remember:
• Disadvantages of Partnership
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Share profits
Unlimited liability for each partner
Decision making is slow
Disagreements can lead to problems
Money borrowed is based on assets of business and partners
If one partner leaves, partnership has to be reorganized
Chapter 8 section 3: The
Corporate World and Franchises
Think:
• Have you ever been a member of a club or team? If so, what was it
called? (If not, make one up)
• How was your organization created?
• Did you raise money to pay for activities?
• Who selected your leaders?
What is a Corporation?
Class discussion
Remember:
• A corporation is a business owned by many people but treated like a
person by law
• It can own property
• It must pay taxes
• It can enter into contracts
Remember:
• Individuals by stock or a specific part of a corporation
• An owner, or stockholder, has limited liability and is only responsible
for their own investment
• corporations have to submit articles of incorporation in the state
where the corporation will have its headquarters (register basic info)
• The state issues a corporate charter or license to allow corporation to
operate
Remember:
• People who buy common stock in the corporation own part of it and
vote on what to do with future profits
• These stockholders receive a dividend or portion of the corporation’s
profits
• Preferred stock holders do not have voting rights, but get a portion of
future profits before others
Remember:
• A franchise is a business that sells the rights to its name and products
to another company
• Examples:
Remember:
• Advantages of corporations
• Owners (stockholders) do not have to devote time to the company
• Limited liability
• If sued or bankrupted, creditors cannot take person property form
stockholders
• Responsibility divided among many
• Decisions made by trained individuals
• Draw on resources of investors
• Can continue indefinitely if profitable
Remember:
• Disadvantages of corporations
• Decision making can be slow
• Interests of those running the corporation (board of directors/trustees) may
not match those of stockholders
• Federal gov’t and state/local taxes apply to corporate profits
• Dividends are taxed again as personal income
• Most stockholders do not have a say in how corporation is run