Analyzing the Characteristics of Business Course Title – Money Matters Lesson Title – Analyzing the Characteristics of Business Specific Objective –Given basic facts on the characteristics of business, students use critical thinking skills and computer skills to analyze and report on the different forms of business. Performance Objectives: Students will: Explain the free enterprise system. Identify and classify forms of ownership Explain the legal requirements for forming a proprietorship, a partnership and a corporation. Identify the advantages and disadvantages of the three major forms of business ownership. Input findings in a word processing document, computer presentation, poster and/or bulletin board. Proofread document or presentation. TEKS: 130.162.(c)(3)(B) Time required: Instruction time for this lesson and activities 2 days (90 minute classes). (Time is estimated and may vary depending on teaching style) Occupational Correlation (O*Net – http://www.onetonline.org/) 11-1021.00 - General and Operations Managers Plan, direct, or coordinate the operations of public or private sector organizations. Duties and responsibilities include formulating policies, managing daily operations, and planning the use of materials and human resources, but are too diverse and general in nature to be classified in any one functional area of management or administration, such as personnel, purchasing, or administrative services. Sample of reported job titles: Operations Manager, General Manager (GM), Director of Operations, Plant Manager, Store Manager, Facilities Manager, Plant Superintendent, Vice President of Operations, Warehouse Manager, Chief Operating Officer (COO) I. Tasks Oversee activities directly related to making products or providing services. Direct and coordinate activities of businesses or departments concerned with the production, pricing, sales, or distribution of products. Review financial statements, sales and activity reports, and other performance data to measure productivity and goal achievement and to determine areas needing cost reduction and program improvement. Manage staff, preparing work schedules and assigning specific duties. Direct and coordinate organization's financial and budget activities to fund operations, Copyright © Texas Education Agency, 2012. All rights reserved 1 maximize investments, and increase efficiency. Establish and implement departmental policies, goals, objectives, and procedures, conferring with board members, organization officials, and staff members as necessary. Determine staffing requirements, and interview, hire and train new employees, or oversee those personnel processes. Plan and direct activities such as sales promotions, coordinating with other department heads as required. Determine goods and services to be sold, and set prices and credit terms, based on forecasts of customer demand. Locate, select, and procure merchandise for resale, representing management in purchase negotiations. Preparation Equipment Needed: Computers with internet access – one per student Computer with projection software Whiteboard or other means to display student handwritten responses Handouts of multimedia presentation with note blanks – one per student Learner Preparation: A business is easy to form in a free enterprise economy. If a person wants to start a business, it is a matter of deciding what will be bought and sold and how to attract customers. Thousands of people operate small enterprises from their own homes with little thought about how the business is organized and whether it is following proper business procedures. The form of business ownership determines the financial, managerial, and legal responsibilities of business owners. Ask students to identify what they believe to be the primary differences between businesses owned by one or two people compared with those owned by hundreds of stockholders. Stress to students that this lesson will help them understand the similarities and differences among the forms of ownership. Teaching Strategies: Have each student indicate whether they would like to own their own business or not. Ask volunteers to explain why they are interested or not interested in owning their own business. Ask students what would be necessary if they wanted to start their own small, parttime business. Explain that it is actually easy to form a business in the U.S. if a person has the desire. Copyright © Texas Education Agency, 2012. All rights reserved 2 Introduction: When a new business is started, the owner should carefully consider the form of ownership. While it is possible to change the form of ownership for an existing business, it is best to decide which to use both for the long-term future of the business as well as for its first few years. Assessment: Quiz on Characteristics of Business Report – written and presentation on “Sweet Success” Key Terms: Sole Proprietorship – a business owned and managed by one person Partnership – a business owned and managed by two or more people Corporation – a distinct legal entity formed by completing required legal documents in a specific state in the U.S. Additional Resources: Websites: "Business Ownership: How Sweet It Can Be!" Economics and Personal Finance Resource for K-12. Council for Economic Education, n.d. Web. 14 June 2012. <www.econedlink.org/lessons/index.php?lid=533&type=educator> Additional teaching resources: The Corporation. CaliforniaStateUniversity, Northridge, 2003. Accessed 20 May, 2012. http://www.csun.edu/~hfact004/corporation.htmlBusiness Partners Corporations.Publication 542 (Rev. March 2012) - http://www.irs.gov/pub/irs-pdf/p542.pdf. Accessed 20 May, 2012 Textbooks: Dlabay, Les R., and Jim Burrow. Business Finance. Mason, Ohio: South Western, 2008. Print. Dlabay, Les R., Jim Burrow, Brad Kleindl, and Steven A. Eggland. Intro to Business. 7th ed. Mason, OH: South-Western Cengage Learning, 2009. Print. Introduction Introduction (LSI Quadrant I): Define “Free Enterprise” – list the 4 elements and discuss - using presentation notes as guide. There are three distinct ways to form a business and each method has particular variations, advantages, and disadvantages depending on the circumstances of the business and the industry. The following is a summary of each of three main categories of ownership. Copyright © Texas Education Agency, 2012. All rights reserved 3 MI Outline I. Free Enterprise System - an economic system that allows individuals to pursue their own interests without undue governmental restriction. Relies on the presence of four elements: A. B. C. D. Notes to Instructor Slide #1-6: Market economies rely on a private enterprise system. Private property rights Freedom of choice Profits Competition Slides #8-10 II. Forms of Ownership A. Sole Proprietorship B. Partnership C. Corporation There are many different goods and services that a new business can offer, but there are only a few ways to organize a business. The vast majority of businesses start out as sole proprietorships or partnerships. A third option is to set up a corporation. In the United States, about 70 percent of all businesses are sole proprietorships, 20 percent are corporations and the remaining 10 percent are partnerships. Each type of business has distinctive characteristics. Copyright © Texas Education Agency, 2012. All rights reserved 4 III. Guest Speaker – A. Legal requirements for forming (and dissolving) different forms of businesses. B. Have students write the guest speaker a thank you letter. In the letter, have them include a review of at least one legal requirement the speaker discussed for each form of business. Ask students to listen to an attorney or someone from a small business center about the legal requirements for forming different forms of businesses. You might also want to ask the guest speaker to address any legal requirements in dissolving businesses. Have your students write the guest speaker a thank you letter. In the letter, have them include a review of at least one legal requirement the speaker discussed for each form of business. Have students prepare a written recommendation as to which form of business organization they think is best. Have them state the reasons for their recommendations. In each case, there will be some disadvantages to the business form they recommend. Have them identify at least one negative for each and suggest how the client might minimize its effects. IV. Compare and Contrast Copyright © Texas Education Agency, 2012. All rights reserved 5 Verbal Linguistic Students’ quiz answers will be a graded assignment. V. Assessment VI. Observation A. Graded Assignments: 1. QUIZ – Analyzing the Characteristics of Business 2. Guest speaker thank-you letter with a review of at least one legal requirement the speaker discussed for each form of business 3. “Sweet Success” group activity Logical Mathematical Visual Spatial Musical Rhythmic Bodily Kinesthetic Intrapersonal The Sweet Success assignment will serve as independent review and review as a class when the class goes over the responses to the assignment. Interpersonal Naturalist Existentialist Summary Review (LSI Quadrant I & IV): Ask students to write a brief description of the three common forms of business ownership without referring to the lesson on their notes. Have students read their answers aloud and compare them with those of other students. Review each point of the different forms of business organization as you enjoy each group’s presentation in “Sweet Opportunities” and when you go over the quiz after it has been graded and returned to students. Evaluation Informal Assessment (LS1 Quadrant III): Observe students’ participation in class as you advance through the multimedia presentation. Ask open-ended questions of students that are not engaged. “Volunteer” these students for tasks during the lesson. Writing student responses on the board, etc. Formal Assessment (LSI Quadrant III, IV) : Quiz – Analysions the Caractéristiques of Business Group report on Sweet Success Copyright © Texas Education Agency, 2012. All rights reserved 6 Extension Extension/Enrichment (LSI Quadrant IV): SWEET OPPORTUNITIES Scenarios – Divide students into small groups to prepare their recommendations. If time is limited, you may want to assign each group just one or two clients. After the groups finish reading the client stories in the file, Sweet Opportunities, have them prepare written recommendations as to which business organization they believe to be best. Make sure the groups provide reasons for their recommendations as well as list at least one negative with suggestions on how to minimize that negative effect. When students have completed their recommendations, compare and discuss their decisions as a class. Here are some sample recommendations, Sweet SuccessRecommendations, to assist you in this discussion. Obviously, there will be variations in their advice given. Here are some questions for the discussion: If students need additional information to help them make their recommendations, they can refer to the links below: "Should You Have a Partner” "What Type of Business Organization is Best for You?" What accounts for the differences in your recommendations? [The weight advisors and clients give to various decision factors varies; also, with most problems there is more than one solution.] What are the negatives you identified and what are your solutions for dealing with them? [Answers will vary. Particularly savvy students may suggest the use of limited partnerships or subchapter S corporations.] Why do you think most new businesses are sole proprietorships and partnerships? [These forms of ownership are easier and less expensive to start.] What do you see as the biggest disadvantages of sole proprietorships and partnerships in the long term? [Disruptions caused by the death/disability of an owner; potential for disagreements over operations; difficulty transferring ownership; acquisition of resources for expansion are limited to owner assets, income and debt.] What are the advantages of setting up a limited versus general partnership? [The partners can limit their liability to their investment in the business. A limited partnership can also be used to establish who has the authority to make decisions.] Are there any disadvantages? [Partners unable to provide input in the decision process may be unhappy.] Under what circumstances might a business operating as a sole proprietorship or partnership decide to incorporate? [Potential answers include when a company wants to insure there is no disruption to business if an owners dies; to reduce liability; to offer ownership shares as a means to get money for expansion or motivational incentive for employees.] Copyright © Texas Education Agency, 2012. All rights reserved 7 Next, (and if time allows), have each group research what has happened to the founders and businesses featured in the case studies. Multimedia slide presentations are an ideal way for students to share with classmates what they discover. If this is not possible, have them use word processing or desktop publishing software to create their report. Encourage them to use images as well as text. Copyright © Texas Education Agency, 2012. All rights reserved 8 Quiz – Analyzing the Characteristics of Business 1. Business owned by one person is a. Merchandising business b. Sole proprietorship c. Service business d. Business entity 2. A business owned by two or more persons is called a a. small business b. partnership c. corporation d. merchandising business 3. The amount of money earned over the money spent in the business is called a. going concern b. earnings c. profit d. loss 4. What are the three main types of business ownership? a. _______________________________________________________________ b. _______________________________________________________________ c. _______________________________________________________________ 5. Of the three types of business ownership, which one is the most difficult to set up?_______________________________________________________________ 6. The owners of a Corporation are called _______________________________. 7. Give two reasons why you would consider forming a Corporation versus a Partnership or Proprietorship. _________________________________________________________________ _______________________________________________________________ 8. In a Corporation, who controls and directs the business? a. Managers b. Employees c. Stockholders d. Board of Directors 9. In a Proprietorship, the __________________ __________________ controls and directs the business. 10. In a Corporation, the ______________ _____________ ______________ elect the Board the Directors. Copyright © Texas Education Agency, 2012. All rights reserved 9 Analyzing the Characteristics of Business Quiz KEY 1. 2. 3. 4. b. Sole Proprietorship b. partnership c. profit What are the three main types of business ownership? Proprietorship Partnership Corporation 5. Of the three types of business ownership, which one is the most difficult to set up? Corporation 6. The owners of a Corporation are called ___________shareholders________. 7. Give two reasons why you would consider forming a Corporation versus a Partnership or Proprietorship. _____________________________________________________________________ _____________________________________________________________________ 8. d. Board of Directors 9. In a Proprietorship, the ____owner______ controls and directs the business. 10. In a Corporation, the ____shareholders____ elect the Board the Directors. Copyright © Texas Education Agency, 2012. All rights reserved 10 SWEET OPPORTUNITIES Make a recommendation as to what form of business organization you think is best for each client. State the reasons for your position. There will also be some disadvantages to the business form you choose. Identify at least one negative and suggest how you might minimize it. Client 1: When I was three years old, I started making candy with my grandmother. I am now 10 and I want to sell chocolate candy with a farm theme to my friends and family. My product ideas include Brown Cows (chocolate cows on a stick), Pigs in Mud (marshmallow dipped in caramel, nuts and chocolate) and Farm Eggs (jelly beans dipped in chocolate). The start-up expenses for my business are pretty small: a few candy molds, candy and chocolate.) My parents have agreed to loan me the money I will need and to let me work in the family kitchen. Schoolwork has to take priority over business so if I have more sales than I can handle, I will probably ask friends or my older brother to help. My brother is also pretty good at math and computers so he could help me with keeping track of my expenses and advertising. I really like the product development and packaging part of the business. Client 2: After apprenticing for another candy maker, I started my first candy business at age 18. Unfortunately, my first attempt at starting a business (as well as my second) was a failure. After a rocky start, my third try was more successful – I have just received a fortune from the sale of my caramel business. During my world travels, I discovered and decided to buy new equipment that makes chocolate. Today, only the wealthy can afford chocolate. With this new technology, I think I can make a chocolate that everyone can afford. In my mid-thirties, I know very little about making chocolate but I am willing to take the time to learn. I want my life to center on inventing new candies, building this new business, and laying out a new community that will be a wonderful place for the people I hire to live. I prefer to leave day-to-day operations of the company—handling production, sales, marketing and distribution—to someone else. Client 3: I have substantial experience working in the candy industry. I helped my father introduce a very popular chocolate bar in the U.S. and have worked in the factories of two of the best chocolate makers in the world. Today, I am a thirty-plus year-old businessperson operating a company I started selling candy and pet foods across Europe. While traveling in Spain recently, I saw a candy-coated chocolate that I think will sell well in the U.S. I would like to create a new American business producing this candy. I have at least 80 percent of the money for getting started but I am concerned about getting the chocolate used in production. There is a war going on and it may be difficult to get this important ingredient without taking on a partner who has connections to a chocolate maker. I like the challenge of building businesses and finding ways to make them operate more efficiently. I also prefer making decisions on my own. Client 4: I am in my late thirties. I have worked myself up from handling mail to being an agent for a well known entertainment agency. I now represent several famous Copyright © Texas Education Agency, 2012. All rights reserved 11 musicians. People say I am an enthusiastic and tireless promoter. To help my clients get jobs, I use bite-sized chocolate chip cookies as a calling card. My aunt taught me how to bake cookies when I lived with her as a teenager. Before I dropped out of high school and joined the Air Force, I was getting vocational training in the food trades but I have never run my own business. Some of my friends in the entertainment industry have encouraged me to open a store that would sell my cookies. They have offered to help finance my venture in exchange for partial ownership. My cookies would look and taste very different from the cookies sold in the grocery stores today. Copyright © Texas Education Agency, 2012. All rights reserved 12