Types of Business
4 Elements of Business
1.
2.
3.
4.
Considerations when starting a business
_________________________________________.
_________________________________________ – turbo tax, quick books
_____________ - the opportunity cost. You could be working for someone else.
Business Types
Sole-Proprietorship, Partnership, Corporation
What are the main differences between the 3 main types of businesses?
1. Sole Proprietorship
 _______________________________________
 East & relatively inexpensive to start.
 Typically small businesses.
 Most common form of business
 Unlimited liability
 How much of the profit does the owner receive in a sole proprietorship?
Advantages
Disadvantages
1
2. Partnership
*Owned by _____________________________________________________
*______________________________ - Partners sign an agreement on what each is responsible
for.
a. Limited Partnership
Partners are _______________________________
General Partner - __________________________________
Limited Partner – owns a small part of the business – ____________________________________
________________________________________________________________________________
LLPS (___________________________________________) mix of _________________________
___________________________ - very popular with lawyers, accountants, and architects
Joint Venture - __________________________________________________
Advantages
Disadvantages
3. Corporation
a. Owned by _________________
b. Started by a __________________________
c. ______________ by stockholders
d. __________ by a board of directors
e. State government issues a charter to run the business
f. Complicated structure
g. Business has the same rights as an individual
h. Are Double Taxed.
Duties of Corporate Role PlayersFounders
Responsibilities
Board of Director’s Responsibility
2
Advantages
Disadvantages
Owners do not have to devote time
to make money
Decisions are ______.
Interest of the board may _______
from the stockholders
Stockholders have limited liability;
_______________________________.
__________ _______________ - Govt taxes
corporate profit, then individual
shares.
Individuals trained in specific areas make
decisions
stockholders have ________________ say
in how business is run
Stocks and bonds
Stock - ____________________________________________________. Shareholder receives voting rights
and dividends.
Bond - ________________________________________________________________________________
_________________________________________________________
Other Types of Businesses
Franchise – _________________________________________________________
Helps train employees & set up the business
Franchisee - pays a startup fee & annual fee
Ex. Non- Profit – Making money is not the main purpose of the company
Ex Cooperative - ________________________________________________________________________
Producer – ex – farmer’s market
Consumer – ex – PCC Natural Markets, REI
Service - ex – Credit Unions, Utility companies
3
Stocks
Why do corporations sell stock?
Why do people buy stock?
_____________________ - a share of a corporation’s profits.
______________________ - When stock is sold for _________ than it originally cost.
Rule –_________________________
Stock Indexes
Statistical measures that track stock prices over time
The ticker
Ex –
Stock Exchanges
Stock Market - ____________________________________________________
Ex –
Others – American Stock Exchange, Chicago Mercantile Exchange, Electronic – NASDAQ
What are stock prices based on?
Bull Market
Bear Market
Changes to Stock Prices
Change in profits
Rumors (externalities)
News
_____________________ - person who buys and sells stock
4
Roles of Business
Who are businesses responsible to?
Responsibilities to Consumers
Responsibilities to Owners
Responsibilities to Employees
Responsibilities to the Community
5
Business Cycle
The business cycle (AKA The Economic Rollercoaster)
The ups and downs of the economy
Alternating periods of growth and decline.
4 Economic Phases
Prosperity
Decline
Boom
Recession
Years
6
Fiscal Poicy
What is it?
What does the government do with fiscal policy during a recession?
Why do they do this?
What do you think the government will do with fiscal policy during an expansion?
How does the government control peaks?
What will that do?
Monetary Policy
What is monetary policy?
How does the government regulate the amount of money in circulation?
Who is in control of monetary policy?
How many district banks are in the Federal Reserve?
Inflation
What is inflation?
What is purchasing power?
Inflation is measured by the Consumer Price Index and the Implicit GDP Price Deflator
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Consumer Price Index (CPI)
What is CPI?
Each year is compared to the average of 1982-1984. This makes the base year.
Why is the CPI important?
Implicit GDP Price Deflator
Takes inflation away for the year.
The base year used for comparisons is 1987.
Gross Domestic Product
The total dollar value of all final goods and services produced and sold in the nation during a single year.
Value is always expressed in terms of the dollar.
Final means only finished goods.
Only new items are counted. Anything bought used is not counted.
GDP Categories
Consumer Goods
Business Goods
Government Goods
Export
Import
Net Exports
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Loose and Tight Money
Loose Money
Tight Money
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
This can lead to inflation
This can lead to a recession
Fractional Reserve Banking
The way banks create money.
Discount Rate Reserve Requirements Banks are free to loan out money that is not on reserve leading to expansion.
Struggles in the Economy
The Great Depression
The depression begins in 1929. Black Tuesday, October 29, 1929.
By 1933, salaries decreased by ___________ and hourly wages by ________ compared to 1929 levels.
The average family income fell from _______________ to _____________
1930 -4 million Americans were unemployed. By 1933 the number tripled.
Bank runs Many Americans marked this as the end of __________________________.
Communists and Socialists fought with each other leading to the decline of this movement.
What are Hoovervilles?
Why were they called Hoovervilles?
New Deal
_________________________________ plan to end the depression. First had to restore faith in the banks.
Began _______________________________ insuring Americans the situation would improve.
_____________________________ - March 9-June 16, 1933. Congress passed 15 bills. Most were written by FDR.
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Financial Reform
Glass-Steagall Act (1933)
Federal Securities Act (1933)
Unemployment
Unemployment Rate
Unemployement reduces living standards, disrupts families, and causes a loss of self-respect.
Reaches its height during a recession.
Types of unemployment
Cyclical
Structural
Seasonal
Frictional
How Banks Operate
Banking Services
What do banks do?
Checking accounts
Savings accounts
.
Certificates of Deposits (CDS)
What is one of the main principals of banking? Why?
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