Business Organizations
OCTOBER 7- 23, 2013
Sole Proprietorships,
Partnerships, and
Corporations
Business OrganizationsOctober 7, 2013
•In the U.S., many important decisions are made
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by economic institutions-persons and
organizations that use or represent the factors
of production.
One of the major economic institutions is the:
Business Organization is a profit-seeking
enterprise that serves as the main link between
scarce resources and consumer satisfaction.
Business Organizations
•There are three main forms of business
organizations: sole proprietorships,
partnerships, and corporations.
 Students will be working in their groups to complete their Business
Organization Projects.
 How do Business Organizations Influence the US Economy?
 Students will each get an Econ Book from the bookshelf, and
construct a 3 column T-chart providing details of each type of
business organization.
1. Sole Proprietor
2. Partnership
3. Corporation
 On the back of their paper, students will create a Venn Diagram,
depicting the similarities and differences of each.
 WHAT ARE THE 3 Types of Business Organizations? Which do you
think is the most beneficial? Why?
 After submitting your Freak Paper, We will continue watching the
documentary.
 COULD YOU OWN or START YOUR OWN BUSINESS? Students will
take a short quiz to find out!
 http://money.cnn.com/quizzes/2006/fortune/start_business/
I. Sole Proprietorships
Sole Proprietorships
•A Sole Proprietorship is
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a business owned and
run by one person.
This is the most
common but smallest
sized business.
Sole proprietorships
today account for about
72% of all businesses
but only 5% of all
business sales.
Sole Proprietorships
Strengths
•1. Ease in which it can be started.
•(Run out of home, mow lawns, lemonade
stand.)
•2. Ease of management.
•(Decisions made quickly by the owner.)
•3. Keep all profits.
•(There may be losses, but there may be
Sole Proprietorships
Strengths
•4. Does not pay business income tax.
•(Owner pays personal income tax on
profits.)
•5. Be your own boss.
•(Psychological, personal satisfaction.)
•6. Ease of getting out.
•(Simply stop offering goods and
Sole Proprietorships
Weaknesses
•1. Unlimited liability
•(Owner is personally and fully responsible for
all loses and debts of the business.)
•2. Difficult in raising financial capital.
•(It takes a lot of money to start a business,
banks are hesitant to lend.)
•3. Not big enough to operate efficiently.
•(Need enough capital to pay for labor and
Sole Proprietorships
Weaknesses
4. Limited managerial experience.
(Owner may have to hire others to do sales,
marketing, or accounting.)
5. Do not offer fringe benefits to employees.
(No paid vacation, sick leave, retirement,
health insurance.)
6. Limited life.
(If the owner dies, quits, or sells, the firm
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II. Partnerships
 Students will read the following
article:http://www.sba.gov/content/entrepreneurship-you
 Upon completion of Reading, Students will write a paragraph
describing whether or not they could run a business and why?
 In order to start a business, you need to have something to “sell”,
be it something tangible, an experience, or idea. Students will
watch Ted Talk on Joseph Pine: What consumers want.
 Please draw the chart on Economic Change
 What is more beneficial?
 Students will read article from Forbes Magazine:
http://www.forbes.com/sites/actiontrumpseverything/2012/09/1
9/franchisees-are-entrepreneurs-let-the-debate-begin/
 Students will watch a Ted Clip, on the history of the Franchise.
https://www.youtube.com/watch?v=Ie8qJuXYN7w
 After Clip, students will utilize ECON books to create a t-chart
comparing the franchise and a start-up.
 What is more beneficial, running a business by yourself or with a
partner? WHY?
Partnerships
•A partnership is a
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business owned by
two or more persons.
This shares many of
the same strengths
and weaknesses as a
sole proprietorship.
Partnerships
represent about 8%
or all businesses and
Partnerships
Types of Partnerships
•1. General Partnership-all partners are
responsible for the management and
financial obligations.
•2. Limited Partnership-at least one
partner is not active in running the
business.
Partnerships
Forming a Partnership
Articles of partnership are legal papers drawn
up to specify arrangements between partners.
These papers state ahead of time how profits
or losses are divided.
Limited liability means investor only
responsible for the size of his or her
investment.
It may also state the way future partners can
be taken into the business and the way the
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Partnerships
Strengths
1. Ease of establishment.
2. Ease of management
(Each partner has his or her strength.)
3. Lack of taxes
4. Easier to acquire financial capital.
(Better chance of a bank loan.)
5. Larger size makes it more efficient.
6. More easily attracts top talent because they
can offer more fringe benefits.
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Partnerships
Weaknesses
1. Fully responsible for other partners.
(One partner can cause a firm to suffer
huge losses.)
2. Limited life
(If one partner ceases to exist, it must
go through a legal change.)
3. Potential conflict between owners.
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STUDENTS WILL UTILIZE THE REMAINDER OF THE
CLASS TO WORK ON PROJECT.
 Students will watch:
https://www.youtube.com/watch?v=Pin8fbdGV9Y
III. Corporations
Corporations
•A corporation is a form of
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business organization
recognized by law as a
separate legal entity having
all the rights of an individual.
Corporations can buy and
sell property, enter into
contracts, and can sue or be
sued.
Corporations make up 20%
of all businesses and 87% of
Forming a Corporation
Incorporate – to form a
corporation
Business must ask
the state or national
government
permission.
If approved, a charter
is granted.
The charter states
the company name,
address, purpose of
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Forming a Corporation
•A charter specifies the number of shares
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of stock, ownership parts of a firm.
These are sold to investors called
stockholders or shareholders.
The money is then used to set up the
corporation.
If a corporation is profitable, it may issue
a dividend, a check representing a
Corporate Structure
•After an investor purchases stock, he or she
becomes an owner and has certain ownership
rights.
•The rights of ownership depends on the type
of stock.
•1. Common Stock- usually receives one vote
for each share of stock owned.
•The vote is used to elect a board of directors,
who direct the corporation’s business.
•2. Preferred Stock-nonvoting owners who are
Corporate Structure
 BUSINESS ORGANIZATIONS UNIT- Analysis of a Corporation
 What is a Corporation? Why is it beneficial to today’s Economy?
 Students will watch the following Video:
https://www.youtube.com/watch?v=wtMORWO5h9Y
Corporations
Strengths
1. Ease of raising financial capital.
May issue bonds, money given to a Corporation
as a loan. They mature at a certain date with a
set amount of interest.
2. Hire the best talent available.
3. Limited liability.
(The corporation, not the owners are responsible
for its debts and obligations.)
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Corporations
Strengths
4. Unlimited life.
(Business exists even when ownership
changes.)
5. Ease of transferring ownership.
(Simply sell the stock.)
Corporations
Weaknesses
•1. Difficult and expensive to gain a charter.
•(Attorney fees, filing expenses; can range
from a few hundred to several thousand
dollars.)
•2. Owners have little say in running
business.
•3. Expensive taxes on profits.
Microsoft Corporation is a computer industry giant. Its operating
systems run more than 90 percent of the personal computers in the
world. When Microsoft integrated its newest operating system with its
own Internet software, other software firms cried foul. They claimed
that Microsoft was seeking to use its control of operating system
software to gain control of the market for application programs. Was
Microsoft becoming a monopoly? The Justice Department and many
states filed antitrust suits against Microsoft. Cartoonists took note.
 STUDENTS WILL ANALYZE AND ANSWER THE FOLLOWING QUESTIONS:
http://teachers.sduhsd.k12.ca.us/sfisher/AP%20Economic%20Resources
/Economic%20Cartoons.pdf
 Bellwork 10/18- Students will work in 8 Groups, analyzing business
decisions and determining which business organization is best
suited for the scenario.
 Client 1: Elise MacMillan and her brother Evan co-founded The
Chocolate Farm in Englewood, Colorado, in the late 1990s.
 Client 2: Milton Hershey broke ground for his chocolate factory near
Lancaster, PA in 1903. It was the beginning of what would become
Hershey Foods Corporation .
 Client 3: Forest Mars invited Bruce Murrie, an investment banker and
son of the Hershey company president, to be his partner in M&M Ltd.
The M&Ms we still eat today were first sold to the public in 1941. The
letters in "M&M" stand for Mars & Murrie. Eventually, Murrie left the
business but Forest Mars became the owner of Mars, Inc.
 Client 4: Wally Amos launched the Famous Amos Cookie Company in a
Hollywood, CA storefront on Sunset Boulevard in 1975.
Students have the option to either, work on their project or study
for their Midterm.
Midterm- Oct. 22nd
Project- Oct. 23rd