Business Organizations
Ch. 8
Overview
• Section 1: Sole Proprietorships
• Section 2: Partnerships
• Section 3: Corporations, Mergers, &
Multinationals
• Section 4: Other Organizations
Sole Proprietorships
Sec. 1
• Key Vocabulary
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Business organization
Sole proprietorships
Business license
Zoning law
Liability
Fringe benefits
• Objectives:
– Describe characteristics of
a Sole Proprietorship
– Analyze advantages &
disadvantages of a Sole
Proprietorship
Characteristic of a Sole Proprietorship
• Business owned & managed by a single individual
• That’s it…just one owner, thus the word “sole”
• Nifty facts to know:
– Most entrepreneurs started out as sole
proprietors
– 75% of businesses in US
– Only 6% of all US sales
Sole Proprietorship
• Advantages:
– Easy to setup
– Few regulations
– Owner gets the profits
after taxes
– Owner has full control
– Easy to discontinue
• Disadvantages:
– Unlimited Personal
Responsibility
– Limited access to
resources
– Lack of permanence
Section 2: Partnerships
• Key Vocabulary
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Partnership
General partnership
Limited partnership
Limited liability
partnership (LLP)
– Articles of partnership
– assets
• Objectives:
– Describe characteristics
of the three main types
of partnerships
– Analyze advantages &
disadvantages of a
partnership
Characteristics of a Partnership
• Business organization owned by two or more persons
• All agree on specific division of responsibilities and profits
• Three types:
– General
– Limited
– Limited liability
• Nifty facts to know:
– About 7% of all businesses in US
– 5% of all sales
– 10% of all income earned in US in a year
Partnerships
• Advantages:
– Ease of setup
– Few regulations
– Shared decision making
and specialization
– Larger pool of capital
– No special taxes
• Disadvantages:
– Unlimited liability unless
you’re an LLP
– Potential for Conflict b/t
partners
Section 3: Corporations, Mergers, &
Multinationals
• Key Vocabulary
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Corporation
Stock
Closely held corporations
Publicly held corporations
Certificate of incorporation
Dividend
Horizontal merger
Vertical merger
Conglomerate
Multinational corporation
• Objectives:
– Describe characteristics of a
corporation
– Analyze advantages &
disadvantages of
incorporating
– Compare & contrast types of
corporate combinations
– Describe role of multinational
corporations
Characteristics of a Corporation
• Legal entity, or being, owned by individual stockholders (or
shareholders)
– Like an individual, a corporation
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pays taxes
can engage in business
can make contracts
can sue and be sued
• Types of Corporations
– Closely held: examples are Mars Candy, Rolex, LEGO, IKEA
– Publicly held
• Nifty facts to know:
– 20% of all businesses in US
– 90% of all sales
– 70% of all income earned
Typical Corporate Structure
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Owners:
Board of Directors:
Corporate Officers:
Managers:
Employees:
people who buy stock
elected by stockholders
appointed by Board
hired by Corporate officers
hired by managers
To incorporate or not to incorporate
• Advantages of
incorporating
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Limited liability
Transferable ownership
Ability to attract capital
Owners don’t need
special skills, just money
– Long life
• Disadvantages of
incorporating
– Expensive & difficult to
start up
– Double taxation
– Loss of control
– More regulations
Mergers
• Sometimes companies want to joint together or one
wants to buy a competing company. Sometimes a
company buys another company just to make more
money.
• Types of Mergers
– Horizontal
• Not many examples today b/c gov’ts fear monopolies
– Vertical
• Examples: American Apparel, ExxonMobil, Apple
– Conglomerate
• Examples: Boeing, Comcast, Dow Chemical, Procter &
Gamble, Time Warner, Trump Organization, Viacom
A word about Multinationals
• Companies that operate in more than one
country
• Typically the largest corporations
• Why would a corporation want to operate in
more than one country?
• Are there any disadvantages to operating in
more than one country?
A few famous multinationals,
to name a few
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Activision Blizzard
AMD
Apple
Aeropostale
Baskin-Robbins
Bic
Billabong
Black & Decker
Boeing
Bridgestone
Capital One
Caterpillar
Coca-Cola
Costco
Dell
Dunkin’ Donuts
Facebook
Ford
Google
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Johnson & Johnson
Krispy Kreme
L’Oreal
McDonald’s
Mattel
Michelin
Microsoft
Motorola
Nestle
Nike
PepsiCo
Red Bull
Samsung
Sony
Southwest Airlines
Starbucks
Toyota
Wal-Mart