Business
Organizations
The Role of Sole Proprietorships
•A sole proprietorship is a business owned and
managed by a single individual who has a
approved business license.
• A business organization is an establishment formed
to carry on commercial enterprise.
• Most sole proprietorships are small.
• They only make about 6 percent of all United
States sales.
Characteristics of Proprietorships
• Most sole proprietorships earn modest
incomes.
• Many proprietors run their businesses part-time.
Characteristics of Proprietorships
By Size of Receipts
0.9%
0.4%
By Type
3%
1%
Under $25,000
$25,000 – $49,999
$50,000 – $99,999
2%
9%
13%
$500,000 – $999,999
Mining
8%
$100,000 – $499,999
12%
3%
Construction
5%
Manufacturing
49%
$1,000,000 or more
Agriculture, forestry,
fishing services
Transportation
Wholesale trade
70%
16%
8%
Retail trade
Finance, insurance,
real estate
Services
Source: Statistical Abstract of the United States
Advantages of Sole
Proprietorships
1.Ease of Start-Up
2. Relatively Few
Regulations
3. Sole Receiver of Profit
4. Full Control
5. Easy to Discontinue
Disadvantages of Sole Proprietorship
1. unlimited personal liability
• Liability is the legally bound obligation to pay debts
2. Sole proprietorships have limited access to resources, such
as physical capital.
3. Cant afford fringe benefits.
4. Sole proprietorships also lack permanence. Owner dies
then the business dies.
5. Must adhere to zoning laws.
Section 2 - Partnerships
Types of Partnerships
1. General
Partnership
–partners share
equally in both
responsibility
and liability.
2. Limited Partnership
– In a limited
partnership, only
one partner is
required to be a
general partner, or to
have unlimited
personal liability for
the firm.
Carnegie-Illinois Steel blast furnaces in Etna, Pennsylvania (1941)
Limited Partnership Classic Example:
Bloomberg L.P.
(You DO NOT Need to write this)
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privately held financial software, news, and data company.
Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.6 billion.
founded by Michael Bloomberg (current Mayor of New York City)
with the help of Thomas Secunda and other partners (Bloomberg's former coworkers from Salomon Brothers) in 1981 and a
30% ownership investment by Merrill Lynch.
3. Limited Liability Partnership
– A newer type of partnership is the limited liability
partnership. In this form, all partners are limited partners.
Dentists
Attorneys
Accountants
Advantages of Partnerships
1.Ease of Startup
2.Shared Decision Making
and Specialization
3.Larger Pool of Capital
4.Taxes
Disadvantages of Partnerships
1. Unless the partnership is a limited
liability partnership, at least one
partner has unlimited liability.
2. Bound by each others actions.
3. Has potential for conflict.
Section 3 – Corporations, Mergers,
and Multinationals
• Corporation- a legal entity owned by
individual stockholders.
• Stocks (shares) - represent a
portion of ownership of a
corporation.
Types of Corporations
1) Closely Held Corporation
2) Publicly Held Corporation
Advantages of Incorporation
Advantages for the Stockholders
• No responsibility for corporations
actions
• Stocks are transferable
Advantages for the Corporation
• Has great potential for growth.
• Bonds
• Can hire the best available capital.
• Corporations have long lives.
Disadvantages of
Incorporation
1) Difficult and expensive to start up
– must have certificate of
incorporation
2) Loss of control
3) Double taxation
4) Must pay dividends
5) Heavily regulated
Corporate
• Horizontal
mergers
• Vertical
mergers
• Conglomerate
Combinations
Multinationals (MNCs)
• Large corporations headquartered in one country that
have subsidiaries throughout the world.
Multinational corporate
structure:
• Horizontally integrated multinational
corporations
• Vertically integrated
multinational corporations
• Diversified multinational
corporations
Advantages of MNCs
• Offer products worldwide.
• spread new technologies and production
methods across the globe.
Disadvantages of MNCs
• Influence culture and politics
• Critics are concerned about wages
and working conditions
Chapter 8 – Section 4
Other Organizations
• business franchise - a semi-independent
business that pays fees to a parent
company in return for the exclusive right
to sell a certain product or service in a
given area.
Franchise Example: Dairy Queen
Franchise Example:
Tim Hortons
Franchise Example: Del Taco
Franchise Example: Denny’s
Franchise Example: NAPA Auto Parts
Franchise Example: El Pollo Loco
Franchise Example: Dunkin’ Donuts
Franchise
Example:
Domino’s Pizza
Advantages to Franchises
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Management training and support
Standardized quality
National advertising programs
Financial assistance
Centralized buying power
Disadvantages to Franchises
• High franchising fees
and royalties
• Strict operating
standards
• Purchasing restrictions
• Limited product line
Cooperatives
• A cooperative is owned and operated by a
group of individuals for their shared benefit.
• Robert Owen (1771 - 1858) was a social
reformer and a pioneer of the cooperative
movement.
Consumer Cooperatives
•sell their goods to their members at
reduced prices.
Service Cooperatives
• provide a service
The Cloyne Court Hotel, a student housing cooperative in Berkeley, California, United States. Owned by students, run by students, for students.
Producer Cooperatives
•are agricultural marketing
cooperatives that help members sell
their products.
Nonprofit Organizations
• Institutions that function like business
organizations, but do not operate for
profits.
• Nonprofit organizations are exempt from
federal income taxes.
• Individual states and localities offer
nonprofits exemptions from other taxes
such as sales tax or property tax.
N.P.O. Examples
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Amnesty International
Oxfam
Rotary International
Carnegie Corporation of
New York
DEMIRA Deutsche
Minenräumer (German
Mine Clearers)
FIDH International
Federation for Human
Rights
Goodwill Industries
United Way
• The National Rifle
Association
• ACORN(now defunct)
• Habitat for Humanity
• Teach For America
• Red Cross
• UNESCO
• IEEE
• World Wide Fund for
Nature
• Heifer International
• SOS Children's Villages.
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