BUSINESS ORGANIZATION
Chapter 5
Page 100 - 121
•UNDERSTAND how ownership differs among sole
proprietorships, partnerships, and corporations.
•GRASP the advantages of the three major types of business
ownership.
•DESCRIBE the changing status of U.S. employment
•DISCUSS the role of business in the U.S. economy.
•LEARN the five functions of managers.
•RECOGNIZE three specialized forms of business.
Types of Business Ownership
• Major “types” of business ownership:
– Sole proprietorship
– Partnership
– Corporation
SOLE PROPRIETORSHIP
A sole proprietorship is a
business owned by one
person.
More than 2/3 of U.S.
businesses are operated as
sole proprietorships.
Nearly 19.5 million businesses have
no employees other than the owner.
Owner has complete
responsibility for all
business decisions
PARTNERSHIP
A partnership is a business owned and managed by a
small group, often just two or three people.
These partners have a written
agreement to share the profits or
losses.
Partners have unlimited
liability for the debts of their
business.
CORPORATION
Operate under
written permission.
Written permission is called
certificate of
incorporation.
A corporation is a business
owned by a number of people
(sometimes millions).
Owner is known as a
shareholder or stockholder.
Who’s Running the Show?
Managers run the show, that’s who.
Dr. Gemma
Managers are employees who are responsible for
coordinating resources within a business --- human, capital,
and natural. Management activities are focused in five key
areas: planning, organizing, staffing, leading, and
controlling.
Who manages the resources here at CDO?
Role of Business
• Provide employment
• Employee wages are used to purchase goods
and services
• Profits eared by businesses are used to
compensate owners and investors.
• Most businesses pay taxes to federal, state, and
local governments.
• Governments spend those taxes to provide
services such as streets, parks, libraries,
schools, police, etc.
Impact on Community
• When a new business opens
– Pays wages to workers
– Buys goods and services from other
businesses in the area
– This money was not in the community before
so businesses and employees use much of
the money to purchase things they need.
– May result in need for more employees
– May result in need to form housing,
automobiles, food, and entertainment
Business Activities
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Generating Ideas
Raising Capital
Employing and Training Personnel
Buying Goods and Services
Marketing Goods and Services
Maintaining Business Records
Planning
Goals must be set & strategies devised
for achieving those goals.
Planning involves thinking, gathering
and analyzing information, and then
making decisions about all phases of the
business.
Principles of Effective Organization
• Responsibility – the obligation to complete
specific work.
• Authority – the right to make decisions
about how responsibilities should e
accomplished.
• Accountability – taking responsibility for
the results achieved.
Principles of Effective Organization
• Unity of Command – there is a clear
reporting relationship for all staff of a
business.
• Span of Control – the number of
employees who are assigned to a
particular work task and manager.
Business Organization Chart
Mrs. Volpe
Mr. Enright
Mr. Thatcher
Mr. Bermudez
This function is the process of
determining what work has to be done
& who is to do each job.
Setting Direction
• Mission Statement
– A mission statement is a short, specific written
statement of the reason a business exists and
what it wants to achieve.
– The mission statement for Starbucks is to
“Establish Starbucks as the premier purveyor
of the finest coffee in the world while
maintaining our uncompromising principles
while we grow.”
Starbucks uses six guiding principles to measure their
progress: their work environment, diversity, high
standard, satisfied customers, clean environment,
and profits.
Setting Direction
• Goal – a precise statement of results the
business expects to achieve.
• Policies – guidelines used in making
consistent decisions.
• Procedures – descriptions of the way work
is to be done.
Staffing
Mrs. Postil going to work
Staffing includes all of the activities
involved in finding, selecting, hiring,
training, appraising, and rewarding the
business’s employees.
Leading
The work of people must be
directed so their tasks will be
performed correctly and timely.
Effective leaders inspire workers to willingly perform
their jobs and accept responsibility for
accomplishing the goals of the business.
Leading requires good human relations
and communications skills.
Controlling
Controlling means comparing what
actually happens with what was
planned.
Managers must determine to what
extent the business is
accomplishing the goals it set out
to reach in the planning stage.
Growing a Business
articles of partnership
A written agreement that provides the
details of the partnership will work.
Includes:
•Name
•Investment
•Salaries
•Profit and loss share proportions
•Responsibilities
•Purchase or buy-out rights.
Growth Opportunities
One way to raise capital and to limit risk is to form a
corporation. Soliciting investment from others (going
public) has enabled many entrepreneurs to grow into
large national or even international businesses.
Forming a Corporation
Apply for corporation status in the
state located
Issue and sell shares
Receive Articles of
Incorporation
Call meeting of shareholders to elect
board of directors, responsible to guide
the operations of the corporation
Board of directors elect executive
officers, such as President, VPs,
CEO, CFO, Treasurer, etc.
Earn profits and declare dividends
Other Forms of Business Ownership
A franchise is a written contract granting permission to sell
someone else’s product or service in a prescribed manner, over a
certain period of time, and in a specified territory.
A franchisee is the
person or group of
people who received
the franchise from a
parent company.
A franchisor is the parent
company granting a
franchise.
•A franchise is an easy business to start.
•The franchisor agrees to help the franchisee get started.
•One advantage is national advertising by the parent
company.
•The franchisor collects a percentage of sales or a flat fee
for their services.
•Franchises usually require a large investment of capital
to start.
•Not all franchises succeed.
A cooperative is owned by
the members it serves and
is managed in their
interest.
A cooperative is much like a regular corporation. Its
formation must be approved by the state. It sells
shares of stock to its members and has a board of
directors. Unlike a corporation, a cooperative is
controlled by a vote of members based on service
bought from the cooperative and most of the profits are
distributed to members at the end of the business year.
Non-Profit Corporations
Operate to provide a service, but not for profit.
Tucson, is a municipal corporation or municipality (a
non-profit corporation). Tucson has its own officials,
police and fire departments, provides street repairs,
street lighting, and other services for its citizens. To do
this, Tucson levies taxes and passes rules and
regulations to operate effectively.
Other groups also organize as non-profit corporations. Among
them are private colleges and universities, American Red Cross,
Boy Scouts of America, and DECA.
Types of Businesses
• Producers
– Create the products and services used by
individuals and businesses.
– An extractor is a business that takes
resources from nature for direct consumption
or for use of development other products
• Crops
• Lumber
• Coal
Types of Businesses
• Intermediaries
– Businesses involved in selling goods and
services of producers to consumers and other
businesses
• Retailers
• Wholesalers
Types of Businesses
• Service Businesses
– Carries out activities that are consumed by its
customers. It does not offer products for sale.
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Dentists
Physicians
Lawyers
Pet Sitters
Painters
Furniture Movers
– Fastest growing part of the economy.
The Changing U.S. Job Market
• Employment data
– Number of jobs expected to reach 165 million
by 2014
– “Baby boomers” refers to people born
between 1946 and 1964 and they have
dominated the job market sine the 1960s
– The will start retiring in the 2010s
– The average age of US workers in 2020 will
be over 50
The Changing U.S. Job Market
• Employment data
– A mini-boom of younger workers will cause
the 20- to 30- year-old age group to grow
faster for the first time in 25 years
– Other groups that will go through higher
employment growth rates are Asian, Hispanic,
and African-American workers.
– Currently white non-Hispanic workers make
up 70 percent of the labor force
Pressures on Employees
• Increased work hours
– Downsizing
• Streamlined production
• Implemented other cost-cutting procedures
• Result - employees taking on new tasks and
working longer hours.
– Recent survey reported that 7 of 10 parents
felt they were not able to spend enough time
with their children
Pressures on Employees
• Increased use of contingent workers
– One who has no explicit or implicit
contract for long-term employment.
• About 5% of the US workforce (nearly 6
million people) is made up of contingent
workers.
• Some estimates project that number will
double in 10 years.
• Some workers take contingent work
because they cannot find permanent jobs,
others like the flexibility it offers.
Sample Test Questions
True or False
1. A sole proprietorship must be chartered
by the state in which it is located.
2. A partnership is owned by two or more
people who own shares of stock in the
company.
3. A corporation is a legal entity and has a
life separate from its owners.
Sample Test Questions
True or False?
1. Managers have to plan, control, lead,
staff, and organize.
2. Gathering and analyzing information, and
then making decisions about all phases of
the business, is called organizing.
3. Determining what work has to be done
and who is to do it is called organizing.
Sample Test Questions
4. Goals must be set in order to perform the
management activity of controlling.
5. Franchises can be operated only as sole
proprietorships or partnerships.
6. The person or group who receives a
franchise is called the franchisee.
7. A business owned by its members that is
managed in the owners’ interests is called
a cooperative.
Sample Test Questions
1. The form of business that represents two-thirds of U.S.
businesses is the
a. corporation.
b. partnership.
c. sole proprietorship.
d. cooperative.
2. A form of business that is based on a written agreement
about how to manage it and how to share profits is the
a. corporation.
b. partnership.
c. sole proprietorship.
d. cooperative.
Sample Test Questions
3. The form of business that requires written permission
from the state in which it is organized and can have
many owners is the
a. corporation.
b. partnership.
c. sole proprietorship.
d. cooperative.
4. People who become part owners of a corporation are
called
a. partners.
b. special owners.
c. shareholders.
d. cooperative owners.
Sample Test Questions
5. Which of the following is NOT one of the five activities of
business managers?
a. planning
b. purchasing
c. controlling
d. staffing
6. Performing the management activities of planning
includes
a. coming up with strategies to meet goals.
b. influencing people.
c. staffing the business.
d. developing organization charts.
Sample Test Questions
7. Assigning jobs to workers and giving authority to certain
people is a managing activity called
a. planning.
b. controlling.
c. leading.
d. organizing.
8. The part of the profits that are paid to shareholders is
called
a. excess profit.
b. a surplus.
c. a dividend.
d. none of the above.
Sample Test Questions
9. The parent company of a franchise business is known as
the
a. franchisee.
b. franchisor.
c. Big Daddy.
d. all of the above.
10. Which of the following is NOT true about a non-profit
corporation?
a. It can be organized to serve citizens.
b. It has no shareholders.
c. Examples are school clubs, colleges, and service
organizations.
d. All of the above are true.
Sample Test Questions
1. The written permission that allows a
corporation to organize is called a
_______________________.
2. Directing people so that their work is
performed correctly and on time is called
____________________.
3. A ____________________ is a group that
is responsible for guiding the operation of
a corporation.
Sample Test Questions
4. A written contract to sell another’s product
or service in a prescribed manner is a
____________________ agreement.
5. Some towns are organized as
_____________________ corporations.
Assignment
Page 120, Review Your Reading
Create a Word document, with a header
and answer questions 1, 2, and 3.
Page 121, Develop Your Business
Language
#10 through #23 –letter and the term that
matches it.
For example:
10. i. partnership