CHAPTER 5 SLIDE 1 BUSINESS ORGANIZATION Business in

CHAPTER 5 SLIDE 1 BUSINESS ORGANIZATION Business in the U. S. Economy Forms of Business Ownership Organizational Structure for Businesses © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 Contingent worker- employee with no long term obligation (short term or temporary worker) PERCENT OF BUSINESSES BY EMPLOYEE SIZE © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 BUSINESS ACTIVITIES ● Generating ideas ● Raising capital ● Employing and training personnel ● Buying goods and services ● Marketing goods and services ● Maintaining business records © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 TYPES OF BUSINESSES ● Producer- Create products and services Example: Extractor, Farmer, manufacturers ● Intermediaries- Selling goods & services Example: Retail clothing store, COSTCO ● Service business- Offer something intangible Example: Dentist, Teacher © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

3 TYPES OF BUSINESS OWNERSHIP CHAPTER 5 ● Sole Proprietorship- 1 owner Example: Duncan’s Landscape (small business) ● Partnership- 2 or more owners Example: Law office of Smith & Williams ● Corporation- A legal entity where the owners are shareholders (stock ownership) Example: Apple, Wal-Mart © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 3 TYPES OF BUSINESS OWNERSHIP Sole Proprietorship. Unlimited Liability- Owner is 100% responsible for the business Partnership Agreement- Legal Document that defines the details of each partner Corporation. Articles of Incorporation- Legal documents that defines the details of the corporation. Stock- shares of ownership in a corporation Limited Liability- The risk is limited to your investment. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 Forms of Ownership U. S. Business Comparison by Form of Ownership Proprietorship Number of Businesses (2006) Total Revenue (Thousands) Percent of All Businesses Percent of Total Revenue 22, 075, 000 1, 278, 000 71. 53% 4. 06% Corporation 5, 841, 000 26, 070, 000 18. 93% 82. 82% Partnership 2, 947, 000 4, 131, 000 9. 55% 13. 12% 30, 863, 000 31, 479, 000 100. 00% Total © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 Checkpoint ● Which form of business ownership is the most complex and difficult to form? ● The corporation is more complex to begin than other business forms. ● Forming a corporation requires much more bureaucracy, is more subject to government regulations, requires the organization of a board, and must have clearly defined bylaws. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

OTHER FORMS OF OWNERSHIP CHAPTER 5 ● Franchise- a chain business that you can purchase for a fee. Any 3 of the ownerships can invest in a franchise EXAMPLE: Mc. Donalds, Sport Clips, © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 Checkpoint ● What are the other specialized forms of business ownership? ● Limited liability partnership ● Joint venture ● S corporation ● Limited liability company (LLC) ● Nonprofit corporation © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 KEY TERMS ● Mission Statement- a written objective of the company’s goals and vision ● Goal- the objective, what are you wanting to accomplish ● Policies- rules of the business ● Procedures- methods of activities that support the mission statement and goals. ● Organization chart- chain of command chart, who is in charge of who and what © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

BUSINESS ORGANIZATION CHART © 2012 Cengage Learning. All Rights Reserved. CHAPTER 5 SLIDE 12

CHAPTER 5 (3 types of ownership, advantages/ disadvantages/legal documents) Sole Proprietorship Advantage- 100% profit, easy to start Disadvantage- 100% liability & risk, long hours Legal Docs: Assumed Name Certificate, SS# or Tax ID Partnership Advantage- shared responsibility and risk Disadvantage- shared profits Legal Docs: Partnership Agreement, Tax ID Corporation. Advantage – limited liability, more resources Disadvantage- double taxation, limited profits Legal Docs: Corporate Resolution, Articles of Incorporation, Tax ID © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 SLIDE 14 Page 2 A & 2 B (ONLINE RESEARCH) FRANCHISE RESEARCH (2) www. entrepreneur. com/franchise CORPORATION RESEARCH © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 SLIDE 15 Entrepreneurship and Small Business Management Becoming an Entrepreneur Small Business Basics Starting a Small Business © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 KEY TERMS ● Entrepreneur- the individual that is a risk taker and innovator. ● Entrepreneurship- the business that is creative and risky. ● Characteristics: Creative, confident, goaloriented, motivated, hard-working ● Risks: Unproven idea, little management experience, long-hours with no guarantee of a profit © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 KEY TERMS ● Venture Capital- Money provided by large investors to finance new products and new businesses that have a good chance to be very profitable *Innovation- a brand new creation or invention *Improvements- a significant design change or addition on an existing product © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER Small Business- a business with 5 less than 500 employees (typically just a few people) ● Not all business owners and managers are entrepreneurs. ● Entrepreneurs have unique skills and personal characteristics. ● 3 CHARACTERISTICS OF A SMALL BUSINESS: The owner is usually the manager Usually only 1 or 2 locations Typically serves a small market © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 3 Reasons most small businesses fail ● Lack of money ● Lack

Employment Growth by Business Size, 1990– 2005 © 2012 Cengage Learning. All Rights Reserved.

CHAPTER 5 Checkpoint ● What are the sources of financing that entrepreneurs use for their new businesses? ● Personal savings ● Friends and family ● Venture capital ● Bank loans © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 SLIDE 22 KEY TERMS ● Small Business Administration (SBA)- a government agency that helps small business owners develop business plans and obtain financing © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER Common Types of Small Businesses as Percent of All Small Businesses © 2012

CHAPTER BUSINESS PLAN 5 SLIDE 24 Business Plan- a written description of the business idea and how it will be carried out. 5 ELEMENTS 1)Description of the business & goals 2)Customer Analysis- knowing your customer 3)Operations Plan- organizing the business 4)Marketing Plan- marketing & advertising 5)Financial Plan- Creating a Budget: start up, short term & long term © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 SLIDE 25 Checkpoint ● What are the “strategic alternatives” in a business plan? ● Strategic alternatives are alternative plans for production, staffing, financing, and so on. ● Even the best business plan cannot predict every possible circumstance. ● An alternate plan allows a business to be prepared for the unforeseeable. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

FINANCING THE SMALL BUSINESS CHAPTER 5 SLIDE 26 ● Types of financing ● Start-up financing- the money and details of getting the business started: inventory, supplies ● Short-term financing- the money needed for the first year of expenses ● Long-term financing- a 3 -5 year plan of success for the business, identify long term financial needs. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e

CHAPTER 5 SLIDE 27 Checkpoint ● In addition to owner-supplied capital, what are several other sources of financing for a small business? ● Borrowed money may come from banks, finance companies, or other individuals, such as friends and family. ● Some suppliers may also be willing to extend credit. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8 e