chapter 6 Business Organizations 6 1 Business in
chapter 6 Business Organizations 6 -1 Business in America 6 -2 Proprietorships in America 6 -3 Partnerships in America 6 -4 Corporations in America © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1
chapter 6 6 -1 Business in America Learning Objectives LO 1 -1 Identify the beginnings of business in America, from farming to the Gilded Age. LO 1 -2 Discuss the evolution of business activity in the Twentieth Century. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2
chapter 6 6 -1 Business in America Vocabulary From Agriculture to Enterprise barter industrialization specialization The Twentieth Century mechanization productivity branding © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3
chapter 6 From Agriculture to Enterprise Barter is the process of exchanging one product for another. ü In order to meet needs of food, clothing, and shelter, trading and bartering was a common means of business activity from the early 1600 s to the mid 1700 s in America. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -1 Business in America 4
chapter 6 From Agriculture to Enterprise Industrialization is the process of making large quantities of goods and services in factories. ü The industrial revolution in America began in the mid 1700 s and flourished through the mid 1800 s. ü A growing population demanded more goods and services. Businesses popped up to meet those needs. ü People with skills started companies to make and sell products. Many people started working in factories and earning a paycheck. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -1 Business in America 5
chapter 6 From Agriculture to Enterprise Specialization occurs where workers are doing just a few tasks and learning to do them well. ü When people began working in factories, they were able to specialize in a small number of tasks, rather than making almost everything they consumed. ü This process leads to efficiency and the ability to make more and better products at a lower cost. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -1 Business in America 6
chapter 6 The Twentieth Century Mechanization is the process of using tools and machines to make more, better, and cheaper products. Productivity is the value of outputs compared to the cost of inputs. ü As outputs (what you can produce) go up, while the cost of labor and materials does not increase as fast, productivity grows. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -1 Business in America 7
chapter 6 The Twentieth Century Branding gives recognition that leads to customer loyalty. ü Following World War II, businesses began to rethink how they would use their resources to make profits. Product branding and differentiation began. ü Brand names gained recognition, from Coca-Cola to Chevrolet. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -1 Business in America 8
chapter 6 6 -2 Proprietorships in America Learning Objectives LO 2 -1 List and explain the advantages of the proprietorship form of business ownership. LO 2 -2 List and explain the disadvantages of proprietorships. LO 2 -3 Describe the advantages of a limited liability company. LO 2 -4 Describe the disadvantages of a limited liability company. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9
chapter 6 6 -2 Proprietorships in America Vocabulary Proprietorships: The Good News sole proprietorship business tax deduction business license Proprietorships: The Bad News unlimited liability collateral The LLC: Good News limited liability company (LLC) The LLC: Bad News © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10
chapter 6 Proprietorships: The Good News In a sole proprietorship, the business is owned and managed by a single person. ü That person is accountable to no one except him- or herself. ü That means the owner makes all the decisions and controls what the company does or does not do. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -2 Proprietorships in America 11
chapter 6 Proprietorships: The Good News A write-off, or business tax deduction, allows business owners a favored tax status. A business license is a document issued by a local government unit that allows business activities within a certain geographic area. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -2 Proprietorships in America 12
chapter 6 Proprietorships: The Bad News Unlimited liability is when all a proprietor’s assets (even car and home) are at risk. ü The business owner has total liability for what the business does. The debts of the business are the debts of its owners. If the business fails, the owner is responsible. If the business gets sued, the owner will also have to pay. Collateral is assets that have value and can be sold for cash. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -2 Proprietorships in America 13
chapter 6 The LLC: Good News A limited liability company (LLC) is a form of business ownership that creates a sole proprietorship without unlimited liability. ü This is a relatively new form of business ownership. ü The LLC is not a corporation, nor is it a partnership. ü It is formed by filing a document called “articles of organization” with the state. This procedure requires the owner(s) to write up an operating agreement and pay a filing fee. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -2 Proprietorships in America 14
chapter 6 The LLC: Bad News There are several limitations to the LLC from of ownership. Understanding the LLC an the decision to be made up front will take time. Setting up an LLC will likely require the services of an attorney or a tax accountant and require an investment of a several thousand dollars. LLCs are created in individual states. They differ by states. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -2 Proprietorships in America 15
chapter 6 6 -3 Partnerships in America Learning Objectives LO 3 -1 Discuss the characteristics of a general partnership, including advantages and disadvantages. LO 3 -2 Discuss the characteristics of a limited partnership. LO 3 -3 Describe the concept of a limited liability partnership. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16
chapter 6 6 -3 Partnerships in America Vocabulary General Partnerships partnership general partnership agreement Limited Partnerships limited partnership limited liability Limited Liability Partnerships (LLPs) limited liability partnership (LLP) © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17
chapter 6 General Partnerships When two or more people go into business together as co-owners, it is called a partnership. ü This form of ownership is less common than proprietorships or corporations, but still there are nearly 2. 5 million of them in America today. ü There are three different types of partnerships: general, limited, and LLPs. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -3 Partnerships in America 18
chapter 6 General Partnerships A general partnership is a business with partners that manage the company and share in the profits (or losses) from the business. A partnership agreement is an agreement that clearly states what each partner of a business has agreed to. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -3 Partnerships in America 19
chapter 6 Limited Partnerships A limited partnership is a business where there is at least one general partner and at least one limited partner. ü A limited partner is one who contributes money and does not participate fully in the business. ü The limited partner is entitled to a part of the profits (as stated in the agreement). But the limited partner does not have management or daily responsibilities. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -3 Partnerships in America 20
chapter 6 Limited Partnerships Limited liability means the limited partner will be held liable for debts or obligations of the company only to the extent of his or her financial investment in the company. ü In other words, as long as they do not participate in general management, their personal assets will not be at risk. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -3 Partnerships in America 21
chapter 6 Limited Liability Partnerships (LLPs) The limited liability partnership (LLP) is an ownership plan that allows general partnerships to provide limited financial liability for general partners. ü The main advantage of an LLP is that it protects all partners. Thus all partners can take an active role in managing the business, and all partners will have some form of limited liability. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -3 Partnerships in America 22
chapter 6 6 -4 Corporations in America Learning Objectives LO 4 -1 Describe the four types of corporations, three of which are profit-seeking. LO 4 -2 Discuss how corporations are formed and how they operate. LO 4 -3 List and define the advantages and disadvantages of the corporate form of organization. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23
chapter 6 6 -4 Corporations in America Vocabulary Types of Corporations C corporation dividends S corporation Forming a Corporation stockholders common stock preferred stock The Good and the Bad © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24
chapter 6 Types of Corporations A C corporation is organized to sell stock to the general public. ü It is the most common type of corporation and what most people think of when they say “corporation. ” ü The stock of these companies is sold on the stock market and stock exchanges. Anyone can buy it, including individuals. ü Because shares of stock are sold to the public, C corporations are subject to the rules and regulations of the Securities and Exchange Commission (SEC). © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -4 Corporations in America 25
chapter 6 Types of Corporations Dividends are returns to owners of the profits earned by the company. ü Dividends are taxable income to those who receive them. ü Businesses and individuals paying taxes on the same money is the concept of “double taxation. ” © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -4 Corporations in America 26
chapter 6 Types of Corporations An S corporation is a small business entity that is created under state laws. ü Most proprietorships or partnerships become an S corporation in order to avoid unlimited liability. ü An S corporation does not sell stock to the general public, and it is often referred to as a “family business corporation. ” ü State laws control what an S corporation can and cannot do, what paperwork must be filed, and how often the corporate officers must meet. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -4 Corporations in America 27
chapter 6 Forming a Corporation Stockholders are individuals who buy shares of stock to become part owners in a corporation. Common stock is a class of stock in a corporation that carries the biggest risk. Preferred stock is a class of stock in a corporation that typically has a guaranteed annual dividend. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -4 Corporations in America 28
chapter 6 The Good and the Bad The biggest advantage of corporate ownership is limited liability. Corporations often get large and complex, and they are subject to government regulation. Corporations are subject to double taxation. © 2013 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6 -4 Corporations in America 29
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