Sole Proprietorships What role do sole proprietorships play

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Sole Proprietorships • What role do sole proprietorships play in our economy? • What

Sole Proprietorships • What role do sole proprietorships play in our economy? • What are the advantages of a sole proprietorship? • What are the disadvantages of a sole proprietorship? Chapter 8 Main Menu 1

The Role of Sole Proprietorships • A business organization is an establishment formed to

The Role of Sole Proprietorships • A business organization is an establishment formed to carry on commercial enterprise. • Sole proprietorships are the most common form of business organization. Chapter 8 Main Menu 2

The Role of Sole Proprietorships • Owned and managed by a single individual. •

The Role of Sole Proprietorships • Owned and managed by a single individual. • Most are small. • Generate only about 6% of all US sales. • Most earn modest incomes. • Many are run part-time. Chapter 8 Main Menu 3

Characteristics of Proprietorships Chapter 8 • Page 186 Main Menu 4

Characteristics of Proprietorships Chapter 8 • Page 186 Main Menu 4

Advantages of Sole Proprietorships 1. Ease of Start-Up • Small amount of paperwork and

Advantages of Sole Proprietorships 1. Ease of Start-Up • Small amount of paperwork and legal expenses. 2. Relatively Few Regulations • The least-regulated form of business organization. Chapter 8 Main Menu 5

Advantages of Sole Proprietorships 3. Sole Receiver of Profit • After paying taxes, the

Advantages of Sole Proprietorships 3. Sole Receiver of Profit • After paying taxes, the owner keeps all the profits. 4. Full Control • Can run their businesses as they wish. Chapter 8 Main Menu 6

Advantages of Sole Proprietorships 5. Easy to Discontinue • Pay off taxes and debt,

Advantages of Sole Proprietorships 5. Easy to Discontinue • Pay off taxes and debt, stop doing business. Chapter 8 Main Menu 7

Disadvantages of Sole Proprietorships • Limited access to resources such as physical and human

Disadvantages of Sole Proprietorships • Limited access to resources such as physical and human capital. • Lack permanence. Whenever an owner closes shop, the business ceases to exist. Chapter 8 Main Menu 8

Disadvantages of Sole Proprietorships • The biggest disadvantage is unlimited personal liability. Liability is

Disadvantages of Sole Proprietorships • The biggest disadvantage is unlimited personal liability. Liability is the legally bound obligation to pay debts. Chapter 8 Main Menu 9

Section 1 Review 1. What is a sole proprietorship? 2. What is an advantage

Section 1 Review 1. What is a sole proprietorship? 2. What is an advantage of a sole proprietorship? 3. What is a disadvantage of a sole proprietorship? Want to connect to the PHSchool. com link for this section? Click Here! Chapter 8 Main Menu 10

Partnerships • What types of partnerships exist? • What are the advantages of partnerships?

Partnerships • What types of partnerships exist? • What are the advantages of partnerships? • What are the disadvantages of partnerships? Chapter 8 Main Menu 11

Partnerships • Account for 7% of all businesses • 5% of sales • 10%

Partnerships • Account for 7% of all businesses • 5% of sales • 10% of income Chapter 8 Main Menu 12

Types of Partnerships Three types of partnerships: 1. General Partnership – partners share equally

Types of Partnerships Three types of partnerships: 1. General Partnership – partners share equally in both responsibility and liability. 2. Limited Partnership – only one partner is required to be a general partner, or to have unlimited personal liability for the firm. Chapter 8 Main Menu 13

Types of Partnerships Three types of partnerships: 3. Limited Liability Partnership – A newer

Types of Partnerships Three types of partnerships: 3. Limited Liability Partnership – A newer type of partnership, all partners are limited partners. Chapter 8 Main Menu 14

Advantages of Partnerships 1. Ease of Start-Up No required agreement, but usually develop articles

Advantages of Partnerships 1. Ease of Start-Up No required agreement, but usually develop articles of partnership. 2. Shared Decision Making and Specialization Bring different strengths and skills to the business. Chapter 8 Main Menu 15

Advantages of Partnerships 3. Larger Pool of Capital Each partner's assets improve the firm's

Advantages of Partnerships 3. Larger Pool of Capital Each partner's assets improve the firm's ability to borrow funds. 4. Taxation Individual partners are subject to taxes, but the business itself does not have to pay taxes. Chapter 8 Main Menu 16

Advantages of Partnerships – Articles of partnership spells rights and responsibilities of each partner.

Advantages of Partnerships – Articles of partnership spells rights and responsibilities of each partner. - Uniform Partnership Act – state law that establishes rules of partnership. Chapter 8 Main Menu 17

Disadvantages of Partnerships • Unless it is a limited liability partnership (LLP), at least

Disadvantages of Partnerships • Unless it is a limited liability partnership (LLP), at least one partner has unlimited liability. • General partners are bound by each other’s actions. Chapter 8 Main Menu 18

Disadvantages of Partnerships • Potential for conflict. Partners need to ensure that they agree

Disadvantages of Partnerships • Potential for conflict. Partners need to ensure that they agree about work habits, goals, management styles, ethics, and general business philosophies. Chapter 8 Main Menu 19

Section 2 Review 1. What advantage does a partnership have over a sole proprietorship?

Section 2 Review 1. What advantage does a partnership have over a sole proprietorship? • How is a general partnership organized? Want to connect to the PHSchool. com link for this section? Click Here! Chapter 8 Main Menu 20

Corporations, Mergers, and Multinationals • What types of corporations exist? • What are the

Corporations, Mergers, and Multinationals • What types of corporations exist? • What are the advantages of incorporation? • What are the disadvantages of incorporation? • How can corporations combine? Chapter 8 Main Menu 21

Types of Corporations • A corporation is a legal entity owned by individual stockholders.

Types of Corporations • A corporation is a legal entity owned by individual stockholders. • Stocks, or shares, represent a stockholder’s portion of ownership (equity) of a corporation. Chapter 8 Main Menu 22

Types of Corporations • Closely held corporation - issues stock to a limited a

Types of Corporations • Closely held corporation - issues stock to a limited a number of people. • A publicly held corporation - buys and sells its stock on the open market. • 20% of businesses, 90% of sales, 70% of net income Chapter 8 Main Menu 23

Advantages of Incorporation Advantages for the Stockholders • Individual investors do not carry responsibility

Advantages of Incorporation Advantages for the Stockholders • Individual investors do not carry responsibility for the corporation’s actions. • Shares of stock are transferable, which means that stockholders can sell their stock to others for money. Chapter 8 Main Menu 24

Advantages of Incorporation Advantages for the Corporation • More potential for more growth. •

Advantages of Incorporation Advantages for the Corporation • More potential for more growth. • Corporations can borrow money by selling bonds. • Corporations can hire the best available labor. • Corporations have long lives. Chapter 8 Main Menu 25

Disadvantages of Incorporation 1. Difficulty and Expense of Start-Up Corporate charters - expensive and

Disadvantages of Incorporation 1. Difficulty and Expense of Start-Up Corporate charters - expensive and time consuming Certificate of incorporation - state license is required Chapter 8 Main Menu 26

Disadvantages of Incorporation 2. Double Taxation Corporations pay taxes on their income. Owners also

Disadvantages of Incorporation 2. Double Taxation Corporations pay taxes on their income. Owners also pay taxes on dividends. Chapter 8 Main Menu 27

Disadvantages of Incorporation 3. Loss of Control Managers and boards of directors, not owners,

Disadvantages of Incorporation 3. Loss of Control Managers and boards of directors, not owners, manage corporations. 4. More Regulation More regulations than other kinds of business organizations. Chapter 8 Main Menu 28

Corporate Combinations • Horizontal mergers combine two or more firms, in same market, same

Corporate Combinations • Horizontal mergers combine two or more firms, in same market, same good or service. • Vertical mergers combine two or more in different stages of producing the same good or service Chapter 8 Main Menu 29

Corporate Combinations • Conglomerate - business combination merging more than three businesses that make

Corporate Combinations • Conglomerate - business combination merging more than three businesses that make unrelated products. • No single business contributing a majority of the revenue. Chapter 8 Main Menu 30

Multinationals Multinational corporations (MNCs) are large corporations headquartered in one country that have subsidiaries

Multinationals Multinational corporations (MNCs) are large corporations headquartered in one country that have subsidiaries throughout the world. Chapter 8 Main Menu 31

Multinationals Advantages of MNCs • Benefit consumers by offering products worldwide. • Spread new

Multinationals Advantages of MNCs • Benefit consumers by offering products worldwide. • Spread new technologies and production methods. Chapter 8 Main Menu 32

Multinationals Disadvantages of MNCs • Some feel MNCs influence culture and politics. • Concern

Multinationals Disadvantages of MNCs • Some feel MNCs influence culture and politics. • Concern about wages and working conditions. Chapter 8 Main Menu 33

Section 3 Review 1. Name some advantages of incorporation. 2. How do horizontal and

Section 3 Review 1. Name some advantages of incorporation. 2. How do horizontal and vertical mergers differ? Want to connect to the PHSchool. com link for this section? Click Here! Chapter 8 Main Menu 34

Other Organizations • How do business franchises work? • What are three types of

Other Organizations • How do business franchises work? • What are three types of cooperative organizations? • What are nonprofit organizations? Chapter 8 Main Menu 35

Business Franchises Business franchise Semi-independent business - pays fees to a parent company -

Business Franchises Business franchise Semi-independent business - pays fees to a parent company - exclusive right to sell a certain product or service in a given area. Chapter 8 Main Menu 36

Business Franchises • Franchisers develop products and services. Local franchise owners help to produce

Business Franchises • Franchisers develop products and services. Local franchise owners help to produce and sell those products. • Franchises allow owners a degree of control, as well as support from the parent company. Chapter 8 Main Menu 37

Advantages and Disadvantages of Business Franchises Advantages of Business Franchises • Management training and

Advantages and Disadvantages of Business Franchises Advantages of Business Franchises • Management training and support • Standardized quality • National advertising programs • Financial assistance • Centralized buying power Chapter 8 Main Menu 38

Advantages and Disadvantages of Business Franchises • High franchising fees and royalties • Strict

Advantages and Disadvantages of Business Franchises • High franchising fees and royalties • Strict operating standards • Purchasing restrictions • Limited product line Chapter 8 Main Menu 39

Cooperatives Cooperative - business organization owned and operated by a group for their shared

Cooperatives Cooperative - business organization owned and operated by a group for their shared benefit. 1. Consumer Cooperatives – Retail outlets owned and operated by consumers. – Sell their goods to their members at reduced prices. Chapter 8 Main Menu 40

Cooperatives 2. Service Cooperatives – Provide a service, rather than goods. 3. Producer cooperatives

Cooperatives 2. Service Cooperatives – Provide a service, rather than goods. 3. Producer cooperatives – agricultural marketing cooperatives that help members sell their products. Chapter 8 Main Menu 41

Nonprofit Organizations Professional Organizations work to improve the image, working conditions, and skill levels

Nonprofit Organizations Professional Organizations work to improve the image, working conditions, and skill levels of people in particular occupations. Business Associations promote the business interests of a city, state, or other geographical area, or of a group of similar businesses. Chapter 8 Main Menu 42

Nonprofit Organizations Trade Associations promote the interests of particular industries Labor Unions organized group

Nonprofit Organizations Trade Associations promote the interests of particular industries Labor Unions organized group of workers whose aim is to improve working conditions, hours, wages, and fringe benefits Chapter 8 Main Menu 43

Section 4 Review 1. What is a business franchise? 2. What is a consumer

Section 4 Review 1. What is a business franchise? 2. What is a consumer cooperative? Want to connect to the PHSchool. com link for this section? Click Here! Chapter 8 Main Menu 44