Business Organizations

LEQ: What are the different types of

business organizations?

Key Words: sole proprietorshipcorporationlimited liabilityunlimited liabilityStockArticles of incorporation

Use chart paper listing the different types of business and the characteristics of each.

1. Partnerships 2. Limited partnerships 3. Joint ventures 4. Corporations

Types of business.

When starting a business there are multiple ways to gain the necessary funds.◦ 1. Entrepreneurs take the risk to start a business

by investing time and money (resources) in hope to make a profit.

◦ 2. Help from the government. The Small Business Administration often helps finance startups, or new businesses.

◦ 3. “Small business Incubators” help aid local businesses by supporting them with state funds.

Starting a Business

1.Expenses- The money spent or put into a business to make it run.◦ Inventory, wages, bills and taxes.◦To find out if your business is making a profit

you add up all your expenses and weigh them against the money your business is making.

2. Advertising is set to make potential customers aware of the good or service of the business and what the price is.

What are the four elements of every Business?

3. Record Keeping- Every business must keep track of expenses and receipts to calculate profit.

4. Risk- Every business involves risk taking. ◦ Spending part of your savings on business

expenses.

What are the four elements of every Business?

Business Types

A sole proprietorship is a business owned by one person.

A proprietor is someone who owns a business.

The biggest disadvantage of a sole proprietorship is the unlimited liability , which means the sole owner of the business is responsible for all debts and damages from the business .

Sole Proprietorships

A business venture involving two or more people.◦ Business partners sign a legal binding document

that describes the duties, division of profits, and distribution of assets if the partnership is broken.

◦ Just like a sole proprietorship, the business partners have unlimited liability.

Partnerships

A special form of partnership where the partners are not equal.◦ In most cases there is one person who assumes

all the managerial aspects of the business.◦ The other partner may just be involved in

contributing money or property.

Limited Partnerships

This is when companies set up a temporary partnership for a specific purpose. They sign a temporary legal binding documents that holds the companies involved responsible.

Joint Ventures

Corporation is a type of business organization owned by many people but treated by law as though it were a person.◦ It can own property, pay taxes, and make

contracts.◦ Corporations are different then partnerships

because in corporations the group of people involved are there for financial backing and not involved in decision making.

Corporation

The people investing their money in a corporation buy “stock”.◦ Stock represents ownership rights to a certain

portion of the future profits and assets of the company that issues the stock.

Corporations make up only 20% percent of all business but earn 90% of business revenue.

Corporation (contd.)

One of the major advantages of a corporation is the limited liability. If a corporation goes bankrupt or gets sued, only the business itself loses money and assets not the stockholders.

Corporation (contd.)

3 Things must be done to start a corporations◦ 1.Register the company with the government of

the state in which it will be headquartered.◦ 2. Sell stock.◦ 3. Elect a board of directors

Corporate Structures

Most states require that the business filing for corporation creates a articles of incorporation, which is a document listing basic information.◦ Name, address, and purpose◦ Names and addresses of board of directors◦ Number of stock to be sold◦ Amount of money to be raised issuing stock

The state will then issue a corporate charter, which is a license granting the formation of corporation

1.Registering the Corporation

Common stock gives the investor part ownership in the corporation, a right to the company's future profits and voting rights at the annual meeting.

Preferred Stock gives no voting rights but they are guaranteed a certain amount of dividend each year.

2.Selling Stock

Stockholders at the annual meeting elect the board.

Board of directors set up the bylaws of corporation.

Bylaws are a set of rules describing how stock will be sold and dividends paid with a list of the duties of the company’s officers.

The board is responsible for supervising and controlling the corporation.

3.Naming a Board of Directors

A franchise is a contract in which a franchiser sells to another business the right to use its name and sell its products.

Many hotels, gas stations and resteraunts are franchises.

Franchise

1.Create or invent a product. 2. Create a poster board consisting of:

◦ a drawn picture of your product◦ 3-4 sentence description◦ Price◦ Product name◦ Company Name

Advertising Activity