Business Organizations

1. Business Organizations Chapter 3

2. Goals & Objectives • Characteristics of Business Organizations. • Advantages & Disadvantages of Business Organizations. • Structure & Features of a Corporation. • Expanding business profits & growth. • Mergers: Types & Causes. • Nonprofit organizations. • Direct & Indirect role of gov’t in our economy.

3. 3 Types of Business Org. • 1. Sole Proprietorships: owned and operated by one person. • 2. Partnerships: jointly owned by two or more persons. • 3. Corporations: separate legal entity having all the rights of an individual.

4. Business Organizations

5. Sole Proprietorships • Easiest form of business to start, no legal requirements: taxes, fees, regulations 70+% of all business start-ups are sole proprietorships 15+% of business profits are sole proprietorships

6. One Owner Business Type

7. Sole Proprietorships • ADVANTAGES: • 1. Easy to start. • 2. Ease of management. • 3. Owner keeps all profits. • 4. Owner does NOT have to pay taxes! • 5. Psychological satisifaction.

8. Sole Proprietorships • DISADVANTAGES: • 1. Unlimited Liability—personally responsible for losses and debts. • 2. Difficult to raise start-up money. • 3. Lack of capital to purchase inventory. • 4. Limited Managerial experience. • 5. Difficult to attract qualified employees. • 6. Limited Life—most fail in first two years.

9. Partnerships • 2 types of partnerships: • 1. General Partnership—ALL partners are equally responsible for financial management and obligations. • 2. Limited Partnerships—ONE partner operates with autonomy. 51% Bi-Laws written by attorney.

10. General & Limited Partnerships

11. Partnership Advantages • 1. Easy to establish. • 2. Ease of management. • 3. Lack of special taxes. • 4. Larger and more capable of attracting financial capital and contracts.

12. Partnership Disadvantages • 1. One partner is fully accountable for the other partner’s mistakes. • 2. LimitedPartnership: limited partner not accountable for lawsuits or • 3.Bankruptcy: court granted permission to cease or delay payments. • 4. Conflict between partners and tax obligations.

13. Corporations • A separate legal entity! • Forming a Corporation: • 1. charter: government permission to create is granted. • 2. stock: ownership of certificates, shares sold to shareholders: stockholders: • 3. dividend: profit from shares

14. S-Corporation vs. C-Corporation

15. Common Stock: basic ownership with the right to vote on Board of Directors….more expensive to purchase. Public/Professional Mgt. Team Preferred Stock: nonvoting ownership. Stock pays dividends. Preferred stock gets paid first. Two types of Stock

16. Common or Preferred?

17. Corporation Advantages • Ease of financial capital: stock (shares) • Bonds: IOU’s (principal-interest:) • Can afford professional managers. • Provides limited liability (LLC)!!!!!!!!!!! • Ease of transferring ownership.

18. Bonds vs Preferred Dividends

19. Corporation Disadvantages • 1. difficulty and expense of obtaining a charter. • 2. Owners have little autonomy over daily business operations. • 3. DOUBLE TAXATION: profits are taxed twice (business tax, personal income tax) • 4. subject to government regulation (SEC)

20. Obama Tax Increases

21. Government/Business Regulation • State Gov’t: sets insurance rates. • State Gov’t: sets utility rates. • State Gov’t: sets banking rules. • State Gov’t: sets licensing requirements. • State Gov’t: Regulates Education. • State Gov’t: Regulates Transportation. Examine your State’s Success Rate:

22. Business Growth • Merger: two or businesses to form a single firm. • Net Income: Gross-Taxes-Expenses=Net Income • Depreciation: loophole for wear on capital goods.

23. Mergers & Acquistions

24. Reasons for Merging • 1. Efficiency • 2. Acquire new product lines (patents) • 3. Eliminate competition. • 4. Lose corporate identity: • 5. Lessen management expenses.

25. Types of Mergers • 1. horizontal merger: two or more producing the SAME goods • 2. vertical merger: LINE merging, auto company with tire company • WAL-MART: Wholesale (Sam’s), Retail (Wal-Mart), Discount (Bud’s) Horizontal • WAL-MART: Retail goods, trucking company, gas station, car sales, banks, etc…

26. Conglomerates • 4 or more business’ making different products that do not produce a majority of its sales • Diversification:” put all their eggs in one basket”

27. Conglomerate Examples

28. Multinationals • Operations in a number of different countries. • --Free Trade has given growth to multinationals? Explain. • Free Trade has bankrupted America’s: Social Security & Medicare Trust Funds • 1. abuse power by: low wages, natural resources, causing bankruptcy of native business. (9/11 Terrorist Attack?)

29. Most Popular Multinationals

30. Nonprofit Organizations • No financial gain: YMCA, public-private schools, churches, Salvation Army, Red Cross, etc…. • Pay no taxes but are eligible for Tax Subsidies and federal financing. • PAC’s—Iron Triangles---Special Interests

31. Cooperatives • Business to protect and profit it’s members: • 1. Consumer Cooperative: Sam’s Club • 2. Service Cooperative: Credit Unions • 3. Producer Cooperative: Farmers Co-op • Less Government Regulation.

32. Producer Cooperatives

33. Labor Unions • Labor Unions: benefits it’s members only • Collective Bargaining: pressure for government protection. • AFL-CIO

34. Professional Associations • 1. AMA: • 2. ABA: • 3. NEA: • Want government to pass laws to limit their competition!

35. Chamber of Commerce • Promotes community: Bass Pro Shops. How did Spanish Fort attract them? What are the benefits of getting Bass Pro Shops? • BBB:

36. Direct Role of Government • TVA: power • FDIC: banking protection • US Post Office • SEC, IRS, DEA, BATFE, OBAMACARE, FTC, WTO, EPA, OSHA, FDA, FCC, NLRB, FAA, EEOC, CPSA, NRC, FERC • Amtrack

37. 2013 Government Spending

38. Indirect Role of Government • Gov’t regulated utilities, cable television. • Social Security/Medicare • Pell Grants • Unemployment Compensation. • Food Stamps • Medicaid • Welfare • WIC • Obamacare • Subsidies & Business Bailouts