Business Organization

1. CHAPTER 5 Business Organization 5-1 Business in the U.S. Economy 5-2 Forms of Business Ownership 5-3 Organizational Structure for Businesses

2. 5-1 Business in the U.S. Economy Learning Targets: Describe the changing status of U.S. employment. Discuss the role of business in the U.S. economy. Describe three major types of businesses.

3. Chapter 5 THE CHANGING U.S. JOB MARKET • Employment data – Baby boomers (people born between 1946-1964) have dominated the labor market. • They will continue to dominate until they reach retirement age (2010-2019). • Average age of U.S. workers in 2020 will be 50 • 20-30 year old age group will grow fastest in 2010-2020. • Other groups that will grow: Asian, Hispanic & African-American • Over last 50 years, most notable change in workforce has been women.

4. It was thought that technology would allow people to work fewer hours. Economic stress has led to downsizing; requiring employees to work extra hours or work two jobs. 7 of 10 parents felt they did not spend enough time with children/families. Chapter 5 Pressures on employees

5. Chapter 5 BUSINESS AND THE ECONOMY • Size of businesses – most U.S. businesses are small • Roles of business – provide employment, pay taxes, distribute goods and services • Impact on a community – buys goods and services, employs local people, other businesses open

6. Percent of Businesses by Employee Size Chapter 5 Source: U.S. Census Bureau

7. Chapter 5 BUSINESS ACTIVITIES • Generating ideas – remain competitive • Raising capital - buy buildings, materials, employ workers. Mostly obtained through loans and investments • Employing and training personnel – recruit, hire, train employees; pay wages and benefits • Buying goods and services • Marketing goods and services – activities directed at providing goods/services; without marketing, goods and services go unsold • Maintaining business records – management makes decisions based on financial records

8. Chapter 5 TYPES OF BUSINESSES • Producers – create products/services; farmers, extractors • Intermediaries – sells goods/services made by the producers; Remke’s, Kohl’s • Service businesses – dentists, lawyers, painters, pet sitters, furniture movers, etc.

9. 5-2 Forms of Business Ownership Learning Targets: Understand the three major forms of business ownership. Determine when each form of business ownership is most appropriate. Recognize other specialized business ownership forms.

10. Chapter 5 BUSINESS OWNERSHIP • Proprietorship – owned and run by one person. Easiest to start and end; few legal requirements. Control over all business decisions. If it fails, owner responsible. • Partnership – owned and controlled by 2 or more people. Share profits; partnership agreement; each partner is responsible. • Corporation – owned by shareholders; managed by board of directors; must meet legal requirements.

11. Forms of Ownership Chapter 5 Source: Internal Revenue Service

12. Chapter 5 CHOOSING A FORM OF BUSINESS OWNERSHIP • Choosing a proprietorship – freedom of working for self; total control; some formed from hobbies and can be part-time • Choosing a partnership – shared responsibilities; more people to invest; help with decisions • Choosing a corporation – must follow laws in state where they are; must file article of incorporation; more laws/regulations; liability is limited

13. Chapter 5 OTHER FORMS OF OWNERSHIP • Specialized partnerships and corporations • limited liability partnership – you cannot lose more than what you invested • Joint venture • S corporation – all income is passed onto the owner’s • Non-profit organization • Cooperatives and franchises

14. 5-3 Organizational Structure for Businesses Learning Targets: Understand important principles in designing an effective organization. Compare alternative organizational structures for businesses.

15. Chapter 5 DESIGNING AN EFFECTIVE BUSINESS ORGANIZATION • Setting direction – needs to be well organized and have a clear purpose; comes from mission statement; • Principles of effective organization • Responsibility, authority, and accountability • Unity of command – clear reporting relationship • Span of control – number of employees who are assigned to a particular work task and manager

16. Chapter 5 TYPES OF ORGANIZATIONAL STRUCTURES • Functional organization structure – arranged by department/job description • Matrix organizational structure – arranged by project or products

17. Business Organization Chart Chapter 5

18. Problems with functional organizational structure: Chapter 5 • Employees in a functional organizational structure may tend to lose sight of overall corporate goals. • Workers tend to be limited to specific duties and may not see their relationship to the organization as a whole. • This can result in lack of interest and motivation over time.

19. Owned and run by one person No protection for personal assets The easiest for a business to start and run Business income is taxed like personal income Does not require a business name The majority of U.S. businesses are sole proprietorships Chapter 5 Characteristics of a Sole Proprietorship

20. Owned and controlled by two or more people A written agreement No protection for personal assets Usually must be dissolved if an owner leaves Two or more people can invest in the business Must register the business name and the names of all owners Chapter 5 Characteristics of a Partnership

21. A written agreement Shareholders have a say in business decisions Managed by a board of directors Protects the liability of the owners Two or more people can invest in the business Must create bylaws or operating procedures Chapter 5 Characteristics of a Corporation