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Chapter 8:
Business Organizations
Section 1: Starting a Business
• Profit Motive• Getting Started– Entrepreneur, some one willing to take a risk.– Gather relevant factors of production.– Research• Competition• Demography• What else?
Getting Started
• Help from the government– Startups- new small business– Small business incubator– Economic Enterprise zones– Department of Commerce
– Help from the internet
Elements of Business Operation
• Expenses– Start up– Inventory– Monthly
• Advertising• Record Keeping– Receipts
• Risk
Section 2: Sole Proprietorships and Partnerships
• Sole Proprietorship, most common type of business.
• Proprietor, owner.• Profits and losses are all yours.• Unlimited liability, assets may be seized• All management is on you.• Pay taxes as personal income, saves money.
Sole Proprietorship
• Personal satisfaction in a job well done.• Demands on time.• Easier to get credit.• Borrowing large amounts can be tough.• Life of the business is limited.
Partnership
• Two or more owners.• Limited Partnership, Partners are not equal.– General Partner- run day to day affairs– Limited Partner(s)
• Shared profits
Continued
• More efficient, two heads are better than one but can lead to disagreements.
• Tax advantage • Combines capital.• Business lasts longer, can buy one out.• Limited liability• Joint Venture- Temporary
Section 3: The Corporate World and Franchises
• Time to expand-corporation : is an organization owned by many people by treated by the law as though it were a person.
• Stocks: a share of ownership in a corporation, entitles buyer to part of future assets of the company.
• Limited liability: requirement in which an owners responsibility is for a companies debts is limited to the size of the owners investments in the firm.
Articles of incorporation
• Articles of incorporation:– Name, address, and purpose of corporation– Name, address of initial board members and
directors– Number and shares of stocks to be issued– Amount of money capital to be raised through
issuing stock.
• Corporate charter: a license to operate from that state.
• Common stock: Shares of ownership that give stock holders voting rights and a portion of future profits.(after holders of preferred stocks are paid)
• Dividend: portion of profit paid to stock holders.
• Preferred stocks: NO VOTING in company, but guaranteed a certain amount of dividend each year.
• By Laws: a set of rules describing how stock will be sold and dividends paid.
• Franchise: is a contract in which a firm sells to a group of people to use its name and sell its product.
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