CHAPTER 8 Resource Manager CHAPTER 8 Resource … · a bank limits the partnership’s liability. ... Chapter 8 Test Form A Name Date Class SCORE A B USINESS ORGANIZATIONS RECALLING

Assessment and Evaluation

Spanish Economic Concepts Transparency 7

Spanish Vocabulary Activity 8

Spanish Reteaching Activity 8

Spanish Section Quizzes for Chapter 8

Spanish Chapter 8 Audio Program, Activity, and Test

Spanish ResourcesReading for the Student

Drucker, Peter F. Concept of the Corporation. NewBrunswick, NJ: Transaction Publishers, 1993. The classicstudy of the American corporation.

Multimedia MaterialThe Business File. PBS. Video. Forming a Business:

Corporation/Proprietorships and Partnerships providedetailed information on business organizations.

Additional Resources

Vocabulary PuzzleMaker Software

Interactive Tutor Self-Assessment Software

ExamView® Pro Testmaker

NBR Economics & You Video Program (English/Spanish)

Presentation Plus!

Glencoe Skillbuilder Interactive Workbook CD-ROM,Level 2

Interactive Lesson Planner

MindJogger Videoquiz

Interactive Economics! CD-ROM

Audio Program (English or Spanish)

Technology and Multimedia


PROCEDURE

1. Discuss with the students what it is like to do a project alone (advantages and disadvantages).

2. Ask if any of them have ever done a major project with a partner. Again discuss the advantages and disadvan-tages. Finally, generate a discussion about doing group projects, once again talking about the advantages anddisadvantages.

3. Organize the class into groups. Give each group a copy of the chart with the pieces inside. Let them try to pieceit together. They should find the names of the business organizations, a definition for each, characteristics ofeach, and advantages and disadvantages of each. This activity allows the students time to discuss what they as agroup would consider an advantage or a disadvantage. Give the groups about 15 minutes to complete the chart;give a surprise to the group who comes the closest to being correct.

4. Put the correct chart on the chalkboard, and explain it as they copy it.

5. Next, distribute the list of businesses that you have prepared. Have the students decide if the businesses listedare sole proprietorships, corporations, or partnerships. Ask: Why do most of us assume that there are more corporations than any other form? Perhaps this would lead you into a discussion of the Fortune 500 or into franchises.

Assessment

1. Have students check with local businesses to determine whether they are sole proprietorships, partnerships, orcorporations.

2. Have students survey members of the business community to find their perceptions about the advantages anddisadvantages of their particular business organization.

▼ BACKGROUND

American business organizations can take anyof three major forms: sole proprietorships,partnerships, or corporations.

▼ MATERIALS

A chart showing the definitions, characteris-tics, advantages, and disadvantages of thethree types of business organizations, with thepieces cut up and placed in envelopes; a list of30 local or national businesses, most of whichwill be sole proprietorships

▼ OBJECTIVES

After completing this activity, students will beable to• Compare the advantages and disadvantages

of the three types of businesses.• Explain the responsibilities of launching an

entrepreneurship.

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B USINESS ORGANIZATIONS

Name Date Class

RUBRICSsurvey, display, orposter

3

Performance Assessment Activity 3

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8, B

15. A temporary partnership set up for a specific purpose for a short period of time is known as a

a. joint stock company. b. acting board of directors.c. joint venture. d. committee.

CRITICAL THINKING QUESTIONS

Directions: Answer each of the following sets of questions on a separate sheet of paper.

16. Summarizing Information What are the three major types of business ownership? What are the advan-tages and disadvantages of each?

17. Distinguishing Fact from Opinion Do you think that people that work for corporations are more highlymotivated than people who start their own businesses? Why or why not?

APPLYING SKILLS

READING THE FINANCIAL PAGEFinancial Results for Delta Airlines, November 10, 1999

18. How many shares of Delta stock traded hands on November 10?

19. What was the highest price anyone paid for Delta stock on November 10?

20. At what price did Delta shares close on November 10?

52-week High Low Stock Div Yld % P/E Sales 100s High Low Last Chg

72 45 1/16 DeltaAir .10 0.2 7 3730 51 1/8 49 3/4 50 3/8 �3/8

Chapter 8 Test Form B

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RECALLING FACTS AND IDEAS

Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.

11. Entrepreneurs are people who

a. sit on a corporate board of directors. b. earn profits.c. pay dividends. d. start up businesses.

12. In a limited partnership,

a. all partners are equal. b. a bank limits the partnership’s liability.c. some partners bear no risk. d. a general partner manages the business.

13. Shares traded on the New York Stock Exchange tend to be those of

a. very large corporations. b. medium-size corporations. c. sole proprietorships. d. limited liability partnerships.

14. The board of directors of a corporation is responsible for

a. running the company’s day-to-day operations. b. hiring officers to run the business.c. determining the price of the company’s shares. d. paying dividends to shareholders.

A1. startup

2. inventory

3. sole proprietorship

4. unlimited liability

5. joint venture

6. assets

7. proprietor

8. corporation

9. receipts

10. common stock

USING KEY TERMS

Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.

Ba. income received from the sale of goods and/or services; slips

of paper documenting a purchase

b. requirement that an owner is personally and fully responsiblefor all losses and debts of a business

c. owner of a business

d. beginning business enterprise

e. all items to which a business or household holds legal claim

f. type of business organization owned by many people, buttreated by law as though it were a person

g. business owned and operated by one person

h. shares of ownership in a corporation that give stockholdersvoting rights and a portion of future profits

i. partnership set up for a specific purpose just for a short period of time

j. supply of the items used in a business, such as raw materialsor goods for sale

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13. The stock of the largest companies in the United States is

a. listed on the National Association of Securities Dealers Automated Quotation (NASDAQ).b. listed on the New York Stock Exchange (NYSE).c. traded over-the-counter.d. owned by their boards of directors.

14. One of the advantages of purchasing a franchise is

a. franchisee pays a fee and a percentage of the revenues taken in.b. franchisee signs a contract with the franchisor.c. franchisor often provides training.d. risk of losing money is small.

15. In the United States, which type of business accounts for the greatest share of revenues?

a. sole proprietorship b. partnershipc. corporation d. shareholders

CRITICAL THINKING QUESTIONS

Directions: Answer each of the following sets of questions on a separate sheet of paper.

16. Determining Relevance If you were to start your own business, which type or types of business ownershipwould you be most likely to choose? Why?

17. Making Comparisons How does owning a sole proprietorship compare with owning part of a partnership?What are the advantages and disadvantages of each type of ownership form?

APPLYING SKILLS

READING THE FINANCIAL PAGEFinancial Results for Delta Airlines, November 10, 1999

18. At what price did Delta Airlines shares close on November 10?

19. At what price did Delta shares open on November 11?

20. What was the highest value at which Delta shares traded in 1999 as of November 10?

52-week High Low Stock Div Yld % P/E Sales 100s High Low Last Chg

72 45 1/16 DeltaAir .10 0.2 7 3730 51 1/8 49 3/4 50 3/8 �3/8

Chapter 8 Test Form A

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8, A


RECALLING FACTS AND IDEAS

Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.

11. Unlimited liability means that

a. shareholders of a company receive dividends only if the company earns a profit.b. owner of the business bears complete legal responsibility for all debts and damages arising from doing

business.c. business cannot lose more than a preset amount.d. credit can be obtained more easily than in a business that has limited liability.

12. A joint venture is

a. merger between two companies. b. temporary partnership set up for a specific purpose for a short period of time.

c. partnership. d. conglomerate.

A1. proprietor

2. entrepreneur

3. assets

4. joint venture

5. startup

6. partnership

7. corporation

8. inventory

9. dividend

10. common stock

USING KEY TERMS

Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.

Ba. business that two or more individuals own and operate

b. shares of ownership in a corporation that give stockholdersvoting rights and a portion of future profits

c. beginning business enterprise

d. portion of a corporation’s profits paid to its stockholders

e. type of business organization owned by many people, buttreated by law as though it were a person

f. all items to which a business or household holds legal claim

g. owner of a business

h. person who organizes, manages, and assumes the risks of abusiness in order to gain profits

i. partnership set up for a specific purpose for a short period of time

j. supply of the items used in a business, such as raw materialsor goods for sale

206B

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Resource ManagerCHAPTER 8

You and your students can visit ett.glencoe.com—the Web site companion to Economics Today andTomorrow. This innovative integration of electronic andprint media offers your students a wealth of opportuni-ties. The student text directs students to the Web site forthe following options:

• Chapter Overviews • Student Web Activities

• Self-Check Quizzes • Textbook Updates

Answers are provided for you in the Web ActivityLesson Plan. Additional Web resources and InteractivePuzzles are also available.

Use the Glencoe Web site for additional resources. All essential content is covered in the Student Edition.

ECONOMICS

Application and Enrichment


ANALYZING A BUSINESS

Directions: Select a business that operates in your community and analyze its structure, organization, andhistory. Use the chart below to organize the basic information, which will be the basis for a written report.If possible, arrange to interview the owner or a manager of this business to help you gather information, aswell as researching material in the public record.

Business Name:

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Name Date Class

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1. Type of business organization.(i.e., sole proprietorship, partnership,corporation)

2. Product or service this business provides

3. When and by whom was it started?

4. Number of employees

5. Employee benefits provided

6. Types of Advertising

7. Basic organizational structure

8. Advantages and disadvantages of this type of organization

9. Tax advantages or special tax breaks?

10. Predict the short-term and long-term success of this business. What challenges might it face in the future? What factors could stimulate growth?

Enrichment Activity 8

Teaching Transparency

Application and Enrichment

Review and Reinforcement

C HAPTER 8 BUSINESS ORGANIZATIONSDirections: Use the following clues to fill in the vocabulary terms on the grid below.

ACROSS

1. Some of the owners only contribute money orproperty to the business, while other owners manage the business (two words).

3. A business owned by one person (two words)

6. A state license to operate as a corporation (twowords)

8. Articles of define the corporation, its board of directors, the shares of stock to be issued,and the amount of capital to be raised throughissuing stock.

9. A business owned and operated by two or morepeople

10. Money needed to finance a business in the beginning stage

DOWN

2. A supply of the items used in a business

4. A temporary partnership meant to carry out a single business operation (two words)

5. A contract in which the right to use the name of a business and sell its products is sold to another business

7. The owner of a business

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Economic VocabularyActivity 8

206A

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U SING THE INTERNETTo access the Internet, you will need a personal computer, a modem (a device that connects acomputer to a telephone line), and an account with an Internet Service Provider (ISP), suchas America Online or CompuServe. Once you are able to connect to the Internet with yourWeb browser, use a search engine, such as Yahoo! or AltaVista, to explore the World WideWeb. Type a subject or name into the “search” box and press Enter. The search engine will listavailable sites that may contain the information you are looking for.

Directions: Using a computer with a modem, utilize the Internet to research MasterCard rates and terms.Following the example provided, complete the table. Then answer the questions that follow.

1. In addition to the information included in the table, what other information on MasterCard services did you findon the Internet?

2. Find two MasterCard companies that donate some of their fees to charity. Indicate which causes those cards sup-port.

3. Which Internet search engine did you decide to use to do the majority of your research? Why?

4. Which of the MasterCards you researched would best meet your needs? Why?

Name Date Class

21

Issuing Bank Interest Rate Annual Fee Rewards

Associates National 6.9% for first six months; None 2% rebate on purchases atBank (Delaware) variable rate after first True Value stores; 1% rebate

six months on all other purchases

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C ATEGORIZING INFORMATION ABOUT BUSINESSORGANIZATIONS

33

Categorizing helps you deal with many facts in an organized way. For example, the advantagesand disadvantages of business organizations can be studied by organizing facts in a chart.

Directions: Categorize the information about two types of business organizations by writing the numberof each phrase below in the correct space or spaces.

Business Organization Advantage Disadvantage

Sole Proprietership

Partnership

1. usually limited capital

2. ease of starting up

3. ease of management

4. only one special IRS schedule required at tax time

5. establishment involves only fees for attorney andstate

6. potential for conflict

7. enjoyment of profits without having to share them

8. no separate business income tax preparation

9. more easily attracts top talent

10. satisfaction of being your own boss

11. ease of getting out of business

12. attracts financial capital more easily

13. personal and full responsibility for all business lossesand debts

14. difficulty raising financial capital

15. each responsible for acts of all other partners

16. often limited managerial experience

17. difficult attracting qualified employees

18. limited life

19. more efficient operations because of larger size

Critical Thinking Activity 3 Reteaching Activity 8

Reinforcing Economic Skills 21

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N EEDS, WANTS, AND MARKETERSThe American market system operates on the principle of voluntary exchange. Buyers and sellers, exercising their economic choices, affect prices. Consumers might assume that theirchoices are all completely voluntary. However, this is not really true. One goal of advertisingis to create demand through influencing consumers’ perceived needs and wants.

Directions: Choose ten products or services from the list and rank them 1-10 under “Needs,” according tohow necessary they are to you. Then rank your top ten “Wants” and answer the questions.

toothpaste vegetables haircut jeans microwave ovenwristwatch soap movies swimsuit refrigeratorsocks coat pizza CD player chewing gumtelevision telephone bed water air conditionerhair spray deodorant electricity computer fruit

1. Write down as many brand names as you can that identify suppliers of your top five needs on the list above.

2. Write down as many brand names as you can that identify suppliers of your last five wants on the list above.

3. Naming suppliers’ brands from the Wants list should have been easier. Why?

4. What kinds of advertising messages do sellers use to create demand?

Name Date Class

4

Needs Wants

1 1

2 2

3 3

4 4

5 5

6 6

7 7

8 8

9 9

10 10

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C HOOSING A BUSINESS ORGANIZATIONThe three main types of business organizations are sole proprietorships, partnerships, and corporations. The type of business that entrepreneurs choose depends on their tolerance for risk and appetite for rewards.

Directions: Imagine that you have money to invest in a business. Take the following quiz to determinewhich kind of business organization best fits you.

First name the product or service you will provide.

1. You prefer to

a) get all the profits but take all the risks. b) share equally with others in the profits and the losses.

c) get only partial profits but have little risk.

2. You want to make

a) all business decisions quickly.b) joint decisions with competent people.

c) money, not decisions.

3. You plan to

a) take out a small loan against your own assets. b) get help to borrow a larger amount.

c) borrow a huge sum of money.

4. You prefer paying

a) personal income taxes on all profits.b) fewer taxes on less profit.

c) a high tax rate rather than having unlimited liability.

5. You would be most satisfied as

a) your own boss.b) part of a successful team.

c) part owner, but not operator, of a business.

Name Date Class

3

6. You will risk your investment

a) and personal assets on your decisions.b) and personal assets on a colleague’s

decisions.

c) but not your personal assets.

7. In order to expand your business, you arewilling to

a) buy a computer, but that’s all.b) agree to a division of duties and profits.

c) file articles of incorporation and sellstock.

8. After you leave the business, you think it will

a) dissolve. b) operate under a different name.

c) continue as long as it earns a profit.

Did you choose:

• answer a most often?• answer b most often? • answer c most often?

If so, you would probably prefer

• a sole proprietorship.

• a partnership.

• a corporation or to simply buy stock.

If your answers show no clear preference, list your priorities. For example, is profit or doing the work your way more

important to you? Then decide which kind of business organization serves your priorities best.

Write your decision here. Economic Concepts 7

77

M ARKETS AND PRICESThe cartoon shows three individuals doing the same job but receiving different wages in the same location. In thisminiature marketplace, they have negotiated with each other to arrive at different rates of pay.

Economic Concepts Transparency 7

Consumer ApplicationsActivity 4

Free Enterprise Activity 3

Alone With 1 partner With 2 partners(1 person) (2 people) (3 people)

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If you go into business for yourself, all the profits are yours as well as all the costs. If you workwith partners, you share the costs and together you may take in more money, but you usuallyalso share the profits.

Directions: Use the two tables to compare profit scenarios.

Step 1: Figure your share of the profits in the three business arrangements below: working alone as a sole proprietor,working with one partner, and working with two partners.

Assume that you mow lawns. If you charge $8 per lawn and find 4 people to pay you to mow their lawns once aweek for 11 weeks, how much would you take in?

Now consider your costs. To get started you spent $258 on a lawnmower. You have to pay about $1 a week ongas. What would your total cost for gas be for 11 weeks?

Suppose you take on one or two partners who also each know 4 people who want their lawns mowed. Howwould this affect revenue, costs, and profits?

Step 2: Fill in the amounts below to figure and compare your revenue, costs, and profits as a sole proprietor to yourrevenue, costs, and profits working with one or two partners.

Name Date Class

3

G OING SOLO OR TAKING ON PARTNERS?

REVENUE $1,139 $1,523 $2,068

� Costs �607 �792 �1,004

� Profit (1)

� Number of people �1 �2 �3

� Your share of profit (2)

Alone With 1 partner With 2 partners(1 person) (2 people) (3 people)

REVENUE

($8 � 4 � 11 � number

of people) (3)

�Mower cost (4) � � �

� Subtotal (5)

�Gas Cost � � �

($1 � 11 � number

of people) (6)

� Profit (7)

� Number of people (8) � � �

� Your share of profit (9)

�Name Date Class

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RODUCER PAINSErgonomics is the science concerned with human engineering—arranging things in the environment so that people and the things they use interact most efficiently. For example, effi-ciency in production might be increased by changing the height of a worker’s chair.

Directions: Study the cartoon below. Then answer the questions that follow.

33

EXAMINING THE CARTOON

Multiple Choice

1. The stars and stripes identify the character riding on business’s shoulders as

a. a consumer. b. foreign competition. c. U.S. government. d. private industry.

2. The cartoonist believes government is often

a. supportive of business. b. a hindrance to business. c. an enemy of business. d. unaware of business.

Critical Thinking

3. Analyzing the Cartoon What is the irony illustrated by the two statements?

4. Expressing Your Opinion Write a short paragraph agreeing or disagreeing with the point of view of thecartoonist.

P

Steve Kelley

up. It probably won’t look bad, but it could beuncomfortable. In the women’s Sears Jeans That Fit, theinside flap of the fly was poorly finished so the fabricfrayed considerably.

“Blue Jeans: Can You Find Happiness With a $17 Pair of Blue Jeans? QuitePossibly.” Copyright © 1991 by Consumers Union of U.S., Inc., Yonkers, NY10703-1057. Excerpted by permission from Consumer Reports, July 1991.

16 Primary and Secondary Source Readings

ANALYZING THE READING

1. To whom would this article be of interest?

2. What areas should you inspect when you buy jeans?

3. Why do you think the testers at Consumer Reports purchased the jeans a full year before reporting on them?

4. Would this article alter the way you buy jeans? Why or why not?

5. What other consumer products would you like to read evaluations of?

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Cooperative Learning Simulations and Problems 3

Primary and Secondary Source Reading 8

Math Practice for Economics Activity 3

Economic Cartoons Activity 3

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GROUP PROJECT

There are three forms of business organizations in the United States: sole proprietorships,partnerships, and corporations. A sole proprietorship is owned by one person. A partnershipis a business jointly owned by two or more people. Despite the high number of these twotypes of organizations, approximately 90 percent of all business in the U.S. is conducted bycorporations. A corporation is a form of business organization that is a separate legal entitywith all the rights of an individual. Work with members of your group to identify examplesof each form of business organization in your community and to learn more about theiroperations by interviewing people active in them.

▼ MATERIALS:

Current Yellow Pages

Local Businesses

1. Group Work Stage 1: Students work in groups offour or more. Using your local Yellow Pages, make alist of local businesses to investigate. Classify thebusinesses as examples of sole proprietorship,partnership, or corporation. Assign pairs within thegroup to one or more of the businesses on the list.

2. Paired Work Stage 2: Students work in pairs.Using the chart above, make preliminary inquiries todetermine how the businesses you have beenassigned are organized. Identify at least one con-tact person at the business who would be willing toprovide information about the business’s operation.

3. Group Work Stage 3: Students return to original groups. Pairs should share their findingswith the group. Discuss the businesses and narrowthe original list to three, each an example of a different form of organization. Then decide on tenquestions to ask in an interview with the contact ateach business. Choose three individuals or pairs toarrange and conduct interviews with the contacts.

4. Individual/Paired Work Stage 4: Students workeither as individuals or pairs. Conduct interviewswith contact people using the questions preparedby the group. Take notes or tape-record the interview with the permission of the interviewee.

5. Group Work/Analysis Stage 5: Students return tooriginal groups. Individuals or pairs present a brieforal report of the interview. As a group, discuss the differences and similarities among the three business organizations.

Group Process QuestionsDid the group agree on the assignment of tasks?

Did each member contribute ideas at group meetings?

Did members work well together?

What would you change to make the group work moreenjoyable?

COOPERATIVE GROUP PROCESS:

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Type Name Location Contact(s)

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hen Levi Strauss introduced hardworking dungareesto American miners in 1853, surely he never suspectedthat “designer” signatures would one day turn jeans intostatus symbols. Nor could he have seen jeans as a politicalstatement, embroidered with upside-down flags andpeace symbols.

But despite denim fads . . . and fashion detours, thebasic, five-pocket, western jean endures. And it’s thatwardrobe basic that we tested for this report.

We stuck with the familiar (Levi, Lee, and Wranglerbrands) and representative mail-order brands (L.L. Bean,Lands’ End, J.C. Penney, Sears). We also threw in a fewtrendy brands such as Guess, Bugle Boy, and Calvin Klein.

We bought our jeans a year ago. The information weuncovered will help you to evaluate any pair of jeans.

We ran a number of lab tests for fabric and seamstrength, shrinkage, and colorfastness, and we evaluatedconstruction quality. We found differences. But many buy-ers are less concerned with the durability of jeans thanthey are with fit. . . .

We didn’t find enough instances of sloppy construc-tion to judge any brands exceptionally good orexceptionally bad. We did, however, find specific areasthat you should inspect when you buy jeans.

Seams and pockets. . . . In most cases, we found thethread and the seams amply durable.

Seams, however, weren’t always straight. Twistedseams make jeans hard to fold for a neat crease down thecenter front, and they may make the jeans feel or look alittle distorted when you wear them. Twisted leg seamsusually look and feel worse after the jeans are laundered.

Failure of the pocket seams prompted Levi Strauss toreinforce pocket corners with metal rivets. Originally, rivetswere used for the back as well as the front pockets. Butscratched saddles, scarred car fenders, and damagedschool desks led to the elimination of the rear rivets. . . .

The rear pockets on all the other jeans we tested havemultiple stitches known as bartacks securing the corners.Some jeans have bartacks on the front pocket, too. Bothrivets and bartacks proved to be quite strong. . . .

We found differences. But many

buyers are less concerned with the

durability of jeans than they are

with fit. . . .

Waistbands and belt loops. In general, waistbands werewell made and nicely finished, we found, and belt loopswere securely attached. You’re likely to find loops that arepoorly finished on the underside (we did). Over time, theyfrayed, a bit, but didn’t present any functional problems. . . .

Belt loops take a lot of stress, so the more loops thebetter. Here, women’s jeans are often short-changed. Mostwomen’s jeans have five belt loops; most men’s, seven.

Fly and waist closure. Anyone who has ever wiggledinto a pair of tight-fitting jeans knows that the longer thezipper, the better. Zipper length in the women’s jeansranged from 6 inches in the Calvin Klein to 9 inches in theL.L. Bean Stretch. In the men’s jeans, the range was from7 inches in the Bugle Boy to 9 inches in the Levi 501s.

In most jeans, the zipper locks when its tab is turneddown. That’s a little feature that means a lot. In somejeans, the zipper locks when its pull tab is turned up ordown, an even better arrangement.

Most zippers were neatly installed. In some jeans,however, the inside flap of fabric at the bottom of thezipper was unfinished. In time, the fabric is likely to bunch

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Primary and Secondary Source Readings 15

Name Date Class

B LUE JEANS: CAN YOU FIND HAPPINESS WITH A$17 PAIR OF BLUE JEANS? QUITE POSSIBLY.

Consumers Union, best known for their magazine Consumer Reports, is “a nonprofit organiza-tion established to provide consumers with information and advice.” Because Consumers Unionaccepts no advertising and buys the products it tests on the open market, its product evaluationsare widely respected. A Consumer Reports article on blue jeans is excerpted below. As you readthe report, think about the many products that you buy, and why you should conduct researchon most of them before spending your money. Then answer the questions that follow.

8

W

http://ett.glencoe.com

Block Schedule

Denny C. JacksonSwitzerland County

High SchoolVevay, Indiana

Starting a BusinessHave students start a mock business—specifically, a

hotel business. Working in pairs, they must write a busi-ness plan that includes everything from initial financingoptions to staffing considerations to what “free items” willbe provided to hotel guests. See pages 230–231 in theStudent Edition for more details.

ACTIVITYFrom the Classroom ofACTIVITYFrom the Classroom of

Activities that are particularly suited to use within the blockscheduling framework are identified throughout this chapterby the following designation: BLOCK SCHEDULING

Block Schedule

Use Glencoe’s Presentation Plus!,a Microsoft PowerPoint® application, to teach Business Organizations.With this multimedia teacher tool, you

can customize ready-made presentations. At your fingertipsare interactive transparencies, on-screen lecture notes,audiovisual presentations, and links to the Internet and toother Glencoe multimedia.

Interactive Lesson PlannerPlanning has never been easier! Organize your week, month, semester, or year with all the lesson helps you need to make teaching

creative, timely, and relevant—the way it is meant to be.The Interactive Lesson Planner opens Glencoe’s Chapter 8resources, helps you build your schedule, and tracks yourprogress.

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Teaching strategies have been coded for varying learning styles and abilities.L1 BASIC activities for all studentsL2 AVERAGE activities for average to above-average

studentsL3 CHALLENGING activities for above-average students

ENGLISH LANGUAGE LEARNER activitiesELL

Key to Ability Levels

Voluntary Standards Emphasized in Chapter 8Content Standard 10 Students will understand thatinstitutions evolve in market economies to help individualsand groups accomplish their goals. Banks, labor unions,corporations, legal systems, and not-for-profit organizationsare examples of important institutions.

Content Standard 14 Entrepreneurs are people whotake the risks of organizing productive resources to makegoods and services. Profit is an important incentive thatleads entrepreneurs to accept the risks of business failure.

Resources Available from NCEE• MCG—Economics and Entrepreneurship• Entrepreneurship in the U.S. Economy• Learning from the Market: Integrating the Stock Market

Game™ Across the Curriculum

To order these materials, or to contact your StateCouncil on Economic Education about workshops andprograms, call 1-800-338-1192 or visit the NCEE Web siteat http://www.nationalcouncil.org

Easy Planning and Preparation!

206D

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■


206C

Blackline Master

Transparency

Software

CD-ROMVideodisc

Audiocassette

Videocassette

Reading Objectives Reproducible Resources Technology/Multimedia Resources

Section 1Starting a Business• What things must be done before start-

ing a business?• What four elements are involved in

every business?

Section 2Sole Proprietorships and Partnerships• What are the advantages and disadvan-

tages of a sole proprietorship?• What are the advantages and disadvan-

tages of a partnership?

Section 3The Corporate World and Franchises• What are the advantages and disadvan-

tages of corporations?• How are corporations typically struc-

tured?• What types of businesses are involved

in franchises?

Reproducible Lesson Plan 8-1Daily Lecture Notes 8-1Guided Reading Activity 8-1Reading Essentials and Study Guide 8-1Daily Focus Activity 16Section Quiz 8-1*Reinforcing Economic Skills 21

Reproducible Lesson Plan 8-2Daily Lecture Notes 8-2Guided Reading Activity 8-2Reading Essentials and Study Guide 8-2Daily Focus Activity 19Section Quiz 8-2*

Reproducible Lesson Plan 8-3Daily Lecture Notes 8-3Guided Reading Activity 8-3Reading Essentials and Study Guide 8-3Daily Focus Activity 15Section Quiz 8-3*

Daily Focus Transparency 16Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!


Daily Focus Transparency 19

Economic Concepts Transparency 7Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz

NBR's Economics & You*Presentation Plus!


Daily Focus Transparency 15Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!


*Also available in Spanish

Section Resources

http://www.nationalcouncil.org

207

207Business Organizat ions

Terms to Know• entrepreneur• startup• small business incubator• inventory• receipts

Reading Objectives1. What things must be done

before starting a business?

2. What four elements areinvolved in every business?

READER’S GUIDE

How many times have you seen a product for sale and said,“That was my idea”? Or you see an item, nod your head,and think, “That’s a good idea. I wonder how they thought

of that”? Many new products and services arise from personal expe-rience—as in the case of David Kopel’s Beeping Wallet. In this sec-tion, you’ll learn how to take your idea and start a business.

Getting StartedSuppose that you have been tinkering with electronic equip-

ment since you were a child. By now you can take apart andreassemble cassette and CD players, VCRs, most computers, and

1

KIPLINGER’S PERSONAL FINANCE MAGAZINE, DECEMBER 1998

The perfect place for yourcredit cards is in a BeepingWallet—a billfold with amicrochip that beeps every 20 seconds when a creditcard has been removed. It’sboth a last-gasp warning [tonot spend money] and areminder to replace the card,says David Kopel, the wallet’sinventor, who says he came up with the idea after his wifelost a credit card.

CHAPTER 8SECTION 1, Pages 207–211


Reproducible MastersReproducible Lesson Plan 8–1Reading Essentials and Study Guide 8–1Guided Reading Activity 8–1Section Quiz 8–1Daily Focus Activity 16Daily Lecture Notes 8–1

MultimediaDaily Focus Transparency 16Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software

ExamView® Pro TestmakerMindJogger Videoquiz

Presentation Plus!

SECTION 1 RESOURCE MANAGER

OverviewSection 1 explains the steps

involved in starting a business andthe four elements of business oper-ation that entrepreneurs need toconsider.

Answers to the Reading Objectivesquestions are on page 211.

Preteaching VocabularyDirect students to study the

Glossary definitions of the Termsto Know. Then have students usethese terms to write a paragraphabout starting a business.

Vocabulary PuzzleMaker

READER’S GUIDE

206

Chapter Overview Visit the Economics Today and Tomorrow Web site at ett.glencoe.com and click on Chapter 8—Chapter Overviewsto preview chapter information.

Why It’s ImportantHow could you start a businessand operate it successfully?Which has more advan-tages—sole ownership of a business or a part-nership? This chapter will explain how you can start a business as well as the different ways that businesses are organized.

To learn more about sole proprietor-ships, partnerships, and corporations,view the Economics & You Chapter 4video lesson: Business Organizations

IntroducingCHAPTER8

206

Chapter OverviewChapter 8 describes or explains

how businesses are started and theadvantages and disadvantages ofsole proprietorships, partnerships,and corporations as businessorganizations.

CHAPTER LAUNCH ACTIVITY

IntroducingCHAPTER8

Use MindJoggerVideoquiz VHS to previewChapter 8 content.

Introduce students to chaptercontent and key terms by havingthem access Chapter 8—ChapterOverviews at ett.glencoe.com

Ask students to imagine they want to start a business. Have students identify thetype of business they would like to start. Also, have them consider the resources theywould need, and the decisions they would have to make to run this business. Finally,ask students to consider if they would like to run the business by themselves or if theywould like to run it with assistance or financial backing of others. Have students reviewtheir responses to these questions as they work through Chapter 8.

ECONOMICS & YOU

Business Organizations

!7KV0" Chapter 4 Disc 1, Side 1

ASK: What are three importantplanning activities to undertakebefore starting a business?Answers may include conductinga feasibility study to see if thebusiness will attract customers,developing a business plan, andarranging for financing.

Also available in VHS.

Project Daily FocusTransparency 16 and have students answer the questions.

This activity is also availableas a blackline master.

Daily Focus Transparencies

E NTERING THE WORLD OF BUSINESS

1. What are the four factors of production?

2. How might the second step, deciding on the best form of businessorganization, affect the third step, addressing the elements ofbusiness operation?

Entrepreneurship

Gathering the Factorsof Production

CapitalLand Labor

Corporation

Partnership

Sole Proprietorship

Deciding On the Best Form of Business

Organization

Expenses

Receipts andRecord Keeping

Risk

Addressing the Elements of Business

Operations

Advertising

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BELLRINGERMotivational Activity



209


small business incubator:government-funded agency thatassists new businesses by pro-viding advice or low-rent buildingsand supplies

inventory: extra supply of theitems used in a business, such asraw materials or goods for sale

receipts: income received fromthe sale of goods and/or services;also, slips of paper documentinga purchase

A small business incubatormight also aid businesses in yourarea. Just as incubators help hatchchicks, there are business incubatorsthat help “hatch” small businesses.They are often operated with stateand federal funds. A small businessincubator might provide a low-rentbuilding, management advice, andcomputers. The incubator’s goal is togenerate job creation and economicgrowth, particularly in economicallydepressed areas.

Help From the Internet Although new entrepreneurs can gethelp from government agencies, the Internet also provides a hugeamount of information on how to start a business. By using searchengines, you can find Web sites that explain everything from put-ting together a business plan to learning the “secrets to success.”

Elements of Business OperationEvery business must consider four basic elements: expenses,

advertising, record keeping, and risk.

Expenses You’ve probably heard the saying, “You have to spendmoney to make money.” This is true when considering businessexpenses: new equipment, wages, insurance, taxes, electricity, tele-phone service, and so on. And depending on the kind of job youdo, you may need replacement parts. At first, you might buy partsonly as you need them for a particular job. In time, you will find iteasier to have an inventory, or supply of items that are used inyour business. See Part A of Figure 8.2 on page 210.

Wages are an expense. Because you could be working forsomeone else and earning an income, you should pay yourself awage equal to what you could earn elsewhere. It’s important notto forget this opportunity cost when you figure out the profits andlosses your new business is making.

Will your business make a profit? Add your wages to your otherexpenses, including taxes. Then subtract your total expenses fromyour receipts, or the money income you’ve received from customers,and you will have your profit. Keep records of how much you oweand to whom, and of how much your business is taking in. You willneed this information to do your taxes.



IndependentPracticeL2 Applying Ideas Have studentsidentify an interest they have thatthey could channel into a business.Then ask students to create a flyer, anewspaper advertisement, or a Website advertisement promoting theirbusinesses.



entrepreneur: person whoorganizes, manages, andassumes the risks of a businessin order to gain profits

startup: a beginning businessenterprise

other electronic equipment without difficulty. You are so good atrepairing this kind of equipment that you have been doing it forfriends and relatives for some time. Then an idea occurs to you:Why not charge people for your services? Why not go into busi-ness for yourself? By starting your own business, you will becomean entrepreneur.

A person who makes the decision to start a business is anentrepreneur because he or she is willing to take a risk. SeeFigure 8.1. People usually decide to start a business to gainprofits, to “do something on their own,” or to be their own boss.

After making the decision to start a business, entrepreneursmust gather the relevant factors of production to produce theirgood or service and decide on the form of business organizationthat best suits their purposes. (You’ll learn about the types ofbusiness organizations in Sections 2 and 3.)

Anyone hoping to become an entrepreneur must also learn as much as possible about the business he or she plans to start.This process includes learning about the laws, regulations, andtax codes that will apply to the business.

Help From Government For a personwho wants to start a small business, helpis available. The federal government’sSmall Business Administration often helpsfinance startups, or new small businesses.State departments of commerce and com-munity affairs also offer assistance. Manycommunity college and university cam-puses have small business developmentcenters that are federally funded to help asmall business get started.

Student Web Activity Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 8—Student WebActivities to learn more about the Small BusinessAdministration.

208 CHAPTER 8

Entrepreneurship Starting any business, such as electronics repair,is risky. Why do people take the risk of becoming entrepreneurs?

8.18.1

208

Guided PracticeL1 Classifying Information On theboard, draw a four-column tablewith “Expenses,” “Advertising,”“Record Keeping,” and “Risk” as col-umn headings. Call on volunteers tocome to the board and enter exam-ples of elements of business opera-tion in the appropriate columns.Then ask students to use the infor-mation to write a brief explanationof what entrepreneurs need to con-sider in operating a business.

Answer: to make profits

L ECTURE LAUNCHERLSometimes technological advances eliminate entire businesses. For example, before the refrigerator, ice farms were a big business. Workers would cut ice from frozen freshwaterlakes, store it in large blocks, and then distribute it to homes to help keep things cool. Whatdo you think were the risks of starting a refrigeration business? Do you think an ice farmerentering the refrigeration business would have an advantage over others who might enterthis business?

I. Getting Started

A. People who decide to start a business and are willing to take risks are entrepreneurs.

B. Collect information about the business, the factors of production for the product, andlearn about taxes and laws relating to the business.

C. Federal and state government offer help to small businesses.

D. The Internet has a great deal of information to help entrepreneurs.

• Discussion Question

Think of a new business you might like to start. What are some of the types of infor-mation you would need to gather before you started the company? (Answers will vary,but students should be able to relate the ideas of taxes and laws specifically to their product.They should also break down some of the factors of production and list questions relating tothem.)

8-1

PAGES 207–209

Daily Lecture Notes 8–1

See the Web Activity LessonPlan at ett.glencoe.com for anintroduction, lesson description,and answers to the Student WebActivity for this chapter.

Memory Disability Note taking is an important skill to develop, especially for studentswith organization or memory problems. Demonstrate the importance of note taking bytelling students that good notes will help them to focus on significant information in the textand to organize that information in understandable formats. Add that good notes aid mem-ory by helping students to review for tests. Work with students to review note-taking proce-dures. Encourage students to adopt those procedures that work best for them.

Refer to Inclusion for the Social Studies Classroom Strategies and Activities forstudents with different learning styles.

Meeting Special Needs

The term entrepreneur derivesfrom the French word entreprendre,which means “to undertake,” “toadventure,” or “to try.”

Name Date Class

For use with the textbook pages 207–211

S TARTING A BUSINESS

OUTLINING

Directions: Locate the heading in your textbook. Then use the information under the heading to help youwrite each answer.

I. Getting Started

A. Introduction

1. What is an entrepreneur?

2. After deciding to start a business, what must entrepreneurs do?

B. Help from Government

1. Which government agency helps small businesses get started?

2. What is a small business incubator?

C. Help From the Internet—How might one use the Internet to help start a business?

II. Elements of Business Operation

A Expenses

8-1

Guided Reading Activity 8–1

According to the NationalBusiness Incubation Association,North American incubators havecreated nearly 19,000 companiesstill in business, and more than245,000 jobs.

Organize students into several small groups. Direct the groups to locate new busi-nesses in the community. Have these groups interview the owners of the businesses todiscover what steps they took to get started. Tell groups specifically to ask the ownerswhat was the most difficult aspect of starting up a new business. Encourage groups topresent their findings in oral reports to the class. BLOCK SCHEDULING

Free Enterprise Activity


211211


Advertising To start a business, you must make potential cus-tomers aware that your goods or services are available for a price.You could have flyers printed and distributed to advertise yourbusiness, as shown in Part B of Figure 8.2. You could also buyadvertising space in newspapers or on various Web sites.

Record Keeping No matter how small your business, having asystem to track your expenses and income is key to your success.Probably one of the first things you’ll need is a computer. SeePart C of Figure 8.2. You should also purchase or downloadfrom the Internet the programs that will allow you to track yourexpenses and receipts. These programs write checks, calculateyour monthly profits and losses, tell you the difference betweenwhat you own and what you owe (called net worth), and so on.

The slips of paper that document your purchases of supplies—also known as receipts—must be filed in a safe place. Businesspurchases can be deducted from the amount of taxes you owe.

Risk Every business involves risks. You must balance the risksagainst the advantages of being in business for yourself. SeePart D of Figure 8.2. For example, if you spend part of yoursavings to pay for advertising and equipment, you are taking arisk. You may not get enough business to cover these costs.

Understanding Key Terms1. Define entrepreneur, startup, small business

incubator, inventory, receipts.

Reviewing Objectives2. What are at least three things you must do

before starting a business?

3. Graphic Organizer Create a diagram like theone below to explain the four elements commonto all businesses.

Applying Economic Concepts4. Entrepreneurship Think of a product or ser-

vice that you would like to produce. Be sure toconsider a business that you know somethingabout or could easily find information about.Also research if there is a demand for that prod-uct or service. What initial expenses would youhave as a startup?

Critical Thinking Activity

Practice and assesskey skills with

Skillbuilder InteractiveWorkbook, Level 2.

1

5. Synthesizing Information Using youranswer to question 4, compile a table listingall expenses for your startup for one month.For help in using tables, see page xvii in theEconomic Handbook.

Elements of Business



ReteachAsk students to rewrite the sub-

heads in Section 1 as questions.Then pair students and have part-ners exchange their questions. Ask students to reread the sectionto discover the answers to the questions.

1. All definitions can be found in the Glossary.2. Gather the relevant factors of production to

produce goods or services, decide on the formof business organization to use, and learn asmuch as possible about the business.

3. Expenses, Advertising, Record Keeping, Risk4. Answers will vary.5. Tables will vary.

Write the words risk and rewardon the board. Then ask students touse the words to write a sentenceabout starting a new business.



210

A ExpensesThe supplies you need to do your job are included underexpenses. Let’s imagine that you want to start a paintingbusiness. As part of your expenses, you will need to pur-chase brushes, paint, and ladders. As your businessgrows, you might invest in paint sprayers or electricsanders so you can complete jobs more quickly. This newequipment will eventually add to your income, but willprobably require more money than you have on hand atthe startup phase of your business.

B AdvertisingThe cost of advertising often reduces profits substantially in the startup phase of a business. After you have several satisfied customers, however, informationabout your business may spread by word of mouth.

C Record KeepingMaintaining accu-rate records of yourexpenses andreceipts is vital—especially whenyou’re doing yourtaxes.

D RiskMany startups fail. If you work for a boss, youroverall risks are usually small. As your own boss,your risks are greater, but so are the potentialrewards. The profits you expect to make are your incentive for taking those risks.

Elements of Business Operation

8.28.2

210

Meeting LessonObjectives

Assign Section 1 Assessment ashomework or an in-class activity.

Use Interactive Tutor Self-Assessment Software to review Section 1.

Direct students’ attention toPart C in Figure 8.2. ASK: Whyshould business owners file thephysical evidence of their busi-ness purchases? because businesspurchases can be deducted from thetaxes they owe

Small Business and the American Economy How important are small businesses tothe American economy? According to the Small Business Administration, there are 23 mil-lion small businesses in the United States. These businesses employ more than 50 per-cent of the private workforce and are the principal source of new jobs. In addition, thesebusinesses generate more than half of the gross domestic product of the United States.

Relevant Issues in Economics


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Section Quiz 25

Multiple Choice: In the blank at the left, write the letter of the choice that best com-pletes the statement or answers the question. (10 points each)

6. To which element of business operation does the saying, “You have to spend money to make money”refer?

a. expenses b. advertisingc. recording keeping d. risk

7. To determine whether a business made a profit, you must

a. subtract total expenses from receipts. b. subtract taxes from other expenses.c. subtract the cost of new equipment d. subtract wages from receipts.

from income.

8. In the startup phase of a business, advertising

a. increases inventory. b. reduces profits.c. increases risk. d. has no effect.

9. When you run a business, you should pay yourself a wage that is

a. higher than you pay anyone else. b. lower than you pay your workers. c. equal to what you could earn elsewhere. d. based on the profits you expect to make.

10. Record keeping is necessary

a. only if your business earns a profit. b. only if you have a large inventory.c. for any business to be successful. d. only if you have many employees.

SCORE

A1. entrepreneur

2. startup

3. small business incubator

4. inventory

5. receipts

Ba. government-funded agency that assists new

businesses

b. income received from the sale of goods and/or services

c. beginning business enterprise

d. person who organizes, manages, and assumes therisks of a business in order to gain profits

e. extra supply of items used in a business

Matching: Place a letter from Column B in the blank in Column A. (10 points each)

Name Date Class

8, 1

Section Quiz 8–1

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Study Guide 69

Name Date Class

entrepreneur Person who hopes to gain profit from the risks of organizing, managing, and starting abusiness (page 208)

startup the process of beginning a business or enterprise (page 208)

small business incubator A government-funded agency which provides low-cost buildings and sup-plies or advice to help new businesses to grow (page 209)

inventory Ready supply of extra goods or raw materials necessary for the operation of a business (page 209)

receipts Records, such as slips of paper or data stored in computer files, which keep track of sales andpurchases; also, income received from the sale of a good or service (page 209)

KEY TERMS

For use with textbook pages 207–211


DRAWING FROM EXPERIENCE

Have you ever wanted to start your own business? What product or service would you sell? Howwould you organize your business? Do you need any special equipment or advice to start yourbusiness? How would you tell people about your business?

This section focuses on the decisions and the steps a person takes to start a business.

ORGANIZING YOUR THOUGHTS

Use the diagram below to help you take notes as you read the summaries that follow. Thinkabout the things that must be done to start a business and the four elements involved in everybusiness.

Steps to Starting a New Business Four Elements of Every Business

1. 1.

2. 2.

3. 3.

4. 4.

8, 1

Reading Essentials and Study Guide 8–1

213


Terms to Know• sole proprietorship• proprietor• unlimited liability• assets• partnership• limited partnership• joint venture

Reading Objectives1. What are the advantages

and disadvantages of asole proprietorship?

2. What are the advantagesand disadvantages of apartnership?

READER’S GUIDE

Businesses can be organized in a number of ways. Some haveone owner. Others, like Tim Glass’s Cyberslice company,have multiple owners or partners. In this section, you’ll learn

that the two most common ways of organizing business in theUnited States are sole proprietorships and partnerships.

Sole ProprietorshipsThe most basic type of business organization is the sole

proprietorship, a business owned by one person. It is the oldest

2

sole proprietorship: businessowned and operated by oneperson

NEWSWEEK, APRIL 5, 1999

In the movie The Net, Sandra Bullock played a victim-ized computer hacker who, in one scene, orders a pizzaon her computer. The moment flashed by most movie-goers . . . , but it gave Tim Glass an idea—not for a bet-

ter movie but an Internetcompany. With threelongtime friends and col-leagues, [Glass] set aboutrecruiting restaurants topost their menus online.The goal: point-and-clickordering. They called thecompany Cyberslice. . . .




MultimediaDaily Focus Transparency 19Economic Concepts Transparency 7Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software


NBR’s Economics & YouPresentation Plus!


OverviewSection 2 describes two types of

business organizations—sole propri-etorships and partnerships—andexplains the advantages and disad-vantages of each.


Preteaching VocabularyHave students create word-

search puzzles using the Terms toKnow. Then have students locatethe definitions of these terms inthe Glossary and rewrite them asclues for their puzzles.


READER’S GUIDE

TechnologySkills

212

To learn more about almost any topic imaginable, use the Internet—a global network of computers.Many features, such as E-mail, interactive educational classes, and shopping services, are offered on theNet. To get on the Internet, you need three things: (a) a personal computer or WebTV, (b) a modem—ordevice that connects your computer to a telephone line, and (c) an account with an Internet serviceprovider (ISP). An ISP is a company that enables you to log on to the Internet, usually for a fee.

Technology Skills

Using the Internet

1. Log on to the Internetand access a searchengine.

2. Search by typing smallbusiness incubator in thesearch engine.

3. Scroll the list of Webpages that appears whenthe search is complete.Select a page to bring upand read or print.

4. If you get “lost” on theInternet, click on the“back arrow” key at thetop of the screen until you find a site that looksfamiliar.

5. Continue selecting sitesuntil you have enoughinformation to write ashort report on the helpavailable to startups fromsmall business incubators.

Learning the SkillAfter you are connected, the easiest way to access

Internet sites is to use a “Web browser,” a program that lets you view and explore information on the World Wide Web. The Web consists of many documents called “Web sites,” each of which has its ownaddress, or Uniform Resource Locator (URL).Many URLs start with the keystrokes http://

If you don’t know the exact URL of a site, commercial “search engines” such as Yahoo! or AltaVista can help you find information. Type a subject or name into the “search” box,then press Enter. The search engine lists avail-able sites that may have the information you are looking for.

Practicing the SkillTo learn how the Internet can

help business startups, follow the stepslisted on the left.

Application ActivityFollow the above procedures to

locate information about the numberof women-owned businesses. Use the infor-mation you gather to create a chart or bar graph depicting the number, sales, and workforces of women-owned businesses.

212

Using the InternetBegin by stressing that the

Internet, when used correctly, canbe a powerful research tool. First, itoffers access to a world of resourcesthat may not be available at thelocal public library. Further, theInternet often can provide morerecent information than might beavailable in books or periodicals.

Guide students through the stepslisted in Practicing the Skill. Pointout that students often can identifythe type of Web page they havelocated by domain designationsthat end a URL. Provide the follow-ing examples: .com is a commercialorganization, .org is a nonprofitorganization, .gov is a governmentorganization, and .edu is an educa-tional organization. Conclude byassigning the Application Activity.

Answers to Practicing the Skill

Ensure that students accompany their reports with a list of the sources that theyused. You might lead a class discussion in which students share their experiences indoing Internet research.

U SING THE INTERNETTo access the Internet, you will need a personal computer, a modem (a device that connects acomputer to a telephone line), and an account with an Internet Service Provider (ISP), suchas America Online or CompuServe. Once you are able to connect to the Internet with yourWeb browser, use a search engine, such as Yahoo! or AltaVista, to explore the World WideWeb. Type a subject or name into the “search” box and press Enter. The search engine will listavailable sites that may contain the information you are looking for.

Directions: Using a computer with a modem, utilize the Internet to research MasterCard rates and terms.Following the example provided, complete the table. Then answer the questions that follow.

1. In addition to the information included in the table, what other information on MasterCard services did you findon the Internet?

Name Date Class

21

Issuing Bank Interest Rate Annual Fee Rewards

Associates National 6.9% for first six months; None 2% rebate on purchases atBank (Delaware) variable rate after first True Value stores; 1% rebate

six months on all other purchases

Reinforcing Economic Skills 21




S OLE PROPRIETORSHIPS IN THE UNITED STATES

1. How many nonfarm sole proprietorships are in business in theUnited States?

2. What is the most common business activity of sole proprietorships?

1919

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Source: Statistical Abstract of the United States

Nonfarm Sole Proprietorships in the United States

(approximate figures)

Total Number of Sole

Proprietorships

Percent of Sole Proprietorships

Engaged in Different Types of

Business Activity

Total receipts (in millions)

Net income (in millions)

16,154,000

Forestry and fishing

Mining

Construction

Manufacturing

Transportation

Wholesale and retail

Finance, insurance, real estate

Services

Other

2%

1%

1%

3%

4%

18%

9%

50%

12%

$790,630

$166,799



215


proprietor: owner of a business

unlimited liability: requirementthat an owner is personally andfully responsible for all losses anddebts of a business

assets: all items to which a busi-ness or household holds legalclaim

partnership: business that twoor more individuals own andoperate

form of business organization and also the most common. Thecolonies of Maryland and Pennsylvania were founded as soleproprietorships.

When we speak of a proprietor, we are referring to the ownerof a business. The word proprietor comes from the Latin wordproprietas, meaning “property.” A business is a kind of property.

The United States has more than 16 million such businesses, andmany of them are small. For that reason, they usually are easier andless expensive to start and run. You probably have contact withmany sole proprietorships every day without realizing it.

The biggest advantages of sole proprietorships are that theproprietor has full pride in owning the business and receives all the profits. The biggest disadvantage is that the proprietor hasunlimited liability, or complete legal responsibility for all debtsand damages arising from doing business. Personal assets, or itemsof value such as houses, cars, jewelry, and so on, may be seized topay off business debts. Figure 8.3 lists these and other advantagesand disadvantages of operating a sole proprietorship.

PartnershipsEarlier in this chapter, we imagined that you had

started an electronics repair business. Supposeyour business is doing so well that your workloadleaves you little time to do anything else. You couldexpand your business by hiring an employee.However, you also need financial capital to buynew equipment, and you would rather not takeout a loan. You decide to take on a partner.

The best solution is to look for someone whocan keep books, order supplies, handle cus-tomers, and invest in the business. You offer toform a partnership, a business that two ormore individuals own and operate. You sign apartnership agreement that is legally binding. Itdescribes the duties of each partner, the divi-sion of profits, and the distribution of assetsshould the partners end the agreement.

Much like sole proprietorships, an advantageof partnerships is the pride of sharing owner-ship in a business—and contributing to it in aspecialized way that benefits all the partners. Adisadvantage is that, like the sole proprietor, thepartners have unlimited liability. Figure 8.4 on page 216 shows other advantages and disadvantages of partnerships.

Job Description■ Select, order,

and price menuitems

■ Hire, train, andsuperviseemployees

■ Keep records,prepare payroll,and maintainequipment

Qualifications■ Bachelor’s or

associatedegree inrestaurant andfood servicemanagement

Median Base Salary: $30,000Job Outlook: Above average

CAREERSRestaurantManager

—Occupational Outlook Handbook, 1998–99



Project Economic ConceptsTransparency 7 and have studentsdiscuss the accompanying questions.



214 CHAPTER 8

Advantages and Disadvantages of Sole Proprietorships

FIGURE 8.3FIGURE 8.3

Disadvantages

• Losses are not shared.

• The proprietor has unlimited liability.

• If the firm is unable to pay its bills,the proprietor can be forced to sellpersonal assets as well as the busi-ness to pay debts.

• A proprietor must handle all deci-sion making, even for unfamiliarareas of the business. This is asevere problem for many soleproprietorships.

• Running a sole proprietorship isdemanding and time-consuming.

• If the proprietor does not enjoyresponsibility, he or she will findownership a burden.

• A sole proprietor must rely on hisor her own funds plus funds thatcan be borrowed.

• Borrowing large amounts can bedifficult.

• If the proprietor dies, goes bankrupt,or is unwilling or unable to work,the business will probably fail.

• Uncertainty about the futureincreases the risk both to employees and creditors.

Advantages

• Proprietor receives all the profitsbecause he or she takes all the risks.

• Decisions on starting and runningthe business can be made quickly.

• Business operations are less compli-cated than other types of businesses.

• There are generally fewer govern-ment regulations.

• Taxes are usually low because aproprietor pays only personalincome taxes on profits.

• The proprietor has high satisfactionin being his or her own boss.

• The owner can make the businessinto whatever he or she wants it to be.

• Proprietors can obtain credit rela-tively easily. Lenders know they cantake over the assets of the businessas well as personal assets of the pro-prietor if the loan is not paid back.

Profits andLosses

Liability

Management

Taxes

PersonalSatisfaction

FinancingGrowth

Life of theBusiness

214

Guided PracticeL1 Understanding Ideas Organizethe class into two groups. Tell mem-bers of one group that they have setup a CD store as a sole proprietor-ship. Inform members of the othergroup that they also have opened aCD store. However, it is organized asa partnership. Have students write aletter to a friend describing this newbusiness venture by weighing thestrengths and weaknesses of theirchosen form of business organiza-tion. Call on volunteers to read theirletters to the class.

Review the content of Figure8.3 with students. ASK: Whichadvantage would be most impor-tant to you in deciding to start asole proprietorship? Which dis-advantage would be most impor-tant in dissuading you fromstarting a sole proprietorship?

L ECTURE LAUNCHERLFor 130 years, Goldman Sachs was a limited partnership. When the business became a publiccorporation, the various partners became multimillionaires. What does this information tellyou about the business of Goldman Sachs?

I. Sole Proprietorships

A. A business owned by one person, known as the proprietor

B. The biggest advantage is that the owner receives all the profits and has full control ofthe business.

C. The biggest disadvantage is that the owner has unlimited liability, which means theowner is personally responsible for all debts and damages from doing business.

D. Personal assets may be seized to pay off business debts.


Think of a local business that is a sole proprietorship. What might the ownerdescribe as the best and worst part of having a sole proprietorship? (Possible response:Best part: being his/her own boss, doing things the way that he/she wants it done. Worstpart: hard to get time off.)

8-2

PAGES 213–215

PAGES 215–217


Visual Learning Disability Students with visual-spatial processing problems may havedifficulty reading tables. Because information in textbooks often is presented in tabularform, it is important for students to be proficient in reading and interpreting tables. Referstudents to Figure 8.3 on page 214 and Figure 8.4 on page 216. Point out that they canquickly gain a broad understanding of the content of the table by identifying the columnand row headings.




S OLE PROPRIETORSHIPS AND PARTNERSHIPS

RECALLING THE FACTS

Directions: Use the information in your textbook to answer the questions.

1. What is a sole proprietorship?

2. Who is a proprietor?

3. What is the biggest advantage and disadvantage of a sole proprietorship?

Advantage:

Disadvantage:

4. Why can it be difficult to finance growth under a sole proprietorship?

5. What is a partnership ?

6. What are the advantages and disadvantages of management under a partnership?

Name Date Class

8-2


ECONOMICS & YOU



ASK: What are the three typesof business organizations?sole proprietorships, partnerships,and corporations

Also available in VHS.

Organize students into groups of three or four. Inform groups that they have decided toset up a painting and decorating company as a partnership. Have each group draw up anagreement among the partners. Point out that the agreement should address such issuesas the role each partner plays in providing capital and running the company, how eachpartner will share in the profits and losses of the company, and what will happen to thepartnership and its assets or debts if one or more partners dies or decides to leave. Callon group representatives to share their agreements with the class.

BLOCK SCHEDULING

Cooperative Learning

217


limited partnership: specialform of partnership in which oneor more partners have limited lia-bility but no voice in management

joint venture: partnership set upfor a specific purpose just for ashort period of time

Limited Partnerships A limited partnership is a special formof partnership in which the partners are not equal. One partner iscalled the general partner. This person (or persons) assumes all ofthe management duties and has full responsibility for the debts ofthe limited partnership. The other partners are “limited” because allthey do is contribute money or property. They have no voice in thepartnership’s management.

The advantage to the limited partners is that they have no liabil-ity for the losses beyond what they initially invest. The disadvan-tage, of course, is that they have no say in how the business is run.

Joint Ventures Sometimes individuals or companies want todo a special project together. They do not have any desire to worktogether after the project is done. What they might do is form ajoint venture—a temporary partnership set up for a specific pur-pose just for a short period of time.

Suppose investors want to purchase real estate as a short-terminvestment. They may later plan to resell the property for profit.At that point, the joint venture ends.

Understanding Key Terms1. Define sole proprietorship, proprietor, unlimited

liability, assets, partnership, limited partnership,joint venture.

Reviewing Objectives2. What are the advantages and disadvantages of

a sole proprietorship?

3. What are the advantages and disadvantages ofa partnership?

4. Graphic Organizer Create a diagram like theone in the next column, then compare the simi-larities and differences between partnershipsand sole proprietorships. In your diagram, listthe characteristics that are unique to partner-ships and sole proprietorships in the outer part

of each oval. Where the ovals overlap, write thecharacteristics shared by both.

Applying Economic Concepts5. Partnership Make a list describing at least

five character traits that you would want a busi-ness partner to possess in order to have a suc-cessful partnership with him or her.


2

6. Categorizing Information Imagine youare sole owner of an ice cream parlor. Makea spreadsheet listing all the daily and weeklyduties you have to perform in addition tomaking ice cream.





ReteachPair students, and have partners

take turns quizzing each other onthe advantages and disadvantagesof sole proprietorships and partner-ships. For example, one partnerstates an advantage or disadvantageand the other partner must identifywhether it refers to a sole propri-etorship or a partnership.

1. All definitions can be found in the Glossary.2. Advantages: owner keeps all profits, busi-

ness decisions can be made quickly, taxesusually low, own boss, relatively easy to getcredit. Disadvantages: owner responsiblefor all losses, unlimited liability, make allbusiness decisions, huge time demands,must depend on own and borrowed funds.

3. Advantages: losses are shared, taxes usu-ally low, partnerships combine the funds of

several partners. Disadvantages: profits areshared among partners, decision makingsometimes slow, may have trouble borrow-ing money, partnership must be reorgan-ized if one partner leaves or dies.

4. Similarities: pride in owning and runningbusiness, relatively easy to set up, lowtaxes, unlimited liability for debts, may havetrouble borrowing large amounts of money,life of business uncertain. Differences: part-

ners may focus on particular areas of busi-ness whereas sole proprietor is alone, deci-sion making quicker in sole proprietorship,sole proprietors must handle all decisionswhereas decision making shared amongpartners.

5. Encourage students to explain why theyconsider certain character traits important.

6. Have students compare their spreadsheetsand note the similarities and differences.

Write the following on theboard: I prefer the sole proprietor-ship (or partnership) as a businessorganization because . . .

Ask students to complete thesentence. Then call on volunteers toshare and discuss their sentenceswith the class.

Name Date Class

sole proprietorship Business owned and operated by one person (page 213)

proprietor Person who owns a business (page 215)

unlimited liability An owner is personally and completely responsible for all of the debts or losses of hisor her business (page 215)

assets All items legally owned by a business or household (page 215)

partnership Business owned and operated by two or more people (page 215)

limited partnership Special partnership arrangement where one or more of the people involved have lim-ited liability, but cannot make management decisions (page 217)

joint venture Temporary partnership created to achieve a specific purpose (page 217)

KEY TERMS




Have you ever tried to do something complicated by yourself? How difficult was it? Could thetask have been completed more easily or more quickly with the help of some friends? Did youwish that you had extra money to purchase a special tool for the job?

This section discusses the characteristics of sole proprietorships and partnerships.

ORGANIZING YOUR THOUGHTS

Use the diagram below to help you take notes as you read the summaries that follow Think

8, 2




Advantages and Disadvantages of Partnerships

Profits andLosses

Liability

Management

Taxes


FinancingGrowth

Life of theBusiness


Advantages

• Losses are shared.• Partners may survive a loss that

might bankrupt a sole proprietor.

• Partnerships are usually more effi-cient than proprietorships.

• Each partner works in areas of thebusiness that he or she knows mostabout or is best at doing.

• There are generally fewer govern-ment regulations.

• Taxes are usually low because part-ners pay only personal incometaxes on their share of profits.

• Partners feel pride in owning andoperating their own company.

• Partnerships combine capital, mak-ing more funds available to operatea larger, more profitable business.

• Creditors are often willing to lendmore money to partnerships thanto sole proprietorships.

Disadvantages

• Because partners share the risks,they also share the profits.

• Partners have unlimited liability fordebts incurred in business.

• If a partner is unable to pay his orher share of a debt, the others mustmake up the difference.

• Decision making is often slowbecause of the need to reach agree-ment among several people.

• Disagreements can lead to prob-lems in running the business.

• Arguments may result if partners donot get along with each other.

• Partnerships can have trouble bor-rowing large amounts of capital.

• The amount borrowed is usuallylimited by the combined value ofthe business assets and the per-sonal assets of the partners.

• If one partner dies or leaves, thepartnership must be ended andreorganized.

• The other partners may be unableor unwilling to continue operating,and the business may close—anuncertainty that is a risk to employees and creditors.

216




Name Date Class

8, 2


Multiple Choice: In the blank at the left, write the letter of the choice that best completes the statement or answers the question. (10 points each)

6. The most basic type of business organization is a

a. sole proprietorship. b. joint venture.c. partnership. d. limited partnership.

7. The biggest disadvantage of a sole proprietorship is that

a. the proprietor receives all the profits. b. the proprietor has unlimited liability.c. the operation of the business is d. business decisions can be made quickly.

more complicated

SCORE

A1. sole proprietorship

2. unlimited liability

3. assets

4. partnership

5. joint venture

Ba. all items to which a business holds legal claim

b. requirement that an owner is personally and fullyresponsible for all losses and debts of a business

c. business that two or more individuals own andoperate

d. two businesses work together for a specific purposejust for a short period of time

e. business owned and operated by one person

Matching: Place a letter from Column B in the blank in column A. (10 points each)

Section Quiz 8–2

Point out that many school districts throughout the country have encouraged the estab-lishment of student-run businesses—concession stands, bookstores, and so on—inschools. Have students work in small groups to research the topic of student-run busi-nesses. Then ask groups to prepare a report identifying the types of businesses they thinkstudents might run in their school. Suggest that they support their recommendations withstatistics and other information garnered from their research. BLOCK SCHEDULING


IndependentPracticeL2 Writing a Report Ask studentsto work in small groups to draw up areport on several businesses in thecommunity. Suggest that they locatethree sole proprietorships and threepartnerships. Direct groups toinclude in their reports such infor-mation as goods and/or services pro-vided, number of factories, stores, oroffices, number of employees, and soon. Encourage students to concludetheir reports with observations onwhether the businesses chose themost appropriate form of organiza-tion for their operations.

217

219


Terms to Know• corporation• stock• limited liability• articles of incorporation• corporate charter• common stock• dividend• preferred stock• franchise

Reading Objectives1. What are the advantages

and disadvantages of corporations?

2. How are corporations typi-cally structured?

3. What types of businessesare involved in franchises?

READER’S GUIDE

3

BUSINESS WEEK, JANUARY 11, 1999

Yahoo! Inc. could have easilybeen Boohoo! Inc.—if it weren’tfor near-flawless execution byCEO Timothy A. Koogle and his Internet team. Yahoo! isexpected to earn $48 million. . . [and] investors are doingeven better. Yahoo!’s soaringstock price gives the four-year-old company a market valuationof almost $25 billion.

Profits are a good thing. As a sole proprietor, you keep allthe profits. In a partnership, you share the profits with oneor several partners. In a corporation, like Yahoo! Inc., the

profits are dispersed among thousands of shareholders. So whydo entrepreneurs incorporate? In this section, read to learn whyand how corporations are formed.

Why Form a Corporation?Suppose your electronics repair business has grown. You

now have several partners and have turned your garage into a




MultimediaDaily Focus Transparency 15Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software


Presentation Plus!


OverviewSection 3 explains the advan-

tages and disadvantages of corpora-tions, and describes franchises.


Preteaching VocabularyHave students skim the section

to find the definitions of theTerms to Know. Then ask stu-dents to use each of the terms in asentence.


READER’S GUIDE

■ Began publishingNegro Digest in1942

■ Published first issueof Ebony in 1945

■ Was one of the firstentrepreneurs torecognize and takeadvantage of thetremendous busi-ness opportunitiesin the AfricanAmericancommunity

■ Produces AmericanBlack AchievementAwards for televi-sion, first aired in1978

■ Launched EbonySouth Africa in 1995

John Johnson began his careerin 1942 at the age of 24. He

used a $500 loan on his mother’sfurniture to start Negro Digest, amagazine devoted to the accom-plishments of African Americans.Today Johnson PublishingCompany, Inc., is the world’slargest African American-ownedpublishing company. This mediaempire includes Ebony, Jet, EbonyMan, and Ebony South Africa mag-azines and Black EntertainmentTelevision (BET). Also part ofthe company are Fashion FairCosmetics and Supreme BeautyProducts.

Like many minority-ownedcompanies, Johnson faced manysetbacks:

“The first 25 years were diffi-cult, trying to get circulation andto break through in advertising toget large companies to recognizethat black consumers had moneyand would respond to advertisingdirected to them. The first 20 yearsor so in business, we couldn’t get abank loan.”

Although the second 25 yearshave been easier, Johnson saysAfrican American startups willface many of the same hurdles he did:

“But if you have the stayingpower and wherewithal, that isassuming you have a good productand market to sell to, you’ll be suc-cessful. Never say never about newthings.”

Johnson has no plans to sellhis company or take it public forthe following reason:

“If you go public, the stock-holders, the board of directors, theSEC [Securities and ExchangeCommission] are all your bossesand you’ve got to listen to them.We only have three board mem-bers: [daughter] Linda, her mother[Eunice Johnson], and I.”Checking for Understanding

1. What products does Johnson provide?

2. Why does Johnson refuse to turn hisbusiness into a corporation?

John H. JohnsonENTREPRENEUR (1918–)

218

218

BackgroundMention that even though he is

in his eighties, John H. Johnsonremains actively involved with thecompany he founded, serving aspublisher and chief executive offi-cer. His daughter, Linda JohnsonRice, who serves as president andchief operating officer, handles theday-to-day business of the company.

Answers to Checking for Understanding1. several magazines, including Ebony, Jet, Ebony Man, and Ebony South Africa; Black

Entertainment Television; and cosmetic products2. because stockholders, the board of directors, and the SEC would all have a say in

how the business is run

Point out that Johnson feels thatto start a good business “you haveto have a good idea. You look foropportunities, and you look forservices you can render; eitherthose that aren’t being rendered atall, or those that you can providebetter.” He adds that good luck andhard work play no small part inbusiness success.

Have students discuss howJohnson’s ideas on business suc-cess are reflected in his experiencewith Johnson Publishing Company.




C ORPORATE STOCKHOLDERS

1. What type of stock represents ownership in a corporation?

2. Which type of stock gives its owner voting rights in the corporation?

• represents basic ownership of a corporation• stockholders receive voting rights• no dividend guarantee

• ownership certificates in a corporation• purchased by investors called stockholders or shareholders• provide ownership rights

• dividend guarantee• stockholders receive no voting rights• stockholders receive dividends before common stockholders receive theirs• stockholders get their investment back before common stockholders if the corporation goes out of business

COMMON STOCK PREFERRED STOCKBOTH

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221


articles of incorporation: docu-ment listing basic informationabout a corporation that is filedwith the state where the corpora-tion will be headquartered

corporate charter: license to operate granted to a corpora-tion by the state where it is established

Corporate StructureIn order to form a corporation, its founders must do three

things. First, they must register their company with the govern-ment of the state in which it will be headquartered. Second, theymust sell stock. Third, along with the other shareholders, theymust elect a board of directors.

Registering the Corporation Every state has laws governingthe formation of corporations, but most state laws are similar.Suppose that you and your partners decide to form a corpora-tion. You will have to file the articles of incorporation with thestate in which you will run your corporation. In general, thesearticles include four items:(1) Name, address, and purpose of the corporation;(2) Names and addresses of the initial board of directors (these

men and women will serve until the first stockholders’ meet-ing, when a new board may be elected);

(3) Number of shares of stock to be issued;(4) Amount of money capital to be raised through issuing stock.If the articles are in agreement with state law, the state will grantyou a corporate charter—a license to operate from that state.

BusinessOrganizationsAlthough proprietorshipsmake up about 73 percentof American businesses,they generate only about 5percent of total businessrevenues. What percent-age of American busi-nesses are partnerships?

Proportion of Businesses Proportion of Total Business Revenue

73.1%Proprietorships

7.0%Partnerships

5.2%Proprietorships

5.4%Partnerships

19.9%Corporations

89.4%Corporations

Comparing Corporations, Partnerships, and Proprietorships

Source: U.S. Bureau of the Census, Statistical Abstract of the United States


For an online update of this graph, visit ett.glencoe.com and click on Textbook Updates—Chapter 8.



L2 Interpreting Ideas Provide stu-dents with recent issues of BusinessWeek, Forbes, Fortune, The Wall StreetJournal, or the business sections oflocal newspapers. Ask students toreview the periodicals they receive tolocate articles on American corpora-tions. Have them note the majorissues covered in these articles. Thenhave students use their findings towrite a few paragraphs on corpora-tions in the American economy. Callon volunteers to read their para-graphs to the class.



220 CHAPTER 8

corporation: type of businessorganization owned by many peo-ple but treated by law as though itwere a person; it can own prop-erty, pay taxes, make contracts,and so on

shop. You would like to expand and rent a store so that yourbusiness is more visible. You would also like to buy the latestequipment, charge a little less than your competitors, and cap-ture a larger share of the market for electronics repair work.You need financial capital, however.

You have decided that you do notwant any more partners. You wouldhave to consult with them about everydetail of the business as you do nowwith your present partners. What youwant are financial backers who will letyou use their funds while letting yourun the business. What you are propos-ing is a corporation.

What Is aCorporation?

A corporation is an organizationowned by many people but treated bylaw as though it were a person. A cor-poration can own property, pay taxes,make contracts, sue and be sued, andso on. It has a separate and distinct

existence from the stockholders who own the corporation’s stock.Stock represents ownership rights to a certain portion of thefuture profits and assets of the company that issues the stock.

In terms of the amount of business done (measured in dol-lars), the corporation is the most significant type of businessorganization in the United States today. Figure 8.5 on page221 compares corporations to other forms of businesses interms of numbers and proportion of total business revenue.You can see that although corporations make up only about 20 percent of all businesses, they earn about 90 percent ofall business revenues.

Like sole proprietorships and partnerships, corporationshave advantages as well as disadvantages. One of the majoradvantages of a corporation is limited liability. If a corpora-tion goes bankrupt or is sued, only the business loses moneyand assets, not the stockholders. A major disadvantage of corporations is that they are taxed more heavily than otherforms of business organizations. Look at Figure 8.6 on page 222 to read about other advantages and disadvantages of corporations.

Many modern corporations are huge. A study con-ducted in the mid-1990s found that some of these cor-porations have bigger economies than the countries inwhich they operate! More than half of the world’s 100largest economies, the study revealed, were corpora-tions, not nations. General Motors, the United States’slargest corporation, had the 26th largest economy. Thisplaced it above 167 nations, including Denmark, SouthAfrica, Turkey, and Saudi Arabia. ■

Big Business!

stock: share of ownership in acorporation that entitles the buyerto a certain part of the future prof-its and assets of the corporation

limited liability: requirement inwhich an owner’s responsibilityfor a company’s debts is limited to the size of the owner’s invest-ment in the firm

220

Guided PracticeL1 Making Comparisons Have stu-dents study Figure 8.6 on page 222.Next, refer students to the chartsdetailing the advantages and disad-vantages of sole proprietorships andpartnerships (Figure 8.3 on page214 and Figure 8.4 on page 216).Have students create a graphicorganizer that compares sole propri-etorships, partnerships, and corpora-tions by noting these organizations’similarities and differences.

Fine Motor Skills Problems Students who have difficulties with fine motor skills are oftenslow and inefficient writers. This puts such students at a disadvantage, because mostassignments require some type of writing. Teach these students to read short segments oftext and to use an abridged form of note taking, in which they write only single words andrelated facts.



Name Date Class

For use with the textbook pages 219–225

HE CORPORATE WORLD AND FRANCHISES

FILLING IN THE BLANKS

Directions: Use your textbook to fill in the blanks using the words in the box. Some words may be usedmore than once.

corporation stock limited liabilityarticles of incorporation corporate charter stock feefranchise dividend taxes sole proprietorshippartnership board of directors

Introduction/ Why Form a Corporation?As a 1 __________________________ , one keeps all the profits. In a 2 __________________________ the profits are

shared with one or several people. In a 3 __________________________ profits are shared among thousands of

shareholders.

What is a Corporation?A 4 __________________________ is an organization owned by many people but treated by law as though it were a

person. 5 __________________________ represents ownership rights to a certain portion of the profits and assets of

the company issuing the stock. One of the major advantages of a corporation is 6 __________________________ ,

which limits the responsibilities for the owner of the company. A major disadvantage of corporations is that they pay

more 7 __________________________ than other businesses.

C S

8-3

T


Have students study the graphsin Figure 8.5. Then ask them touse information in the graphs tomake generalizations about thethree kinds of business organiza-tions. If students need guidance,offer the following example:Corporations make up a smallpercentage of businesses but gen-erate the most revenue.Answer: about 7 percent

Statistics on Business Organizations Statistics on the number, profits, and sales andoperations income of business organizations are collected by the Internal RevenueService (IRS) from annual tax returns. Published figures are not current, because busi-nesses do not file tax returns until after the tax year is over. Some businesses get exten-sions from the IRS to file at an even later date. When all the tax returns have beenreceived, the IRS may take several months to analyze and collate the data and prepare itfor publication. As a result, the information for a particular year may not be available untilthree years later.

Relevant Issues in Economics

Daily Lecture Notes 54

Copyright ©

by The M

cGraw

-Hill C

ompanies, Inc.

L ECTURE LAUNCHERLecture Launcher Individuals pay their taxes on a calendar year, from January 1 to December 31.A corporation can elect to use a fiscal year for tax purposes, meaning the tax year can start inany month of the fiscal year. This is one advantage of forming a corporation. What are someothers?

I. Why Form a Corporation?

A. The need for financial capital

B. Wanting financial backers who will lend funds without having a hand in the business.


When is becoming a corporation better than taking on more partners? (When a busi-ness seeks limited liability, large capital investment, less input from addition of partners.)

II. What is a Corporation?

A. An organization owned by many people but treated by law as if it were a person.

B. Corporations can own property, pay taxes, make contracts, sue and be sued.

C. Corporations have a distinct existence from stockholders.

D. A major advantage is stockholders have limited liability, they are not personally responsible, only the business loses money and assets.

E. A major disadvantage is corporations pay more taxes than other forms of businessorganizations.


Explain this statement: A corporation is considered by law as if it were a person.(A corporation can be sued or held liable for the business practices of its employees. Any legal fees or fines will be paid by the corporations funds, not the employees’ income.)

III. Corporate Structure

A. Register the corporation in the state where it will headquartered.

8-3

PAGES 219–220

PAGE 220

PAGES 221–224



223

common stock: shares of own-ership in a corporation that givestockholders voting rights and aportion of future profits (afterholders of preferred stock arepaid)

dividend: portion of a corpo-ration’s profits paid to its stockholders

preferred stock: shares of own-ership in a corporation that givestockholders a portion of futureprofits (before any profits go toholders of common stock), but no voting rights

Selling Stock To raise funds for the expansion of your elec-tronics repair business, you could sell shares of either commonor preferred stock in your new corporation. Common stock givesthe investor part ownership in the corporation, a right to a per-centage of the company’s future profits, and voting rights at theannual stockholders’ meeting. However, it does not guarantee adividend—a money return on the money invested in a company’sstock. Holders of preferred stock do not have voting rights in thecorporation, but they are guaranteed a certain amount of divi-dend each year. Plus, if the corporation goes out of business,holders of preferred stock have first claim on whatever value isleft in the company after creditors have been paid.

If your corporation were to become large, you might find itsstock traded in the local over-the-counter market. Over-the-countermeans that individual brokerage firms hold quantities of shares ofstock that they buy and sell for investors. Should your corporationcontinue to grow, its stocks may be traded on a stock exchange.

Naming a Board of Directors To become incorporated, acompany must have a board of directors. You and your partners,as founders of the corporation, would select the first board foryour corporation. After that, stockholders at their annual stock-holders’ meetings would elect the board. The bylaws of the corpo-ration govern this election. Bylaws are a set of rules describinghow stock will be sold and dividends paid, with a list of theduties of the company’s officers. They are written after the corpo-rate charter has been granted.

T he inventor and entrepreneur IsaacSinger began the practice of franchis-

ing in the United States. In the mid-1800s,Singer signed agreements with several mer-chants that allowed them to market hissewing machines.

The interstate highway system causedthe practice of franchising to explode in the

1950s. Increasing automobile ownershiptook more Americans on the road, wherethey looked for familiar motels, restaurants,and gas stations they knew and trusted.Today more than 3,000 American compa-nies franchise. Their 550,000 franchise out-lets sell about $800 billion in goods andservices each year. ■

Economic Connection to... HistoryEconomic Connection to...

Business Organizat ions 223

Franchises, Franchises, Everywhere!Franchises, Franchises, Everywhere!



L3 Illustrating Ideas Ask studentsto use library resources to locate anannual report of a corporation head-quartered in or near their commu-nity. Have them use information inthe report to construct an organiza-tional chart for the corporation simi-lar to the chart on pages 224–225.Suggest that students include infor-mation such as the number of share-holders and the names of the variousoffice holders in their charts. Havestudents display their organizationalcharts around the classroom.



222 CHAPTER 8

Profits andLosses

Liability

Management

Taxes


FinancingGrowth

Life of theBusiness

Advantages

• Owners of the corporation—stock-holders—do not have to devote timeto the company to make money ontheir investment.

• The corporation has limited liability.• If a corporation goes bankrupt or is

sued, creditors cannot normallytake personal property from stock-holders to pay debts.

• Responsibility for running a corpo-ration is divided among many.

• Decisions are made by individualstrained in specific areas, such assales, production, and so on.

• Corporations can handle large andcomplicated operations, and cancarry on many types of businessactivities at the same time.

• An individual may feel satisfactionsimply in owning a part of acorporation.

• Corporations draw on resources ofinvestors and may issue stock atany time to raise capital.

• A corporation can continue indefi-nitely if it remains profitable.

Disadvantages

• Decision making can be slow andcomplicated because so many levelsof management are involved.

• The interests of those running thecorporation may not be the same as those of the stockholders, whooften seek an immediate return ontheir investment.

• The federal government and somestate and local governments tax corporate profits.

• The profits paid to stockholders as dividends are again taxed asincome to those individuals.

• Most individual stockholders havelittle or no say in how a corporationis run.

Advantages andDisadvantages of Corporations


222

IndependentPracticeL2 Making Connections Ask stu-dents to research the origins of theword corporation. Then have themwrite a paragraph detailing how theterm came to be applied to the mod-ern business organization. Call onvolunteers to share their paragraphswith the class.

Have students review the infor-mation in Figure 8.6. Then askstudents to speculate on howworking for a corporation mightbe different from working for asole proprietorship or partnership.

Economic GiantMitsubishi, a Japanese com-

pany involved in automobile, elec-trical, and chemical industries, isthe largest corporation in theworld. It has the world’s 22nd

largest economy, larger than thatof India—a country with a popula-tion of some 978 million people.

Organize students into groups, and tell groups to imagine they are editorial teams work-ing on an economic history textbook. Their task is to develop ideas for a four- to six-pagepictorial essay on the history of corporations in the United States. Ask groups to draw up aplan for the essay, including an introduction, illustration ideas, brief captions for illustra-tions, and ideas for linking paragraphs. Call on groups to present their plans to the class.

BLOCK SCHEDULINGELL

Cooperative Learning

European FranchisesThere are nearly 145,000 fran-

chise outlets operating in theEuropean countries of Austria,Belgium, Denmark, France,Germany, Great Britain, Hungary,Italy, the Netherlands, Portugal,Spain, and Sweden. These fran-chises generate about $83 billionin business each year.

Organize students into groups, and tell them to decide on a franchise each would like tooperate. Have group members assign the following tasks among themselves:1. Listing the group’s reasons for wanting to obtain the franchise.2. Finding out the procedure for obtaining the franchise.3. Interviewing a franchise operator to discover the pros and cons of franchising.4. Developing a plan for financing the franchise.

Have groups compile the information they obtain into an oral report. Call on group rep-resentatives to present their reports to the class. BLOCK SCHEDULING


225225

WarehouseManager

DeliveryManager

Legal StaffVice President,Distribution


Understanding Key Terms1. Define corporation, stock, limited liability, arti-

cles of incorporation, corporate charter, com-mon stock, dividend, preferred stock, franchise.

Reviewing Objectives2. What are the advantages and disadvantages of

corporations?

3. Graphic Organizer Create a diagram like theone below to show how corporations are typi-cally structured.

4. What types of businesses are involved infranchises?

Applying Economic Concepts5. Franchises In what industry would you fran-

chise if offered the opportunity? Explain thepossible advantages and help available fromother franchises in the same industry. Thendescribe possible disadvantages of setting up a franchise in your chosen industry.

6. Making Comparisons Look in the finan-cial pages of a recent newspaper to analyzehow the stocks of three corporations haveperformed. What was the closing price foreach? What were their 52-week highs? Forhelp in reading the financial page, see pagexxiii in the Economic Handbook.


3





ReteachAsk students to rewrite the major

subheadings as newspaper head-lines. Then have them write out-lines for articles to accompanythese headlines.

1. All definitions can be found in the Glossary.2. Advantages: owners need not devote time to

make money on investment, corporation haslimited liability, responsibility for running com-pany shared among many, feeling of satisfactionfrom owning part of corporation, corporationscan draw on resources of many investors andmay issue stock to raise funds, corporation canexist indefinitely. Disadvantages: slow decision

making, higher taxes, shareholders have littlesay in running of company.

3. Refer students to Figure 8.7 on pages224–225.

4. hotels, motels, gas stations, fast-food chains5. Answers will vary.6. Answers will vary. Suggest that students pre-

sent their findings in chart form.

Lead students in a discussion ofthe following question: Which typeof business organization—sole pro-prietorship, partnership, or corpo-ration—is the most important forthe American economy?

Name Date Class

corporation Business organization owned by many people, but treated as a person by law. For example,it can own property, pay taxes, and make contracts (page 220)

stock Allows a person to purchase a specific part of a corporation’s future profits or assets (page 220)

limited liability An owner’s responsibility for the company’s debts is limited only to the size of the owner’sinvestment (page 220)

articles of incorporation registers basic information about the corporation with the state where the corporation will have its headquarters (page 221)

corporate charter A license to operate a corporation within a state’s borders (page 221)

common stock ownership shares in a corporation, which allow its owners voting rights and a portion offuture profits after preferred stockholders are paid (page 223)

dividend A portion of the corporation’s profit paid to stockholders (page 223)

preferred stock An ownership share in a corporation that does not have voting rights, but stockholdersreceive a portion of future profit before others (page 223)

franchise One business, the franchiser, sells the right to use its name and products to another companyknown as the franchisee (page 224)

KEY TERMS


T HE CORPORATE WORLD AND FRANCHISES


Have you ever been a member of a club or team? How was your organization created? Do youraise money to pay for activities? Who selected your organization’s leaders?

8, 3




224 CHAPTER 8

franchise: contract in which onebusiness (the franchiser) sells toanother business (the franchisee)the right to use the franchiser’sname and sell its products

The board is responsible for supervising and controlling thecorporation. It does not run business operations on a day-to-daybasis. Instead, it hires officers for the company—president, vicepresident(s), secretary, and treasurer—to run the business andhire other employees. Figure 8.7 shows the typical structure of acorporation.

FranchisesMany hotel, motel, gas station, and fast-food chains are fran-

chises. A franchise is a contract in which a franchiser sells toanother business the right to use its name and sell its products.The person or business buying these rights, called the fran-chisee, pays a fee that may include a percentage of all moneytaken in. If a person buys a motel franchise, for example, thatperson agrees to pay the motel chain a certain fee plus a por-tion of the profits for as long as his or her motel stays in busi-ness. In return, the chain will help the franchisee set up themotel. Often, the chain will have a training program to teachthe franchisee about the business and set the standards of busi-ness operations.

Corporate Chain of Command A typical board of direc-tors hires officers to run the company. In this organizationalchart, who reports to the vice president of manufacturing?

Stockholders

Board of Directors

PresidentSecretary Treasurer

Vice President,Manufacturing

FactoryManager

FinanceManager

PersonnelManager

AdvertisingManager

SalesManager

PurchasingManager

Research andDevelopment

Director

Vice President,Operations

Vice President,Marketing


224




After students have reviewedFigure 8.7, ask them the follow-ing question: What is the role ofthe board of directors in the run-ning of a corporation? The boardis responsible for supervising andcontrolling the corporation. It hiresvarious company officers to runday-to-day business operations.Answer: purchasing manager,research and development director,factory manager

T HE CORPORATE WORLD AND FRANCHISES

Multiple Choice: In the blank at the left, write the letter of the choice that best completes the statement or answers the question. (10 points each)

6. The most important type of business organization in the United States today in terms of the amount ofbusiness done is the

a. limited partnership. b. joint venture.c. corporation. d. sole proprietorship.

7. A disadvantage of a corporation is that

SCORE

A1. corporation

2. stock

3. limited liability

4. dividend

5. franchise

Ba. contract in which one business sells to another busi-

ness the right to use its name and sell its products

b. requirement in which an owner’s responsibility forbusiness debts is limited to the size of the owner’sinvestment in the business

c. share of ownership in a corporation

d. type of business owned by many people, but treatedby law as a single person

e. portion of a corporation’s profits paid to its stockholders

Matching: Place a letter from Column B in the blank in Column A. (10 points each)

Name Date Class

8, 3

Section Quiz 8–3

Raising Capital for Corporations Selling stock is not the only way a corporation canraise capital to develop and expand. A corporation also can issue bonds. Typically issuedin multiples of $1,000 or $5,000, corporate bonds are debt obligations, or IOUs. That is,when investors buy bonds, they are lending money to the issuing corporation. Bonds carrya promise to repay the purchasing price, or principal, on a specified maturity date. Bondsalso pay a stated rate of interest, usually in semiannual installments.

Extending the Content

227


Starting a Business

• People usually decide to start a business to gainprofits, to “do something on their own,” or to betheir own boss.

• Entrepreneurs must gather the relevant factors ofproduction and decide on the form of businessorganization that best suits their purposes.

• For those wanting to start a small business, help isavailable from the government and from theInternet.

• Every business must consider four basic elements:expenses, advertising, receipts and record keep-ing, and risk.

Sole Proprietorships andPartnerships

• The most basic type of business organization is thesole proprietorship, a business owned by oneperson.

• The biggest advantages of sole proprietorships arethat the proprietor has full pride in owning thebusiness and receives all the profits.

• The biggest disadvantage is that the proprietor hasunlimited liability and can lose personal assets aswell as the business.

• A partnership is a business organization owned bytwo or more individuals.

• A legally binding partnership agreement describesthe duties of each partner, the division of profits,and the distribution of assets should the partner-ship end.

• In a limited partnership, one general partnerassumes the management duties and debt respon-sibility, while the limited partners contribute moneybut have no liability.

The Corporate World andFranchises

• A corporation can own property, pay taxes, makecontracts, and sue and be sued.

• One of the major advantages of a corporation islimited liability.

• A major disadvantage is that corporations are taxed more heavily than other forms of businessorganizations.

• To form a corporation, its founders must registerwith the state government, sell stock, and elect aboard of directors.

• A franchise is a contract in which a franchiser sellsto another business the right to use its name andsell its products.

C H A P T E R

SECTION 1

SECTION 2

SECTION 3

Chapter Overview Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 8—Chapter Overviews toreview chapter information.

8

Use the Chapter 8 Summary to preview, review, condense, orreteach the chapter.

Preview/ReviewVocabulary PuzzleMaker Soft-

ware reinforces the key terms usedin Chapter 8.

Interactive Tutor Self-Assess-ment Software allows students toreview Chapter 8 content.

CondenseHave students listen to the

Chapter 8 Audio Program (alsoavailable in Spanish) in the TCR.Assign the Chapter 8 Audio ProgramActivity and give students the Chap-ter 8 Audio Program Test.

ReteachHave students com-

plete Reteaching Activity 8 in theTCR (Spanish Reteaching Activitiesare also available).

C H A P T E R 8

ECONOMICS & YOU



If you do not have accessto a videodisc player, theEconomics & You programs arealso available in VHS.

Business Organizations Have students keep track of all the goods that they and theirfamilies purchase during one week. Have them list these items with the name of the busi-nesses where they were purchased. Direct students to indicate the size of each busi-ness—small, medium, or large—and whether each business has one or several owners.At the end of the week, ask students to compile the information they have gathered in achart with the following column headings: “Goods and Services Purchased,” “Size ofBusiness,” “Ownership.” Call on volunteers to display their charts to the class. Have themexplain why they buy certain goods from particular businesses.

Economics Journal

SPOTLIGHT

226 CHAPTER 8

SPOTLIGHT ON THE ECONOMY

Now that the drive-through window is a fix-ture of the fast-food world, Burger King is

perfecting the fly-through. A Burger King insuburban London dubs the addition to its regu-lar restaurant the “Whopper Chopper,” a land-ing pad where helicopter pilots can drop in,grab some grub, and fly out without leaving thecockpit.

Pilots call first to alert Burger King that theyare landing. An employee dashes out and callsthe order in. Then it is delivered to the waitingchopper. “This is more like the old diners

where someone comes outto take your order,” saysJon Clarke, a Burger Kingspokesperson in London.“It’s a bit more personal.”

Pilots agree. “I think thisis a great idea,” says MarkBarry-Jackson, an Aeromegapilot. “Finding suitableplaces to stop and refuelpassengers has always beendifficult.” The landing pad,which is under a helicoptertraffic lane, was so popular

it was closed over the hol-idays so it could bemade big enough tohandle militarychoppers, whosepilots had heardabout the place.Burger King, still testingthe concept, won’t com-ment on its profitability. But thefly-through is an idea that may just take off.—Reprinted from January 25, 1999 issue of Business Week by special

permission, copyright © 1999 by The McGraw-Hill Companies, Inc.

Think About It1. How does this Burger King fran-

chise accommodate customerswho are helicopter pilots?

2. What do you think is positiveabout franchises in general?Negative?

Check It Out! In this chapter you learned about fran-chises and corporations. In the following article, readto learn how one franchise has expanded its service inan unusual way.

Hate to Eat and Fly, but . . .Hate to Eat and Fly, but . . .

226

Point out that while Burger Kingis trying to attract customers fromthe skies, other fast-food franchisesare attempting to get their earth-bound customers to “drop in” sev-eral times a day. Working on the“day parts” concept—that differenttimes of the day are identified withcertain foods—franchisers are open-ing franchise combinations. Forexample, food giant Allied Domecqhas opened several “trombos.”These combine three fast-food fran-chises—Dunkin’ Donuts (breakfast);Togo’s, a sub sandwich and saladrestaurant (lunch); and Baskin-Robbins (afternoon and evening).

Answers to Think About It

On March 31, 1998, BurgerKing announced a new additionto its menu for the followingday—the Left-handed Whopper.Left-handers flocked to BurgerKing outlets to buy the sandwich.They should have taken a closerlook at the calendar—it wasApril 1, April Fool’s Day! 1. It offers a “fly-through” service, delivering meals to waiting helicopters on a landing

pad next to the restaurant.2. Answers will vary. Some students might suggest such positives as set standards for

the goods and services offered by franchises. Other students might see this samenessas a negative, since it leads to bland, unimaginative products.

To find up-to-date news andanalysis on the economy, busi-ness, technology, markets,entrepreneurs, investments,and finance, have studentssearch feature articles and spe-cial reports on the BusinessWeek Web site.www.businessweek.com

http://www.businessweek.com

CHAPTER 8Assessment and Activities


229


Thinking Critically1. Drawing Inferences Why do you have to

include the opportunity cost of your timewhen you calculate your profits in yourown business?

2. Drawing Conclusions Why would a persondecide in favor of a partnership ratherthan a sole proprietorship?

3. Understanding Cause and Effect Create adiagram like the one below and identifythree problems in a corporation thatmight be caused by its complex organiza-tional structure.

Applying EconomicConceptsEconomic Institutions and Incentives In thischapter you have read about numerousadvantages and disadvantages of differenttypes of business organizations. Make a listof the following: sole proprietorship, part-nership, limited partnership, joint venture,corporation, and franchise. After each type,indicate the single most important advan-tage that you believe this form of businessorganization has.

Technology ActivityDeveloping Multimedia Presentations Think of aproduct or service you would like to produce.Create a multimedia presentation promotingthat product or service. Utilize video, graphics,and music in your presentation. Share yourpresentation with the rest of the class.

Reviewing SkillsUsing the Internet Several business newsmagazines—Forbes, Fortune, and BusinessWeek—report the top several hundred corpo-rations in America every year. Find out whatthe top five corporations are, then use theInternet to locate each company’s home page.Once you have located each site, access themand use the information to prepare an oralreport on each company’s (1) number ofemployees, (2) total sales in billions of dol-lars, (3) total market value as given by thestock market, and (4) change in ranking fromthe previous year.

Cooperative LearningProject

Working in groups of four, select a cor-poration listed in the financial pages of anewspaper. Then use business magazinesand financial and annual reports, if possi-ble, to determine the annual earnings, divi-dends, and stock prices of that corporationover the past year. Compare the corporationwith those selected by other groups anddiscuss which stocks would have been thebest investments during the past year.

Notice the labels on your clothes, shoes,and food. Find out in which countries theseitems were made or produced. Then researchone of the top five corporations within one ofthose countries. Is its corporate structuresimilar to the structure found in Americancorporations? Explain.

Complex Structure

Problem Problem Problem

Applying EconomicConcepts

Answers will vary. Ask studentsto explain why they consider theselected advantages the mostimportant.

Technology ActivityPresentations will vary.

Reviewing SkillsAfter students have presented

their reports, ask them to identifythe corporations they expected tosee on the list and those they weresurprised to see.

CooperativeLearning Project

Prior to students undertakingthis project, review with them themeaning of the various symbolsused in the financial pages.

Analyzing theGlobal Economy

It might be helpful for studentsto draw diagrams of the structure oftheir selected corporations.

ASK: How might stockholdersinfluence the operations of acorporation? by exercising theirright to vote in elections for theboard of directors

Chapter BonusTest Question

Thinking Critically1. because the time used in running the

business could have been used to dosomething else, including working for awage

2. to expand the business, to share the work,to gain a partner with specific expertise,or to share in business losses

3. decision-making process becomes verycomplex because of the many layers ofmanagement; decision-making processtends to be slow; difficult to identifysource of decisions because of many lay-ers of management



Identifying Key TermsIdentify the letter of the definition in Column Bthat correctly defines each term in Column A.

Column A1. inventory2. corporate charter3. assets4. franchise5. unlimited liability6. sole proprietorship7. partnership8. stock9. joint venture

10. corporation

Column Ba. items of valueb. business owned by two or more peoplec. supply of items that are used in businessd. business owned by many people, but

treated as a person itselfe. contract in which a business sells the

right to use its name to another business

f. business owned by one persong. right to operateh. temporary partnershipi. ownership shares in a businessj. legal responsibility for all debts incurred

when doing business

Recalling Facts and IdeasSection 1

1. Every business involves expenses andreceipts and record keeping. What aretwo other elements?

2. When you calculate your profits, it isespecially important for you to includethe value of your time. What is thiscalled?

3. If you need help in starting a small busi-ness, where can you look?

Section 24. What is the most common form of busi-

ness organization?5. What are the disadvantages of a sole

proprietorship?6. What is the difference between a partner-

ship and a limited partnership?7. What is the difference between a limited

partnership and a joint venture?

Section 38. What are the elements of every

corporation?9. Who grants corporate charters?

10. Which group within a corporationchooses the board of directors?

11. How does a franchise operate?

8

Self-Check Quiz Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 8—Self-Check Quizzes toprepare for the Chapter Test.

228 CHAPTER 8

228

Identifying KeyTerms1. c 6. f2. g 7. b3. a 8. i4. e 9. h5. j 10. d

Recalling Facts and Ideas1. advertising and risk2. opportunity cost3. Small Business Administration,

state departments of commerceand community affairs, commu-nity college and university smallbusiness centers, small businessincubators, the Internet

4. sole proprietorship5. Disadvantages: owner responsi-

ble for all losses, unlimited lia-bility, make all businessdecisions, huge time demands,must depend on own funds andwhat can be borrowed.

6. In a partnership, partners play arole in operating the businessand have unlimited liability. In alimited partnership, one generalpartner runs the business andhas unlimited liability, while thelimited partners play little part

in the business and are liable only forwhat they have invested.

7. A limited partnership lasts as long as thepartners agree to do business together,whereas a joint venture is a temporarypartnership set up for a specific purposeand time period.

8. It is registered in the state where it will beheadquartered, it sells stock, and it electsa board of directors.

9. the state in which the corporation will beheadquartered

10. stockholders11. The franchiser sells the right to use its

name and its product or service to thefranchisee. The franchisee pays a fee anda share of the profits. In return, the fran-chiser helps train the franchisee to runthe business efficiently.

Have students visit theEconomics Today and TomorrowWeb site at ett.glencoe.com toreview Chapter 8 and take the Self-Check Quiz.

MindJogger Videoquiz

Use MindJogger to reviewChapter 8 content.


Answers to Lab Report AnalysisHave students refer to the reasoned explanations they wrote for Step B before answer-

ing the Lab Report Analysis questions. In a concluding session, have students share anddiscuss their answers.

231

After completing your presentation,answer the following questions:1. Why did you choose an independent orfranchise?

2. Why did you choose the specificlocation of your hotel?3. How did you arrive at the room rate?4. What did you decide to include in thetotal project?

5. Decide on the number and wages ofemployees you will need for all shifts: amanager, assistant managers, front deskclerks, housekeeping staff, maintenancestaff, restaurant staff, and so on.

6. Decide the layout of the rooms as well astheir décor. Also design the exterior ofthe hotel, including parking facilities,subway access, and so on.

7. Determine what you will charge perroom. Report on what items areincluded in the room (shampoo, coffeemaker, satellite TV, and so on).

8. Determine how you will obtain thefunds needed to begin: banking institu-tion, grant or loan from a small businessincubator, etc.

Use the results of your research to createat least two drawings: one showing the lay-out of the rooms, and one showing the exte-rior of the hotel. Then create a scale modelof your hotel. Present your drawings andmodel to the rest of the class.

Have students answer the LabReport Analysis questions.

To conclude the Economics Lab,point out that the hotel and motelindustry is a leader in franchising.Ask students why they think this is so.

Teacher’s Notes

Economics LabEconomics Lab

Setting Up a BusinessFrom the classroom of Denny C. Jackson, Switzerland County High School, Vevay, Indiana

In Chapter 8 you learned about the differ-ent types of business organizations and

what it takes to start a business. In this lab,you will set up a hotel business.

✔ Hotel directories

✔ Hotel franchise circulars

✔ Vacation/travel guides (for location ofthe hotel)

✔ Drawing paper

✔ Colored pencils

✔ Clear plastic folder

✔ Computer with access to the Internet(optional)

✔ Supplies necessary to build a scalemodel of your hotel

1. Work with a partner to research points 2through 8.

2. Determine the location of your hotel.Use travel guides to identify the “genera-tors” that will draw people to your hotel:national park, theme park, university,airport, isolated interstate, tour groups,and so on.

3. Decide whether your hotel should be anindependent or a franchise. Explain yourchoice.

4. Determine the makeup of the hotel. Howmany rooms? Restaurant and lounge?Swimming pool? Gift shop? Game roomand health spa?

230

230

Point out to students that in afree market, businesses succeed orfail, in part, because of the prepara-tion and research proprietorsundertake before the business iseven open. Underscore that well-prepared business owners have abetter chance of success than thosewho rely on instinct and enthusi-asm alone. Conclude by informingstudents that the purpose of thislab is to provide an opportunity topractice the type of preparation andplanning that setting up a businessrequires.

Economics LabEconomics Lab

Begin by ensuring that all pairspossess, or have access to, all thematerials listed in Step A. As pairswork through the procedures inStep B, ensure that they are makingreasoned decisions. That is, havethem write full explanations of whyeach decision or determination wasmade. In Step C, suggest that pairsprepare an oral report to accom-pany their presentations of draw-ings and models.

It will take several sessions tosatisfactorily complete thisEconomics Lab. Therefore, establishset times for review of students’progress.

An economic impact survey onthe travel and tourism industriesconducted in 1998 found thatAmericans who stayed in U.S.hotels and motels in the UnitedStates accounted for an estimated$256 billion in spending. Thistotal included such expenditurecategories as lodging, transporta-tion, food, shopping, and entertainment.

Documents

CHAPTER 8 Resource Manager CHAPTER 8 Resource … · a bank limits the partnership’s liability. ... Chapter 8 Test Form A Name Date Class SCORE A B USINESS ORGANIZATIONS RECALLING