Mr. Duggan/ Economics

BUSINESS AND LABOR

SOLE PROPRIETORSHIPS• Is a business owned and managed by

a single individual

• Advantages

• Ease of start up ( license, permit and name)

• Relatively few regulations (zoning laws)

• Sole receiver of profit (after taxes all profit)

• Full control

• Easy to discontinue

• Disadvantages

• Unlimited personal liability- (legally tied for obligation of paying debts)

• Limited access to natural resources

• Lack of permanence (death, retirement and lack of Fringe benefits causes the business a limited life)

PARTNERSHIPS• Business organization owned

by two or more people

TYPES OF PARTNERSHIPS• General partnership- share equally in both

responsibility and liability

• Limited partnership- one partner runs the firms actions and the other invests the money

• Limited liability partnerships- all partners are limited where they are responsible for only certain parts of the business

ADVANTAGES OF PARTNERSHIPS• Ease start up (documents for a partnership)

• Articles of partnerships- legal agreement

• Uniform Partnership Act-government laws for rules of partnership

• Shared decision making and specialization

• Larger pool of money

• Taxation (tax breaks)

DISADVANTAGES OF PARTNERSHIPS

• Unlimited liability- risk for one person bad mistake can destroy the company

• Potential for conflict

CORPORATIONS• Is a legal entity, or being, owned by individual

stockholders, each of whom faces limited liability for the firms debit

• Stock- a certificate of ownership in a corporation

TYPES OF CORPORATIONS

• Closely held corporation- privately held

• Publicly held corporation- stocks traded on open market

ADVANTAGES OF CORPORATION

• Limited liability for owners

• Transferable ownership

• Ability to attract capital

• Long life

DISADVANTAGES IF THE CORPORATION

• Expense and difficulty of start-up (need certificate of incorporation)

• Double taxation (dividends- pay outs to stockholders)

• Potential loss of control by the founders

• More legal requirements and regulations

CORPORATE COMBINATIONS• Horizontal mergers- joining two or more

firms in the same market providing the same good and services

• Vertical mergers- joining two or more firms involved in different stages of producing the same good or service

• Conglomerates- when firm owns more than three businesses that make unrelated products

MULTINATIONAL CORPORATION• Firms that operate in more than one country at

a time

• Advantages – provide jobs and products around the world

• Disadvantages- unduly influence the culture and politics in the countries in which they operate

BUSINESS FRANCHISES• Semi independent business that pays fees to a parent

company in return for the right to sell a certain product

• Advantages

• Management and training

• Standardized quality

• National advertising

• Financial assistance

• Centralized buying power

• Disadvantages

• High franchising fees

• Strict operating standards

• Purchasing restrictions

• Limited product line

COOPERATIVE ORGANIZATIONS

• Consumer cooperatives (sell large quality of products at reduces prices)

• Service cooperatives (banking services, health care and baby sitting services)

• Producer cooperatives (farming markets that help each other sell their products)

NON PROFIT ORGANIZATIONS• Are usually in the business of

benefiting society