Types of Business Organization.ppt
- 1. WHAT SHOULD BE DONE IN ORDER TO HAVE A GOOD COMPANY STRUCTURE, POSITIVE OUTCOMES?
- 2. Identify Business entity Perform group work and collaboration Develop critical thinking and research skills Develop performing in audience skill LESSON OBJECTIVES
- 3. In simplest terms, a business entity is an organization created by an individual or individuals to conduct business, engage in a trade, or partake in similar activities. There are various types of business entities—sole proprietorship, partnership, LLC, corporation, etc.—and a business’s entity type dictates both the structure of that organization and how that company is taxed. WHAT IS BUSINESS ENTITY?
- 4. When starting a business, one of the first things you want to do is choose the structure of your company—in other words, choose a business entity type. This decision will have important legal and financial implications for your business. The amount of taxes you have to pay depends on your business entity choice. it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money.
- 6. TIME: 15 min! Descriptors to the poster : Define the type of a business organization. State the number of participants. Indicate the advantages. Indicate the disadvantages. Give examples. WORK IN GROUPS
- 7. SOLE PROPRIETORSHIP- 72% OF BUSINESSES
- 8. Economic Weakness of sole proprietorship: Unlimited Liability: you have total responsibility for all debts and liabilities of the company Difficulty in raising financial capital Limited size and efficiency Limited managerial experience Limited Life Advantages of sole proprietorships Ease of start up Ease of Management You keep all profits You do not have to pay any business taxes Psychological advantages Ease of exit
- 9. If you started your own business what would it be? What are some of the 4 Factors of production you would need. 2 examples for each STOP AND THINK Land Labor Entrepreneur
- 10. 9% OF BUSINESSES
- 11. Two major types of partnerships: General Partnership: (most common type) all partners are responsible for management and the financial responsibilities of the partnership. Limited Partnership: at least one partner is not active in the day to day running of the business. They have limited liability. Articles of Partnership: contract between partners spelling out the rules of partnership. Dividing profit Dividing responsibility Admitting new partners Buying out partners PARTNERSHIPS
- 12. Advantages of Partnerships: Ease of establishment Ease of Management: each partner has different things to offer No special business taxes Easier to raise financial capital Larger than sole proprietorship Easier to attract qualified workers Disadvantages of Partnerships Unlimited liability Limited partner is only responsible for his initial investment. He has limited liability. Limited Life Conflict between partners PARTNERSHIPS
- 13. WHAT FITS BEST WITH EACH BUSINESS??? TELL ME WHY!!!
- 14. CORPORATIONS- 20% OF BUSINESS 74%- PROFITS
- 15. Incorporate: to form a corporation. Charter: a document granted by the state giving a corporation the right to do business Stock: shares of ownership in the corporation Stockholders (shareholders): owners of stock. Reasons to own stock: Dividends: share of corporate profits paid to stockholders Speculation: buy in hope that price of stock will increase. CORPORATION- SET UP
- 16. STOCK
- 17. Common Stock is a basic share of ownership in a corporation Have voting rights in the management of the company In reality they turn over voting rights to someone else with a proxy: giving someone else the right to vote your share of stock. Preferred Stock: Non voting shares of ownership Guaranteed dividend Liquidation benefit: If corporation goes out of business they are ahead of common stockholders in getting back money. Board of Directors: duty to direct the corporations business by setting board policies and goals Elected by common stockholders Hires a professional management team to run day to day activities. (CEO, CFO….) CORPORATION- OWNERSHIP
- 18. Advantages of a corporation: Ease of raising financial capital (main advantage) Selling stock to investors Selling bonds: a written promise to repay a loan on a specific date Principal: the amount borrowed Interest: the price paid for the use of another’s money Borrowing money from banks. Ability to hire Limited liability Unlimited life Ease of transferring ownership:. Buying and selling stock is easy and is done millions of times a day Disadvantages of a corporation: Start up expenses are high. Stockholders (owners) have a limited liability Profits are taxed Corporations are subject to more government regulations than sole proprietors or partners CORPORATIONS
- 19. Using the interwoven circles list the similarities and differences between Sole Proprietorships, Partnerships, and Corporations DARE TO COMPARE
- 20. 1. Legal liability. To what extent does the owner need to be insulated from legal liability? For example, you have hefty investment in equipment, and the contracts they work on are substantial. You don’t want to take on personal liability for potential losses associated with the business. You need to consider whether your business lends itself to potential liability and, if so, if you can personally afford the risk of that liability,. If you can't, a sole proprietorship or partnership may not be the best way to go. Liability – материальная ответственность SELECTING A BUSINESS ENTITY WHEN MAKING A DECISION ABOUT THE TYPE OF BUSINESS TO FORM, THERE ARE SEVERAL CRITERIA YOU NEED TO EVALUATE.
- 21. 2. Tax implications. Based on the individual situation and goals of the business owner, what are the opportunities to minimize taxation? 3. Cost of formation and ongoing administration. Tax advantages, however, may not offer enough benefits to offset other costs of conducting business as a corporation. Some businesses refer to the high cost of record-keeping and paperwork, as well as the costs associated with incorporation, as one reason that business owners may decide to choose another option--such as a sole proprietorship or partnership. Taking care of administrative requirements often eats up the owner's time and therefore creates costs for the business. And some identify the sole proprietorship as a very popular form of business entity.
- 22. 4. Flexibility. Your goal is to maximize the flexibility of the ownership structure by considering the unique needs of the business as well as the personal needs of the owner or owners. Individual needs are a critical consideration. No two business situations will be the same, particularly when multiple owners are involved. No two people will have the same goals, concerns or personal financial situations.
- 23. 5. Future needs. When you're first starting out in business, it's not uncommon to be "caught up in the moment." You're consumed with getting the business off the ground and usually aren't thinking of what the business might look like five or ten-let alone three-years down the road. What will happen to the business after you die? What if, after a few years, you decide to sell your part of a business partnership? The issue of ownership was a key one for EnviroTech. "When we started EnviroTech," Kalish remembers, "our reasoning for forming it as a corporation was because of ownership; we wanted to be able to bring in stockholders as we grew." "A corporation's capital," Baker says, "can be expanded at any time in a private offering by issuing and selling additional shares of stock. This is especially helpful when banks are being tight with money." Another important question to ask yourself is, "What do I want to happen to the business when I'm no longer around to run it?" While a sole proprietorship or partnership may dissolve upon the death of its owner or owners, a corporation can be readily distributed to family members. Keep in mind that the business structure you start out with may not meet your needs in years to come. Many sole proprietorships evolve into some other form of business-like a partnership or corporation-as the company grows and the needs of the owners change.
- 24. NON-PROFITS: WE DON’T LIKE $$$ WE JUST WANT TO MAKE YOU
- 25. Community and Civic organizations Cooperatives- REI Consumer- Sam’s Club Labor, Professional and Business Organizations Labor Unions- organization of workers formed to represent its member’s interests in varying employment matters. Collective bargaining Professional Associations- a group of people in a specialized field that work to improve their working conditions. Business associations Chamber of Commerce- promote economic growth of the community Better Business Bureau- cops for businesses WHO IS HERE TO HELP???
- 27. 5 Reasons to merge- Make money faster, Increase efficiency, Acquire new product lines, Catch up or eliminate rivals, Lose a company identity. Horizontal Merger- when two or more companies that product the same kind of product join forces. Vertical merger- when two or more firms that are at different steps of manufacturing process join together. Conglomerates- is a firm that has at least four businesses, each making unrelated products. MERGERS AND ACQUISITIONS
- 28. With a neighbor develop 2 examples of each type of merger Vertical Horizontal Conglomerate Why would companies ever want to merge???? BE A THINKER NOT A STINKER 1 2 3 4 5
- 29. With a partner: Use two real organizations and design the following: A vertical merger A horizontal merger Conglomerate SUMMARY