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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