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BUSINESS ORGANIZATIONS

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by

Brad Hayes

on 29 August 2016

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Transcript of BUSINESS ORGANIZATIONS

BUSINESS ORGANIZATIONS
Sole Proprietorship
Make up @ 70% of businesses in the US
Make up 5% of all
sales
in the US
Section 1—Basic Forms of Organizations
Owned/Operated by a single person
Sole Proprietorship
Two or more people enter into business for mutual gain
Partnerships
ADVANTAGES
Partnerships
Firm (Business) legally recognized as having a existence as an entity separate and distinct from its owners.
Corporations
CORPORATIONS
Hardest to find good employees
Hardest to raise capital
Unlimited Liability
DISADVANTAGES
Easy to get out
Easier taxes
Keep profits yourself
Easiest to manage (your own boss)
Easy and inexpensive
ADVANTAGES
Corporation
Make up @20% of businesses in the US
Make up 87% of all
sales
in the US
Partnership
Make up @ 8% of businesses in the US
Make up 8% of all
sales
in the US
Silent partners INVEST in a company they think will be successful. They provide capital but seek no management role. They only want a share of the profit.
Limited-Each person assumes different amounts of liability, investment, profit, etc.
General-Each person shares equally
Partners can be
general, limited, or silent
Joint and Individual Liability
Shared Profits
Potential Conflict with partners
DISADVANTAGES
Complimentary skills
Easi
er
to raise capital/employees than S.P.
No separate taxes
Easy to start--Probably need a contract
2--Selling the stock that you own.
To make money, you must sell at a higher price than what you purchased for. You no longer own that portion of the corporation
Dividends can be paid in three ways. Cash, Stock, or Property
Dividends are a fixed % that you know going in to the purchase
1--Dividends--% of the profit share based on the % of the Corp. you own (# of shares)
Owners (stockholders) can make money in two ways:
Corporations are owned by their stockholders
(shareholders) who share in profits and losses generated through the firm's operations
Public Corporations - Ownership shares known as "stock" are offered for sale to the general public.
Private Corporations - Corporations that do not offer ownership shares for purchase by the general public but may offer them to employees.
Mergers
SECTION 2—Business Growth
One way that businesses attempt to grow is through mergers, because they:
MERGERS
Vertical mergers
are where one company buys others that help to lower the cost or increase the efficiency of production
MERGERS
VERTICAL OR HORIZONTAL?
When one company buys other companies that are unrelated to their core business in an attempt to diversify.
CONGLOMERATES
A multinational corporation is a very large firm with a headquarters in one country and several branches operating overseas.
Multinationals
Advantages of Multinationals
MULTINATIONALS
Multinationals
Conglomerates
Can change its image
Can deliver a better product
Can eliminate a rival
Can be more efficient
Can grow fast
Horizontal mergers
are where one company buys a direct competitor
By having component businesses each making unrelated products, the overall sales and profits will be protected.
Diversification is one of the main reasons for conglomerate mergers.
Corporations may become conglomerates after becoming very large through mergers and acquisitions of a variety of businesses.
May exploit the people of the host nation
They may influence the political life of a host nation
Profits are returned to the overseas head office.
May take away jobs at home
Disadvantages of Multinationals
Produce tax revenues for the host country
New or better goods for host country.
Introduces new production techniques.
Creates jobs for the host country.
Preferred Stock

(rare)
Common Stock

There are two different types of stock offered for sale:
S I D E T R I P
You may be hearing more and more about
another type of business model...THE LLC
LLC stands for Limited Liability Company
LLC's are a great option for small businesses that
want limited liability
LLC's mix the liability aspect of corporations with the
flexibility and tax benefits of partnerships and sole proprietorships
BONUS LEARNING (FREE OF CHARGE!!!)
ALL MERGERS ARE SUBJECT TO REVIEW BY
THE GOVERNMENT IN ORDER TO MAINTAIN
COMPETITION!
Vertical or Horizontal?
Vertical or Horizontal?
ADVANTAGES
Corporations
Potential leveraged buyout
double taxation
Subject to government regulations
Cost of incorporating
DISADVANTAGES
Unlimited Life
Limited Liability (Separate Entity)
Easiest to find good employees
Easiest to raise capital (sell stocks/bonds)
http://www.nytimes.com/interactive/2012/01/20/business/the-iphone-economy.html
Anyone can buy shares
The more shares owned, the more control of the corporation you have
LET ME
GET 50
SHARES!
and a portion of the dividend (a percentage of profits)
Holders entitled to a voting share in the company (1 vote per share)
holders are paid a dividend before common stock holders.
Limited stock issues that have no voting share.
HEY CHIK FIL A
Sole Proprietorship
Simplist and most common form of business

Unincorporated and run by a single person
Legally no difference between the owner and the business
Limited Life
Full transcript