Objective 1.03

Evaluate the role of different types of business and the various forms of business ownership in the United States.

Types of Business Ownership

• Sole Proprietorship

• Partnership

• Corporation

• Franchises

• Cooperatives

• Non-Profit Corporation

Sole Proprietorship

• Business owned by one person

• More than two-thirds of U.S. Businesses are operated as Sole Proprietorships

• Sole Proprietor has complete responsibility for all business decisions

Partnership

• Business owned and managed by a small group

• Usually not more than two or three people

• Written agreement allows these partners to share profits, losses, and have unlimited liability.

Corporation

• Business owned by a number of people and operated under written permission from the state in which it is located.

• Certificate of Incorporation – written permission

• Acts as a single individual on behalf of owners

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• People become owners by buying shares of stock. – Known as shareholders

• The corporation is a legal entity w/ an existence and life separate from its owners.

Managing• Managers are the employees who are

responsible for coordinating resources within a business

• Activities are focused on five key areas:– Planning– Organizing– Staffing– Leading– Controlling

Planning

• Thinking, gathering, and analyzing information then making decisions about all phases of the business

• Goals set and strategies devised

• Make sure you have enough time for this stage

Organizing

• Process of determining what work has to be done and who is to do it.

• Organization chart – work relationships

• Jobs assigned and authority given to certain people

Staffing

• All activities involved in:– Finding– Selecting– Hiring– Training– Appraising– Rewarding

Leading

• Work of people must be directed so that tasks will be performed correctly

• Effective leaders inspire workers to willingly perform their jobs and accept responsibility

• Requires good human relations and communication skills

Controlling• Comparing what actually happens with

what was planned

• Using the standards set up in the planning stage

• Ex. Standard of Production set at 12 customer inquiry calls per hour, the controlling activity would be count the actual calls handled per hr. per employee

How to form a Partnership• Written agreement – Articles of

Partnership

• Includes these six things:– Name– How much each invests– Salary of each partner– Proportion of each partners investments– Partners responsibilities– What happens in case of Death, or withdrawal

Creating a Corporation

• Draw up a plan for Corporation– How much shares of stock will be worth based

on total investment of company

• File an application requesting permission to operate as a corporation to the state

• State issues a certificate of incorporation

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• Main stockholders (people who own most shares of stock) are considered controlling shareholders

• Board of Directors – group responsible to guide the operations of the corporation

• They are in highest authority positions and will make policy decisions.

Dividend

• Profits that each shareholder receives

• Ex. 24,000 Shares in Corporation– After taxes paid corporation made a profit of

$31,600– Board decides to keep $10,000 for expansion– $21,600 divided amongst 32 shareholders– $21,600 / 24,000 = .90 a share

• Own 12,000 shares X .90 = 10,800

Specialized forms of Business Ownership

• Franchises

• Cooperative

• Non-Profit or Municipal Corporation

Franchise

• Written contract granting permission to sell someone else’s product or service in a prescribed manner.

• Franchisee - owner who received franchise from parent company

• Franchisor – Parent company

Cooperative

• Owned by the members it serves and is managed in their interest

• Two main types:– Consumers’ cooperative– Producers’ cooperative

• Started a lot like a corporation only difference is the controlling factor

Non-Profit Organization

• Municipal Corporation – An incorporated town

• Functions by paying for supplies and services under the corporate name of the city

• Services are provided for its citizens with money from taxes levied

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• Non-Profit Organizations operate in the same basic way.– They provide a service, but not for a profit.

• Ex. Private Colleges and Universities, American Red Cross, Boy Scouts of America, and Distributive Education Clubs of America.