BUSINESS ORGANIZATION

UNDERSTAND how ownership differs among sole proprietorships, partnerships, and corporations. GRASP the advantages of the three major types of business ownership. LEARN the five functions of managers. RECOGNIZE three specialized forms of business.

Types of Business Ownership

Major types of business ownership:

Sole proprietorship Partnership Corporation

SOLE PROPRIETORSHIP
A sole proprietorship is a business owned by one person.

Owner has complete responsibility for all business decisions

PARTNERSHIP

A partnership is a business owned and managed by a small group, often just two or three people. These partners have a written agreement to share the profits or losses. Partners have unlimited liability for the debts of their business.

CORPORATION
Operate under written permission. Written permission is called certificate of incorporation. A corporation is a business owned by a number of people (sometimes millions).
Owner is known as a shareholder or stockholder.

Whos Running the Show?

Managers run the show, thats who.
Dr. Gemma

Managers are employees who are responsible for coordinating resources within a business --- human, capital, and natural. Management activities are focused in five key areas: planning, organizing, staffing, leading, and controlling. Who manages the resources here at CDO?

Role of Business
Provide employment Employee wages are used to purchase goods and services Profits eared by businesses are used to compensate owners and investors. Most businesses pay taxes to federal, state, and local governments. Governments spend those taxes to provide services such as streets, parks, libraries, schools, police, etc.

Impact on Community
When a new business opens
Pays wages to workers Buys goods and services from other businesses in the area This money was not in the community before so businesses and employees use much of the money to purchase things they need. May result in need for more employees May result in need to form housing, automobiles, food, and entertainment

Business Activities
Generating Ideas Raising Capital Employing and Training Personnel Buying Goods and Services Marketing Goods and Services Maintaining Business Records

Planning
Goals must be set & strategies devised for achieving those goals.

Planning involves thinking, gathering and analyzing information, and then making decisions about all phases of the business.

Principles of Effective Organization

Responsibility the obligation to complete specific work. Authority the right to make decisions about how responsibilities should e accomplished. Accountability taking responsibility for the results achieved.

Principles of Effective Organization

Unity of Command there is a clear reporting relationship for all staff of a business. Span of Control the number of employees who are assigned to a particular work task and manager.

Business Organization Chart

Mrs. Volpe

Mr. Enright

Mr. Thatcher

Mr. Bermudez

This function is the process of determining what work has to be done & who is to do each job.

Setting Direction
Mission Statement
A mission statement is a short, specific written statement of the reason a business exists and what it wants to achieve. The mission statement for Starbucks is to Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.
Starbucks uses six guiding principles to measure their progress: their work environment, diversity, high standard, satisfied customers, clean environment, and profits.

Setting Direction
Goal a precise statement of results the business expects to achieve. Policies guidelines used in making consistent decisions. Procedures descriptions of the way work is to be done.

Staffing

Mrs. Postil going to work

Staffing includes all of the activities involved in finding, selecting, hiring, training, appraising, and rewarding the businesss employees.

Leading
The work of people must be directed so their tasks will be performed correctly and timely.

Effective leaders inspire workers to willingly perform their jobs and accept responsibility for accomplishing the goals of the business. Leading requires good human relations and communications skills.

Controlling
Controlling means comparing what actually actually happens with what was planned. planned.

Managers must determine to what extent the business is accomplishing the goals it set out to reach in the planning stage.

Growing a Business

articles of partnership

A written agreement that provides the details of the partnership will work. Includes: Name Investment Salaries Profit and loss share proportions Responsibilities Purchase or buy-out rights.

Growth Opportunities

One way to raise capital and to limit risk is to form a corporation. Soliciting investment from others (going public) has enabled many entrepreneurs to grow into large national or even international businesses.

Forming a Corporation
Apply for corporation status in the S.E.C. Receive Articles of Incorporation

Issue and sell shares

Call meeting of shareholders to elect board of directors, responsible to guide the operations of the corporation
Board of directors elect executive officers, such as President, VPs, CEO, CFO, Treasurer, etc. Earn profits and declare dividends

Other Forms of Business Ownership

A franchise is a written contract granting permission to sell someone elses product or service in a prescribed manner, over a certain period of time, and in a specified territory.
A franchisee is the person or group of people who received the franchise from a parent company. A franchisor is the parent company granting a franchise.

A franchise is an easy business to start. The franchisor agrees to help the franchisee get started. One advantage is national advertising by the parent company. The franchisor collects a percentage of sales or a flat fee for their services. Franchises usually require a large investment of capital to start. Not all franchises succeed.

A cooperative is owned by the members it serves and is managed in their interest.

A cooperative is much like a regular corporation. Its formation must be approved by the state. It sells shares of stock to its members and has a board of directors. Unlike a corporation, a cooperative is controlled by a vote of members based on service bought from the cooperative and most of the profits are distributed to members at the end of the business year.

Types of Businesses
Producers
Create the products and services used by individuals and businesses. An extractor is a business that takes resources from nature for direct consumption or for use of development other products
Crops Lumber Coal

Types of Businesses
Intermediaries
Businesses involved in selling goods and services of producers to consumers and other businesses
Retailers Wholesalers

Types of Businesses
Service Businesses
Carries out activities that are consumed by its customers. It does not offer products for sale.
Dentists Physicians Lawyers Painters Furniture Movers

Fastest growing part of the economy.

Sample Test Questions

True or False 1. A sole proprietorship must be chartered by the state in which it is located. 2. A partnership is owned by two or more people who own shares of stock in the company. 3. A corporation is a legal entity and has a life separate from its owners.

Sample Test Questions

True or False? 1. Managers have to plan, control, lead, staff, and organize. 2. Gathering and analyzing information, and then making decisions about all phases of the business, is called organizing. 3. Determining what work has to be done and who is to do it is called organizing.

Sample Test Questions

4. Goals must be set in order to perform the management activity of controlling. 5. Franchises can be operated only as sole proprietorships or partnerships. 6. The person or group who receives a franchise is called the franchisee. 7. A business owned by its members that is managed in the owners interests is called a cooperative.

Sample Test Questions

1. The form of business that represents two-thirds of U.S. businesses is the a. corporation. b. partnership. c. sole proprietorship. d. cooperative. 2. A form of business that is based on a written agreement about how to manage it and how to share profits is the a. corporation. b. partnership. c. sole proprietorship. d. cooperative.

Sample Test Questions

3. The form of business that requires written permission from the state in which it is organized and can have many owners is the a. corporation. b. partnership. c. sole proprietorship. d. cooperative. 4. People who become part owners of a corporation are called a. partners. b. special owners. c. shareholders. d. cooperative owners.

Sample Test Questions

5. Which of the following is NOT one of the five activities of business managers? a. planning b. purchasing c. controlling d. staffing 6. Performing the management activities of planning includes a. coming up with strategies to meet goals. b. influencing people. c. staffing the business. d. developing organization charts.

Sample Test Questions

7. Assigning jobs to workers and giving authority to certain people is a managing activity called a. planning. b. controlling. c. leading. d. organizing. 8. The part of the profits that are paid to shareholders is called a. excess profit. b. a surplus. c. a dividend. d. none of the above.

Sample Test Questions

9. The parent company of a franchise business is known as the a. franchisee. b. franchisor. c. Big Daddy. d. all of the above. 10. Which of the following is NOT true about a non-profit corporation? a. It can be organized to serve citizens. b. It has no shareholders. c. Examples are school clubs, colleges, and service organizations. d. All of the above are true.

Sample Test Questions

1. The written permission that allows a corporation to organize is called a _______________________. 2. Directing people so that their work is performed correctly and on time is called ____________________. 3. A ____________________ is a group that is responsible for guiding the operation of a corporation.

Sample Test Questions

4. A written contract to sell anothers product or service in a prescribed manner is a ____________________ agreement. 5. Some towns are organized as _____________________ corporations.

 Source: http://mrspostil.wikispaces.com/file/detail/ CH+5+Business+Organization.ppt ; Date Accessed: 2 August 2011