Think-Write-Pair-Share
1. What businesses would you like to see
open in Stockton?
U2, S1-Business
L.O.: Understand Entrepreneurship and mergers. Compare and
contrast business organizations.
E.Q.: How does each type of business address the challenges of
starting and running a business?
Text
Entrepren •Entrepreneur: Ambitious
eurship
leader who combines land,
!
!
labor, and, capital to create
and market new goods or
services.
•Someone must be
willing to take the risk of
starting a business.
•My Def.: [Leave space
to fill in your own
definition]
•Examples:[Leave space
to fill in examples]
Think-Write-Pair-Share
2.If you started your own business what
would it be?!
3.What are some of the 4 Factors of
production you would need.!
At least 1 example for each
Labor
Land
Capital
Entrepreneur
FORMS OF BUSINESS
ORGANIZATIONS
1. Sole Proprietorship
!
2. Partnership
!
3.Corporation
Economics-Biba S. Kavass 2011
Forms of •Sole-Proprietorship: a
Business
business owned by a
!
!
single individual.
!
•The
most common
form of business in the
U.S.
•[Leave room to write
advantages/
disadvantages (or
paste if you completed
the notes in class)]
Think-Write-Pair-Share
4. What do you think you would like
about running your own business?!
5.What do you think you wouldn’t like?
Sole Proprietorship - Advantages
● Easiest form of business to start – only need license
and pay fees.!
● Management simple – only you have to make
decisions.!
● Owner does not have to share profits.!
● Business is exempt from any tax on business income
– only tax on income owner receives from business.!
● Easy to get out of business.!
● Pride of ownership and being one’s own boss.
Economics-Biba S. Kavass 2011
Sole Proprietorship - Disadvantages
● Owner of business has unlimited liability.!
● Difficulty of raising financial capital.!
● Size and efficiency – limited by capital.!
● Limited managerial experience.!
● Difficulty in attracting qualified employees.!
● Limited life – once owner passes, business folds.
Economics-Biba S. Kavass 2011
Forms of Business cont’d
Partnership: Business jointly owned by two or more
persons that share responsibility for operations and all profits
or losses.
!
General Partnership – all partners are responsible for
management and financial obligations.
!
Limited Partnership – at least one partner is not active in
daily operations and has limited responsibility for debts of
business.
Partnerships- Advantages
● Ease of startup – just need partnership agreement!
● Ease of management – “two heads better than one”!
● Only pay personal income tax from profits – no
business income tax!
● Can attract financial capital easier
Economics-Biba S. Kavass 2011
Partnerships- Disadvantages
● In General Partnership, each partner responsible for
acts of other partners.!
!
● Limited life – when a partner leaves/dies,
partnership must be dissolved.!
!
● Potential for conflict between partners
Economics-Biba S. Kavass 2011
Forms of Business cont’d
Corporation: A legal entity, or ‘being’, that
is owned by individual stockholders.
Stockholder/Shareholder: Someone
who owns stock in a company.
Stock: Part ownership in a corporation.
▪ Two Types:
▪ Privately Held Corporations: Few people
own stock in the company.
▪ Publicly Owned Corporations: Many
shareholders buy and sell stock on the
open market.
Corporation - Advantages
● Ease of raising financial capital.!
● Limited liability for owners!
● Unlimited life – business remains even if owners
leave!
● Ease of transferring ownership – just sell your stock
Economics-Biba S. Kavass 2011
Corporation - Disadvantages
● Double taxation of corporate profits – taxed first as
corporate profit – taxed second as personal income to
individuals!
● Difficulty and expense of getting a corporate charter!
● Shareholders have little voice in how business is run!
● Subject to more government regulations than other
forms of business
Economics-Biba S. Kavass 2011
Think-Write-Pair-Share
6. Which form of business is the following?:!
Justin, Austin, and Mattaio have been close friends since high school,
and even went to college together. All three boys graduated last year;
Justin with a degree in Computer Science, Austin with a degree in
Graphic Design, and Mattaio with a degree in Business Administration.
All three are “computer geeks” and have worked part-time through
high school and college fixing computer problems. Each has
approximately $50,000 in savings for this business venture. They have
been talking about starting a computer company (JAM Computer
Solutions) in their local town to help businesses and individuals with
computer problems or those who need help developing and designing
web sites. In doing research, Justin found that there are only two other
computer companies in their town of 100,000 people, and neither one
will do both web design and computer hardware/software
troubleshooting.
Think-Write-Pair-Share
7. Which form of business is the following?:!
Marlin Hatfield, who is married and 27, just completed his fifth
year as a journeyman carpenter with John Casey Homebuilders, a
small homebuilder 25 miles from his hometown. Marlin has just
received an inheritance of $100,000 from his favorite aunt. During
the past five years, Marlin has been able to purchase many of the
tools and equipment that he needs to be a good finish carpenter.
He has not been satisfied working for John the past couple of years
and has talked with his wife about starting his own business (M
and K Fine Carpentry). Marlin’s wife, Katherine, agrees that in
order to be happy, Marlin may want to open his own business. She
fully supports Marlin. Katherine graduated from the local
university with a degree in accounting and works for a local
accounting firm.
Think-Write-Pair-Share
8. Which form of business is the following?:!
Demitri and Roland have decided to combine their talents and open a
competitive Cheer and Dance business. Demitri’s expertise is the business
side. He has a degree in Business Administration with a minor in
Entrepreneurship; while Roland has a degree in Sports Management and
has been coaching the local high school cheerleading team, while his wife
has been coaching the school’s dance team. The problem is that Roland
does not have as much capital to invest. In fact, they are having a little
trouble figuring out how they will be able to get the startup capital for the
business. Some of their friends/relatives might be willing to invest in the
firm. There are no other competitive Cheer and Dance companies in the
area. They have found a building to lease at $4,000 per month and expect
that utilities and water will cost approximately $350 per month. Liability
insurance has been estimated to be $1,000 per month, due to possible
injuries. Demitri, Roland and Roland’s wife will do all the coaching and
will also do all the paper work.
Think-Write-Pair-Share
9. Which form of business is the following?:!
Craig and Carol knew that they wanted more out of life. Craig
works as an inspector for the city health department, which
involves inspecting restaurants and food service establishments to
see whether they are operating according to local laws. Carol
worked as an insurance agent for the first 10 years of their marriage
and is a stay-at-home mom. Their home is paid for and their oldest
daughter received scholarships to attend their local state university.
Their son Charles is a senior in high school. Neither Craig nor Carol
has much experience in owning or operating a small business, yet
this is what they want to do when their son graduates from high
school. They have been frugal and have saved over $200,000 for this
venture. Craig will not be quitting his job for a while. This will
leave Carol with the responsibility of running the business.
Forms of Business cont’d
Franchise: A semi-independent business that
pays fees to a parent company.
Advantages of Franchises:
Management: Franchiser will provide
training and experience.
Standardized Quality
Example: A Big Mac in Stockton is the
same as a Big Mac in Sacramento.
Advertising
Buying Power: Buying in bulk helps
franchises save money.
Forms of Business cont’d
Disadvantages of Franchises:
High fees: Franchises pay a share of
their earnings to the parent company.
Strict Standards: Must follow the rules
of the parent company.
Limited Product Line: Can only offer
approved products.
Mergers
•Merger: Two or more
!
!
companies join together into
one company.
!
•Reasons:
•Growth:
smaller
companies join
together to form a
larger company.
• Decrease Competition
•Move into new
geographic or product
areas.
Mergers cont’d
!
Horizontal Merger
Combine 2 or more firms that produce the
same kind of product.
Delta
Airlines
Economics-Biba S. Kavass 2011
Northwest
Airlines
Delta
Airlines
Mergers cont’d
!
Vertical Merger
Lumber Yard
Baseball Bat
Company
Rapid
Trucking
Economics-Biba S. Kavass 2011
Brings together firms
involved in different
stages of manufacturing
or marketing – to protect
against loss of suppliers.
Mergers cont’d
!
Conglomerate
Firm that has at least 4 businesses, each making unrelated
products and none responsible for a majority of its sales – main
reason is diversification.
Economics-Biba S. Kavass 2011
Multinational Corporation
Corporation that has manufacturing or
service operations in a number of different
countries.
Workforce More than 285,000 team members worldwide
Operating Facilities!
Express: 1,057 stations; 10 air express hubs!
Ground: 32 ground hubs; over 500 pickup/
delivery terminals!
Freight: Approximately 470 service centers!
Office: Nearly 2,000 locations!
!
Air Operations 684 aircraft; more than 375 airports served
worldwide
Economics-Biba S. Kavass 2011
Non-Profit!
Organizations
● An organization that works in a
businesslike way to promote the
collective interests of its members
rather than to seek financial gain.!
● Uses volunteers to perform useful
services with minimal expense!
● Includes schools, churches,
hospitals, welfare groups, aid
agencies, etc.!
● Important to our economic system
because many times fill a gap that is
not covered by businesses or the
government.