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    Business Organizations: Economics: Principles in Action

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    Glad Bongcaron
    This document discusses different types of business organizations. It covers sole proprietorships, partnerships, and corporations. Sole proprietorships are owned and managed by a single individual and make up most businesses but generate only 6% of sales. Partnerships can be general, limited, or limited liability and have advantages of shared management and capital but also conflicts. Corporations issue stock, have unlimited life, and can raise capital through stock and bonds but owners have limited liability. They can also merge horizontally, vertically, or as conglomerates. Multinational corporations operate globally but can unduly influence foreign cultures.

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    Business Organizations: Economics: Principles in Action

    Uploaded by

    Glad Bongcaron
    57 views4 pages
    This document discusses different types of business organizations. It covers sole proprietorships, partnerships, and corporations. Sole proprietorships are owned and managed by a single individual and make up most businesses but generate only 6% of sales. Partnerships can be general, limited, or limited liability and have advantages of shared management and capital but also conflicts. Corporations issue stock, have unlimited life, and can raise capital through stock and bonds but owners have limited liability. They can also merge horizontally, vertically, or as conglomerates. Multinational corporations operate globally but can unduly influence foreign cultures.

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    This document discusses different types of business organizations. It covers sole proprietorships, partnerships, and corporations. Sole proprietorships are owned and managed by a single individual and make up most businesses but generate only 6% of sales. Partnerships can be general, limited, or limited liability and have advantages of shared management and capital but also conflicts. Corporations issue stock, have unlimited life, and can raise capital through stock and bonds but owners have limited liability. They can also merge horizontally, vertically, or as conglomerates. Multinational corporations operate globally but can unduly influence foreign cultures.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    57 views4 pages

    Business Organizations: Economics: Principles in Action

    Uploaded by

    Glad Bongcaron
    This document discusses different types of business organizations. It covers sole proprietorships, partnerships, and corporations. Sole proprietorships are owned and managed by a single individual and make up most businesses but generate only 6% of sales. Partnerships can be general, limited, or limited liability and have advantages of shared management and capital but also conflicts. Corporations issue stock, have unlimited life, and can raise capital through stock and bonds but owners have limited liability. They can also merge horizontally, vertically, or as conglomerates. Multinational corporations operate globally but can unduly influence foreign cultures.

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    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 4

    Economics:

    Principles in Action
    CHAPTER 8
    Business Organizations
    CHAPTER 8
    Business Organizations

    SECTION 1
    Sole Proprietorships
    What role do sole proprietorships play in our economy?

    What are the advantages of a sole proprietorship?

    What are the disadvantages of a sole proprietorship?

    A sole proprietorship is a business owned and managed by a single individual.

    The Role of Sole Proprietorships


     A business organization is an establishment formed to carry on commercial
    enterprise. Sole proprietorships are the most common form of business
    organization.
     Most sole proprietorships are small. All together, sole proprietorships generate
    only about 6 percent of all United States sales.
    Characteristics of Proprietorships
     Most sole proprietorships earn modest incomes.
     Many proprietors run their businesses part-time.
    Advantages of Sole Proprietorships

    Disadvantages of Sole Proprietorships


    The biggest disadvantage of sole proprietorships is unlimited personal liability.
    Liability is the legally bound obligation to pay debts.

     Sole proprietorships have limited access to resources, such as physical capital.


    Human capital can also be limited, because no one knows everything.
     Sole proprietorships also lack permanence. Whenever an owner closes shop due
    to illness, retirement, or any other reason, the business ceases to exist.

    SECTION 2
    Partnerships
    What types of partnerships exist?
    What are the advantages of partnerships?
    What are the disadvantages of partnerships?
    Types of Partnerships
    Partnerships fall into three categories:
     General Partnership
    o In a general partnership, partners share equally in both responsibility and
    liability.
     Limited Partnership
    o In a limited partnership, only one partner is required to be a general
    partner, or to have unlimited personal liability for the firm.
     Limited Liability Partnership
    o A newer type of partnership is the limited liability partnership. In this
    form, all partners are limited partners.
    Advantages of Partnerships

    Disadvantages of Partnerships
     Unless the partnership is a limited liability partnership, at least one partner has
    unlimited liability.
     General partners are bound by each other’s actions.
     Partnerships also have the potential for conflict. Partners need to ensure that they
    agree about work habits, goals, management styles, ethics, and general business
    philosophies.
    SECTION 3
    Corporations, Mergers, and Multinationals
    What types of corporations exist?
    What are the advantages of incorporation?
    What are the disadvantages of incorporation?
    How can corporations combine?
    What role do multinational corporations play?
    Types of Corporations
    •A corporation is a legal entity, or being, owned by individual stockholders.

    •Stocks, or shares, represent a stockholder’s portion of ownership of a corporation.

    A corporation which issues stock to a limited a number of people is known as a


    closely held corporation.

    A publicly held corporation, buys and sells its stock on the open market.
    Advantages of Incorporation
    Advantages for the Stockholders

    •Individual investors do not carry responsibility for the corporation’s actions.

    •Shares of stock are transferable, which means that stockholders can sell their stock
    to others for money.

    Advantages for the Corporation

    •Corporations have potential for more growth than other business forms.

    •Corporations can borrow money buy selling bonds.

    •Corporations can hire the best available labor to create and market the best
    services or goods possible.
    •Corporations have long lives.
    Disadvantages of Incorporation
    Corporations are not without their disadvantages, including:
    Corporate Combinations
    - Horizontal mergers combine two or more firms competing in the same market
    with the same good or service.
    - Vertical mergers combine two or more firms involved in different stages of
    producing the same good or service.
    - A conglomerate is a business combination merging more than three businesses that
    make unrelated products.
    Multinationals
    Multinational corporations (MNCs) are large corporations headquartered in one
    country that have subsidiaries throughout the world.

    Advantages of MNCs
    Multinationals benefit consumers by offering products worldwide. They also spread new
    technologies and production methods across the globe.
    Disadvantages of MNCs
    Some people feel that MNCs unduly influence culture and politics where they operate.
    Critics of multinationals are concerned about wages and working conditions
    provided by MNCs in foreign countries.

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