Chapter 5

Business in the U.S. Economy

Forms of Business Ownership

Organizational Structure for Businesses

Objectives

Students will be able to:

Describe the changes that have occurred in U.S. Employment and changes in the types and numbers of businesses.

Identify and describe the forms of business ownership and outline the strengths and limitations of each.

Explain how to organize effective businesses and alternatives structures for businesses.

The Changing U.S. Job Market

Looking at your future, where do you see your self in 10 years?

1996 to 2006 total employment grew 14%

2007 = 144 million people held a job

2014 = Projected 165 million (increase 13%)

Employment Data

Baby Boomers (1946-1964)

Dominate labor market until 2010 (Retirement)

Avg. age will decrease from 2010 – 2014 (70 to 66%)

Pressure on Employees

Technology was designed to limit the amount of hours worked.

Technology has resulted in downsizing within our economy.

Personal and Professional Life

Less time with families Added responsibilities at home and work.

Contingent Worker

Someone who has no explicit or implicit contract for long-term employment.

Business and The Economy

Size

19.5 million businesses (No Employees only the Owner)

4.5 million businesses ( Less than 20 employees)

26,000 businesses (20-100 people)

107,000 businesses (100 or more people)

890 businesses (10,000 people)

Business and The Economy

Businesses:

Provide employment for millions of people.

Wages are used to purchase goods and services.

Profits earned pay owners and investors.

Government spending helps generate more agencies that improve our standard of living.

Help satisfy the consumers needs and wants.

Impact on a Community

How do businesses affect their surrounding community?

Creates Job

Helps pays for transportation, food, etc…

Stimulates a thriving community

Business Activities

Generating Ideas

For new products and services

To satisfy customers needs and wants

Raising Capital

To purchase capital resources

Create new jobs

Generate a successful business

Business Activities

Employing and Training Personnel

Businesses with no employees will grow and add parts to a business to make it run successfully.

Businesses have procedures for: Recruiting

Training Employees Newer Employee

New methods in performing job tasks

Business Activities

Buying Goods and Services

Purchase goods and services for their own personal use.

Purchase tangible and intangible goods:

Computer, Equipment, etc.. (tangible)

Advertising, Legal Advice, Accounting, etc… (intangible)

Marketing Goods and Services

Generating awareness for a companies goods and/or services.

Maintaining Business Records

Performance Tracker

Order and Payment Records

Types of Businesses

Producers

Create the products and services used by individuals and other businesses.

Intermediaries

Businesses involved in selling the goods and services of producers to consumers and other businesses.

Service Businesses

Carries out activities that are consumer by its customers.

Sole Proprietor

Business is owned and operated by one person.

Easiest form of business to start and end.

Pros:

Sole control over all business decisions.

You determine how profits are used.

Cons:

Owner is responsible for all debt.

Any asset (not businesses related) can be claimed to satisfy any outstanding debt.

Partnership

Business owned and controlled by two or more people who have entered into an agreement.

Similar to a Sole Proprietor

Both owners are responsible for key business decisions.

Each partner is liable for all the debts of the business if it should fail.

Corporation

Separate legal entity formed by documents filed with a state.

Owned by one or more shareholder and managed by a Board of Directors.

Meet all legal requirements.

Profits can not be accessed unless Board of Directors approve.

Unlimited Liability (Money invested will not be lost)

Bell Ringer….

What are three forms of ownership?

Proprietorship

Partnership

Corporation

Bell Ringer….

How do some of the business activities contribute towards our society?

Provide Jobs

Create wages to purchase goods/services

Creates transportation, food, clothing, etc…

Training for employees

Forms of Businesses

Businesses Ownership

Proprietorship

Partnership

Corporation

Choosing a Form of Ownership Choosing a Sole Proprietorship

Owners choose this form of ownership for freedom of working by themselves. (Total Control) Businesses formulated from hobbies or operate a business on a

part-time basis.

Start-up is easy to do, must obtain: Licenses

Permits

Financial Backing

Income is taxed as personal income (Expenses are paid out of your own pocket)

Any debt comes from the owner’s own personal assets.

Choosing a Form of Ownership Choosing a Partnership:

Can be formed by a verbal or written agreement between two or more people.

The agreement will show how profits and loses will be divided among the partners.

Authority is based on amount invested in the business.

Very similar to a Sole Proprietorship

Advantages Disadvantages

Multiple Investors Limited Control

Share Ideas No Protection of Assets

Choosing a Form of Ownership

Choosing a Corporation

Popular forms of ownership for large businesses.

Corporations are subject to more laws and are more difficult to form than partnerships and proprietorships.

Treated as an individual by the government. Follow the laws of the state in which they are organized.

Articles of incorporation A written legal documents that defines ownership

and operating procedures and conditions for the business

Choosing a Form of Ownership

Choosing a Corporation

Corporate Bylaws (Code of Ethics)

Formulate a Board of Directors (Decision Makers)

Selling and Purchasing of Stock (A form of ownership)

Pay corporate taxes on profits earned.

Investors also pay taxes on their earnings

Other Forms of Ownership

Specialized Partnerships and Corporations

Limited Liability Partnership Identifies some investors who cannot lose more than the

amount of their investment but they are not allowed to participate in day-to-day activities.

Joint Venture Two or more businesses combine for a limited time for a

specific job task.

S-Corporation Income is passed through to the owners based on their

investments and is taxed during their individual tax returns

Other Forms of Ownership

Specialized Partnerships and Corporations

Limited Liability Company (LLC) Provided liability protection for owners.

No Articles of incorporation or bylaws are needed.

Nonprofit Corporations A group of people who joint to do some activity

that benefits the public.

Other Forms of Ownership

Cooperative and Franchises

Franchise Written contract granting permissions to operate

a business to sell products and services in a set way. McDonald’s

Wendy’s

Taco Bell, KFC, Long John Silvers, A&W (Yum Brand)

Organizational Structure

Mission Statement:

Direction for a business in which it looks to achieve.

Short statement, written, and expresses why the business exists.

Goals:

Precise statement of results the business expects to have.

Policies and Procedures:

Guidelines and descriptions about how the business will be ran.

Identify Your Goals

Since a mission is a where the business can see themselves in the future. I want you to look at your own goals for the future.

On the index card, identify the following:

What is your goal for this school year?

Where do you see yourself in 5 years?

How do you plan to achieve those goals?

Principles of Effective Organization

Responsibility, Accountability, and Authority

Obligations

Rights to make decisions

Taking responsibility for the results achieved.

Unity of Command

There is a clear reporting relationship for all staff of a business.

Span of Control

Number of employees who are assigned to particular work task and manager.

Organizational Structure

Diagram that shows the structure of the organization, classifications of work and jobs, and the relationships amount those classifications

Organizational Structure

Functional Organizational Structure

Work is arranged within main business functions such as production, operations, marketing, and human resources.

Advantage: Working with other who have the same job skills

Matrix Organizational Structure

Work is structured around specific projects, productions, or customer groups.