Ch.7+Business+Organizations

​​Terms:
 * Sole Propritorship**: a business owned an operated by one person.
 * Zoning Laws**: A law governing what types of structures and businesses are allowed in particular.
 * Liability**: 1. A debt obligation. 2. A person or business's legally enforcable responsibility for unpaid expenses.
 * Collateral**: Anything of value that a borrower agrees to give up if he or she is not able to repay the loan.
 * Longevity**: The length of a firms life.
 * Partnership**: A business that is owned and controlled by two or more people.
 * General Partnership**:A partnership in which all members have equal authority and share equally in the business's profits and losses.
 * Limited Partnership**: A form of partnership in which some members, called limited parnters, invest money but take no part in management.
 * Corporations**: A business in which a group of owners called stockholders share in the profits and losses.
 * Articles of Incorporation:** An application to form a new corporation.
 * Charter**: A document that a government issues to grantcertain rights and impose certain restrictions on a bank or corporation.
 * Board of Directors**: A panel elected by the stockholders of a corporation to establish its policies and overall direction.
 * Stock**: 1. A share of ownership in a corporation. 2. The inventory of items held for saleby a manufacturer or other of goods.
 * Share**:1. The smallest unit of ownership in a corporation usually expresed as one share of sock. 2. The portion of an owners interest in a business.
 * Dividends**: A stockholder's portion of a corporations profit.
 * Common Stock**: A share of onwerhip in a corporation; grants dividends and a voice in corporate management to the shareholder.
 * Preferred Stock**: A share of ownershp in a corporation.
 * Corporate Bond:** A document representing a loan made by an investor to a corporation.
 * Principle**: 1. An amount of money that is borrowed, as in a loan. Principal is distinct from interest and profit. 2. The face amount of a bond.
 * Interest**: 1. The financial return gained by investing or lending capital.2. The money that a borrower pays to a bank or other lender in return for a loan pays to a bank or other lender in return for a loan. 3. The return on a debt security investment, such as a bond. 4. A share in the ownership of property-- for example, a 25 percent interest in a business.
 * Merger**: The joining of two or more businesses under a single ownerhip.
 * Horizontal Combination**: A corporation made up of various businesses that produce the same or similar goods or services.
 * Vertcal Combination**: A corporation made up various invested in entrepreneurial entreprises to encourge econmoic growth.
 * Conglomerate Combination**: A corporation made up of several companies involved in different industries and markets.
 * Subsidiary**: A business that another company either owns or in which it has a controlling interest.
 * Franchise**: A business that pays another established business to use tge latter's name and product line.
 * Cooperatives**: A business that is owned collectively by those who use its goods or services.
 * Nonprofit Organization:** An organization that generates revenue from product sales or doations but does not distribute the profits to any owner or trustee.

Benefits for stock holders: If a corporation fails the loss to its stockholders is limited to the amount they invested Benefits for corporations: the owner of sole proprietorship who intends to borrow inorder to expand the buisness may decide to avoid losing his or her personal possesions Corporate Issues:Charter can be expensive and difficult to obtain Stockholder Issues: There is a lack of control when it comes to the company and its stock holders Shared Issues: The income or profit of a corporation is taxed
 * Advantages of Corporations:**
 * Disadvantages of Corporations:**

In the articles of incorpration, there are 6 pieces of information needed. 1) Name and purpose of the proposed corporation 2) Address of the corporate headquarters 3) Method of fund-raising the corporation will undertake 4) Amount of money the corporation expects to raise 5) Names and addresses of the major corporate officers 6) Length of time the corporation is intended to exist

Types of Businesses:

74% are Sole Proprietorships 19% are Corporations 7% are Partnerships

However, of all the money made by businesses:

Corporations earned 68% Sole Proprietorships earned 18% Partnerships earned 14%

Corporate Structure:

Owners/Shareholders →Board of Directors→Corporate Officers→Vice Presidents→Department Heads→Employees

​ Advantages of Corporations

- major advantage is liability. - also gives flexibility, allowing them to take back all or part of their investment by selling shares. - Limited liability - Seperation of ownership from management - Relative ease with which capital can be raised. - Longetivity Disadvantages of Corporations > - Charter can be expensive and difficult to obtain - Federal and State governments regulate coporations much more closely than they do sole porprietorships and partnerships. - Slow process of decision making - First disadvantage seems like an advantage, they can earn a profit without actually working for the company. - Lack of control - Corporate profits are taxed twice - After-tax profits are distributed to shareholders as dividends.
 * Benefits for Stockholders
 * Benefits for Corporations
 * Corporate issues
 * Stockholder Issues
 * Shared Issues

Advantages of Sole Proprietorships: - Ease of Start up - Full Control - Exculsive Right to Profits Disadvantages of Sole Proprietorships: - Unlimited Liability - Sole Responsibility - Limited Growth Potential - Lack of Longevity
 * Easy to form; require small amounts of financial capital and involve few legal considerations.
 * Act quicker to correct problems or take advantage of opportunities. Gives sole proprietors a hiugh degree of personal satisfaction.
 * Main reason to starting a business.
 * Responsible for all business debts.
 * The pwner is responsible for all aspects of running the business.
 * To garauntee repayment, the business will put up a collateral.
 * Since sole proprietorships depend on the health, commitment, and competence of one person, they often have a shorter life span than other types of businesses.

Advantages of Partnerships - Partnerships are easy to form. - Begins when two or more people agree to operate a business together. - Specific business duties can eb assigned to different partners depending on the partnership contract. - Partners can minimize mistakes by consulting with each other on business matters. - The sharing of losses may enable a partnership to survive a situation that would cause a sole proprietorship to fail.
 * Ease of Start-up
 * Specialization
 * Shared decision making
 * Shared Business Losses

Disadvantages of Partnerships - Each general partner has a role in the business, and each is responsible for debts incurred by the business. - Partners may have personality conflicts and different management styles. - The life of the business is dependent on the willingness and ability of the partners to continue working together.
 * Unlimited liability
 * Potential for conflict
 * Lack of Longevity

__Disadvantages of Partnerships__

-Each general partner has a role in the business, and each is responsible for debs incurred by the business. -Partners may have personalty conflicts and defferent management styles. -Illness, death, conflict among partners, and other problems can end the partnership.
 * Unlimited Liability
 * Potential for Conflict
 * Lack of Longevity

__Objectives__ - First, you must turn in a state license known as the articles of incorporation. These articles include 6 peices, which are as followed: - Once your license is granted, then it permits you to for a new corporation.
 * How is a corporation formed?
 * 1) The name and purpose of the proposed corporation.
 * 2) The address of the corporate headquarters.
 * 3) The method of fund-raising the corporation will undertake.
 * 4) The amount of money the corporation expects to raise.
 * 5) The names and addresses of the major corporate officers.
 * 6) The length of time the corporation is intended to exist.

__Advantages of__ __Combination__ -By centralizing decision making in an industry, efficiency can greatly increase. -Buying an existing business is usually less expensive because you wont have to start out with brand new things. -Have a greater ability to raise financial capital than separate corporations.
 * Efficiency
 * Potential for lower cost
 * Makes it easier to acquire financial capital

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