structure of business organization india

business organization

1. Business Organization
How businesses are set up and
run.

2. Business Organization
•Def. an establishment formed to carry on
commercial enterprise.
•3 main types:
Sole Proprietorships
Partnerships
Corporations
•Other, less common:
Business Franchises
Cooperatives
Nonprofits

3. Sole Proprietorship
•Def. a business org. owned and managed
by a single individual.
•Sole Prop. Are the most common form of
business, but are small, generating only
6% of all U.S. sales

4. Advantages of Sole Proprietorships
•Ease of Start-Up
•Relatively Few Regulations
•Sole Receiver of Profit
•Full Control
•Easy to Discontinue (to end)

5. Disadvantages of Sole
Proprietorships
•Unlimited Personal Liability: Owner is
legally bound to pay all business debts.
•Limited Access to Resources: Lack of
money, capital, etc. prevent Sole
Proprietorships from becoming large.
•Lack Permanence: when an owner closes
shop, retires etc. the business ceases to
exist.

6. Partnerships
•Def. Business owned by two or more
people who share responsibility and
liability (responsibility for debt) for the
business.

7. Advantages of Partnerships
•Ease of Start-up
•Shared decision making and
Specialization: partners divide workload
and skills to the business.
•Larger Pool of Capital: partners both
invest funds into the business.
•Taxation: Partners pay their own taxes,
but the business does not.

8. Disadvantages of Partnerships
•At least one partner has unlimited liability
(has to pay business debts/obligations)
•Partners are bound by each other’s
actions (i.e. if your partner makes a stupid
mistake, you are stuck with it!)
•Potential for Conflict: Arguments, disputes
etc. between partners can cause major
problems in the business.

9. Corporations
•Def. A business that is a legal entity (it
exists on its own with rights like a person)
owned by individual stockholders.
•Stock: sometimes called shares, represent
a stockholder’s portion of ownership of a
corporation. (we will discuss the stock
market in more detail next unit)

10. Advantages of a Corporation
•Advantages for the stockholders
–Do not carry responsibility for corporation’s
actions (if a corporation does something
illegal or owes debt, stockholders are not
responsible)
–Shares of stock are transferable, they can be
sold to others for a profit. (I buy a share of
Kodak stock for $1, and sell it to you for $2, I
make a profit of $1!)

11. Advantages of Corporations cont.
•Advantages for the Corporation
–Have potential for more growth than
other business forms
–Can borrow money by selling bonds.
–Can hire the best labor (human
resources) and best equipment (capital
resources)
–Have long lives (ex. George Eastman
died over 70 years ago, yet Kodak is
going strong)

12. Disadvantages of Corporations
•Difficult and expensive to start up
•Double Taxation (the Corporation must
pay taxes on income, and stockholders
must also pay taxes on dividends, or their
share of any corporate profit)
•Loss of Control (managers and boards of
directors control corporations, not owners)
•More Regulation (Government regulates
corporations more than other business
organizations)

13. Growth of Corporations
•Mergers: are combinations of two or more
corporations into a larger corporation.
They are closely watched by the
government to prevent the creation of
monopolies.

14. 3 types of Mergers
•Horizontal Merger: combination of 2 or more
corporations who provide the same good or
service (ex. Cingular and AT&T)
•Vertical Merger: combine 2 or more firms
involved in different stages of producing a good
or service (ex. Carnegie Steel owned the Iron
mines and Steel Refineries)
•Conglomerate: a combination of 3 or more
businesses making unrelated products. [ex. AOL
(internet) Time (news magazines) Warner (TV
and Movies]

15. Multinational Corporations
•Def. Large corporations headquartered in
one country with subsidiaries (smaller
branches) throughout the world.
•Advantages: Offer products worldwide,
spread technology and jobs around globe.
•Disadvantages: Influence cultures of other
countries and take advantage of countries
with little worker protections (ex. Paying
factory workers in China $.25/hour,
polluting countries like Mexico)

16. Business Franchises
•Def. a semi-independent business that
pays fees to a larger parent company in
return for the right to sell a product or
service.
•Ex. McDonalds, 7-11, Pizza Hut
–Pay $ to use the name, symbols, and for help
in running the store/restaurant etc.

17. Advantages of Business
Franchises
•Management training and support
•Standardized quality
•National advertising programs
•Financial assistance
•Centralized buying power

18. Disadvantages of Business
Franchises
•High franchise fees and royalties (have to
pay to use the McDonalds name)
•Strict Operating standards
•Purchasing restrictions
•Limited Product line (can’t sell hot dogs at
KFC)

19. Cooperatives
•Def. a business organization owned and
operated by a group of individuals for their
shared benefit.
•Ex. Sam’s Club: must pay to be a member
and shop there, but get benefit of reduced
prices.

20. Nonprofit Organizations
•Def. Institutions that function like
businesses but do not operate for profit.
Any earned profits are put back into the
organization, not paid out to share holders.
They are exempt from federal income
taxes.
•Ex. The Red Cross, Goodwill, YMCA,
Churches, Labor Unions, Business and
trade associations, the Bar Association,
etc.

21. Examples
Sole
Proprietorships
PartnershipsCorporations
Landscaping
Restaurant
Corner store
Hair
Salon/Barber
Shop
Accounting
Firms
Law Firms
Doctor
Dentist
Kodak
Xerox
IBM
Citibank
Walmart

22. More Examples
Franchises Cooperatives Nonprofits
McDonalds
KFC
Burger King
7-11
Taco Bell
Popeyes
Buffalo Bills
Buffalo Sabres
Labor Unions
Business
Associations
Sam’s Club
Churches
Red Cross
Goodwill
YMCA
YWCA
Salvation Army