Business Organizations – Flashcards
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Explain how a closely held corporation differs from a publicly held corporation.
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closely held corporations do not issue public stock
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Why can corporations exist longer than simple proprietorships or partnerships?
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if head of company dies, theres someone to replace them
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Given the fact that corporations often face double taxation, why do you think that business owners might still decide to incorporate?
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limited liability for owners, transferable ownership, ability to attract capital, and long life.
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Why is it that conglomerates don't tend to decrease competition?
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because the products are unrelated so its not like this super company taking over the manufacturing of one product
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Suppose a multinational corporation decides to open a new store or factory in another country. Describe some advantages and disadvantages that a multinational corporation might pose for the country in which it opens the store or factory.
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Advantage: benefit consumers and workers by providing jobs and products around the world.
Disadvantage: in poorer countries those jobs are marked by low wages and poor working conditions.
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What is the relationship between a franchiser and a franchisee
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a franchise is a contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market. Franchisee is an owner of a franchise
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sell merchandise to their members at reduced prices
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Consumer cooperatives
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Cooperatives that provide a service rather than goods
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service cooperatives
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agricultural marketing cooperatives that help members sell their products
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Producer cooperatives
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institution that functions much like a business org. but do not operate for the purpose of generating profit
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non-profit organization
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a business owned and managed by a single individual
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sole proprietorship
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the ownership structure of a company or firm
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business organization
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All together, sole proprietorships generate only about -- percent of all sales in the United States.
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4
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--- are the most common form of business organization in the United States.
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Sole proprietorships
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do Sole proprietorships have to pay employment taxes?
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yes
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4 types of business organizations
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Sole Proprietorships
Partnerships
Corporations, Mergers and Multinationals
Franchise, Non Profit
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some advantages of SP
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easy upstart and management
few barriers to entry
Few regulations
least regulated form of Business Organization (Health codes and Zoning Laws)
sole receiver of profit (personal satisfaction)
Full control (can respond quickly to changes in the Market place & Fast, flexible decision making)
Easy Out
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steps for SP
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authorization (business license)
site permit (certification of occupancy)
name (register a business name)
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some disadvantages of SP
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Unlimited Personal Liability (legal obligation to pay all debts; may have to cover expenses with personal property)
access to resources
struggle for physical capital
finding qualified employees/ limited managerial experience
size and efficiency
limited life
lack of fringe benefits: other things that can be given other than wage (401K plans, health benefits, etc..)
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partnerships fall into what 3 categories
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general
limited
limited liability
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most common type of partnership
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general partnership
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only one partner is required to be a general partner
general partner has unlimited personal liability-- but also main control of the business
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limited partnership
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like a limited partnership -- but all partners are limited from personal liability
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limited liability partnership
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responsibility and liability is shared equally
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general partnership
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do not actively manage the business
can only lose their initial investment
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limited partner in limited partnership
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are all business allowed to register as LLP?
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No
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some advantages of partnerships
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easy start up
More efficient
Pool of Capital
no special taxes and few regulations
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some disadvantages of partnerships
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partners responsible for each other
Potential conflict between partners
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a legal entity owned by individual stockholders
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corporation
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--- percent of businesses in the US are corporations and they sell approx --- percent of all products
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20
90
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structure of corporation
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owners
board of directors: represent the shareholders
managers
employees
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some advantages of corporation
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limited liability
easy transfer of ownership
easy capital
-- financial capital (offering stock/bonds)
-- can hire professional managers
unlimited life
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two firms producing same product come together
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horizontal merger
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companies in 2+ steps of manufacturing or marketing (warehouse and transportation company become one company) come together
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vertical merger
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at least 3 business with unrelated products come together
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conglomerate
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a semi-independent business that pays fees to a parent company.
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franchise
