CHAPTER 5

SLIDE 1

CHAPTER

5 BUSINESS
ORGANIZATION

5-1 Business in the U.S. Economy

5-2 Forms of Business Ownership
5-3 Organizational Structure for
Businesses

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 CHAPTER 5

Contingent worker- employee with no

long term obligation (short term or
temporary worker)

PERCENT OF BUSINESSES BY EMPLOYEE SIZE

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 CHAPTER 5

BUSINESS ACTIVITIES

● Generating ideas
● Raising capital
● Employing and training personnel
● Buying goods and services
● Marketing goods and services
● Maintaining business records

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

 CHAPTER 5

TYPES OF BUSINESSES

● Producer- Create products and services

Example: Extractor, Farmer, manufacturers
● Intermediaries- Selling goods & services
Example: Retail clothing store, COSTCO
● Service business- Offer something intangible
Example: Dentist, Teacher

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

 CHAPTER 5
3 TYPES OF
BUSINESS OWNERSHIP
● Sole Proprietorship- 1 owner
Example: Duncan’s Landscape (small business)
● Partnership- 2 or more owners
Example: Law office of Smith & Williams
● Corporation- A legal entity where the
owners are shareholders (stock ownership)
Example: Apple, Wal-Mart

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

 CHAPTER 5
3 TYPES OF BUSINESS OWNERSHIP
Sole Proprietorship-
Unlimited Liability- Owner is 100% responsible for the
business
Partnership-
Partnership Agreement- Legal Document that defines
the details of each partner
Corporation-
Articles of Incorporation- Legal documents that defines
the details of the corporation.
Stock- shares of ownership in a corporation
Limited Liability- The risk is limited to your investment.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

 CHAPTER 5

Forms of Ownership
U.S. Business Comparison by Form of Ownership
Form of Number of Total Revenue Percent of All Percent of
Ownership Businesses (Thousands) Businesses Total Revenue
(2006)
Proprietorship 22,075,000 1,278,000,000 71.53% 4.06%
Corporation 5,841,000 26,070,000,000 18.93% 82.82%
Partnership 2,947,000 4,131,000,000 9.55% 13.12%
Total 30,863,000 31,479,000,000 100.00% 100.00%

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

 CHAPTER 5

Checkpoint 

● Which form of business ownership is the

most complex and difficult to form?
● The corporation is more complex to begin
than other business forms.
● Forming a corporation requires much more
bureaucracy, is more subject to
government regulations, requires the
organization of a board, and must have
clearly defined bylaws.

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 CHAPTER 5
OTHER FORMS
OF OWNERSHIP
● Franchise- a chain business that you can
purchase for a fee. Any 3 of the
ownerships can invest in a franchise
EXAMPLE: McDonalds, Sport Clips,

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

 CHAPTER 5

Checkpoint 

● What are the other specialized forms of

business ownership?
● Limited liability partnership
● Joint venture
● S corporation
● Limited liability company (LLC)
● Nonprofit corporation

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 CHAPTER 5

KEY TERMS
● Mission Statement- a written objective of
the company’s goals and vision
● Goal- the objective, what are you wanting
to accomplish
● Policies- rules of the business
● Procedures- methods of activities that
support the mission statement and goals.
● Organization chart- chain of command
chart, who is in charge of who and what
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
 CHAPTER 5
BUSINESS ORGANIZATION SLIDE 12

CHART

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 CHAPTER 5
(3 types of ownership, advantages/ disadvantages/legal documents)
Sole Proprietorship
Advantage- 100% profit, easy to start
Disadvantage- 100% liability & risk, long hours
Legal Docs: Assumed Name Certificate, SS# or Tax ID
Partnership
Advantage- shared responsibility and risk
Disadvantage- shared profits
Legal Docs: Partnership Agreement, Tax ID
Corporation-
Advantage – limited liability, more resources
Disadvantage- double taxation, limited profits
Legal Docs: Corporate Resolution, Articles of
Incorporation, Tax ID
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
 CHAPTER 5
SLIDE 14

Page 2A & 2B
(ONLINE RESEARCH)

FRANCHISE RESEARCH (2)

www.entrepreneur.com/franchise

CORPORATION RESEARCH

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e