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Chapter 8.ppt Revised 4-29-10

Chapter 8.ppt Revised 4-29-10 - Defy some gravity...

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Defy some gravity! http://www.youtube.com/watch?v=3g4ekwT (Idina Menzel & Kristin Chenowith) Course Projects Due Thursday by 1:05 p.m.!!!! Upload on ICON and save your receipt! http://www.youtube.com/watch?v=-h76ApljN http://www.youtube.com/watch?v=hYKYka- (I Wish – Stevie Wonder)
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Jersey Boys http://www.youtube.com/watch?v=NaXAL_ In London http://www.youtube.com/watch?v=WM4fMm At the Tony Awards
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What’s the World Coming To? http://www.msnbc.msn.com/id/21134540/vp
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Chapter 8 Business Organizations
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“Everyone thirsteth after gaine” Sir Edward Coke 1532-1634 Entrepreneurs assume the financial risks in order to make profits. Entrepreneurs need to decide which business form to use.
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WHAT ARE THE ORGANIZATIONAL TYPES? Business owners must decide which type suits their business. The type that is appropriate may change over time.
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Different Types Small and simple to large and complex.
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Types Sole Proprietorships General partnerships Limited Partnerships Limited Liability Partnership Corporations (C and S) Limited Liability Companies Professional Corporations, Limited Liability Companies, Limited Liability Partnerships
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Factors Ease/Method of Creation Legal Status Ownership Management and Control Liability of Owners Tax Considerations Need for Capital
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What does limited or unlimited liability mean? Who pays creditors and with what? Who pays for tort damages and with what? Who pays for employee negligence or bad acts?
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If there are bills to pay, am I personally on the hook? What happens when the business can’t pay its bills? What happens when it must pay damages for torts? Do I have to sell my house? My 401(k)? My children?
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The Answer Depends This issue drives many business organization decisions.
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Sole Proprietorship Beauty in Simplicity
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Sole Proprietors – make up 2/3 of all American Businesses Small by definition. (How many people are in a sole proprietorship?) Owner is the business Can do any kind of business. Usually small but can be big.
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Advantages to Sole Proprietorship Receipt of all profits! Less cost to start up Flexible Freedom of decision making Easy tax filing Pay only personal income tax Easy retirement plans
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Disadvantage to Sole Proprietorships Assumes all risk of losses and liabilities Unlimited Liability More difficult to raise capital. Death Planning
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General Partnerships Assumes more than one But can have many partners Share ownership Share profits Share decision making
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Partnership Agreement To prevent chaos put terms in writing! If you don’t, most states have partnership statutes that will govern.
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What kind of terms would you put in a partnership agreement?
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