This document summarizes key topics from Chapter 5 on business organization, including the three main forms of business ownership (sole proprietorship, partnership, corporation), their defining legal documents and advantages/disadvantages. It also discusses business activities, types of businesses, forms of ownership in the US economy, and defines important terms like mission statements, goals, policies and procedures. Organizational charts are presented as a way to illustrate management structure.

1. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 5
SLIDE 1
5-1 Business in the U.S. Economy
5-2 Forms of Business Ownership
5-3 Organizational Structure for
Businesses
5
C H A P T E R
BUSINESS
ORGANIZATION

2. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 5
Contingent worker- employee with no
long term obligation (short term or
temporary worker)
PERCENT OF BUSINESSES BY EMPLOYEE SIZE

3. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 5
BUSINESS ACTIVITIES
● Generating ideas
● Raising capital
● Employing and training personnel
● Buying goods and services
● Marketing goods and services
● Maintaining business records

4. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 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

5. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 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

6. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 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.

7. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 5
Forms of Ownership
U.S. Business Comparison by Form of Ownership
Form of
Ownership
Number of
Businesses
(2006)
Total Revenue
(Thousands)
Percent of All
Businesses
Percent of
Total Revenue
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%

8. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 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.

9. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 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,

10. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 5
Checkpoint 
● What are the other specialized forms of
business ownership?
● Limited liability partnership
● Joint venture
● S corporation
● Limited liability company (LLC)
● Nonprofit corporation

11. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 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

12. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 5
SLIDE 12
BUSINESS ORGANIZATION
CHART

13. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 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

14. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e
C H A P T E R 5
Page 2A & 2B
(ONLINE RESEARCH)
FRANCHISE RESEARCH (2)
www.entrepreneur.com/franchise
CORPORATION RESEARCH
SLIDE 14