Lesson 13 Activities:
Two Class Periods
As each entrepreneur makes the decision to start a business, he or she must also decide what type of business organization will be most advantageous for the new business. There are three types of business organizations: sole proprietorship, partnership, and corporation. Many businesses start as sole proprietorships or partnerships and grow to become corporations. The type of business organization can change as the business expands or declines.
Entrepreneurs need to understand the advantages and disadvantages of each type of business organization. Legal liability, tax obligations, and financial responsibilities are all factors that entrepreneurs must review when deciding how to organize the new business.
|Economic Institutions||ways of doing things that address the economic decisions of what to produce, how to produce it and who will consume it. Many economic institutions are long-lived and were originally formed in response to economic conditions that may have changed over time|
|Sole Proprietorship||a form of business organization that is owned and managed by one individual who assumes all risk of loss and receives all profits|
|Partnership||a form of business organization that is owned by two or more individuals who assume all risk of loss and receive all profit|
|Corporation||a form of business organization that is created by law, functions as a separate legal entity, and is owned by two or more individuals called stockholders. Stockholders are at risk only for the amount of their financial investment|
|Franchising||a system by which a firm expands into new neighborhoods and towns (or foreign countries) by selling the rights to use the company's name and products to individuals. The franchising company provides training services and an advertising campaign for the purchaser of the franchise. In turn, the purchaser agrees to meet certain quality standards, provide certain products, and pay a franchise fee to the franchising organization.|
Organize the class in small groups. Using Activity 52 as a guide, have the groups identify and develop profiles of businesses in the local community that are representative of each of the three types of business organizations presented in Activity 50.
Used with permission. Master Curriculum Guide: Economics and Entrepreneurship, copyright © 1991,National Council on Economic Education, New York, NY. All rights reserved.For more information visit www.ncee.net or call 1-800-338-1192.