L1: NATURE AND FORMS OF BUSINESS ORGANIZATION

• Three types of business organizations:

  • Service: provides intangible products
  • Merchandising: buys products at wholesale price and sells at retail price
  • Manufacturing: buys products to use as materials in making new products
• Sole Proprietorship:

  • One-person business with full control over finances and operations
  • Advantages: owner keeps all profits, easy to form and operate
  • Disadvantages: unlimited liability, lack of structure, difficulty in raising capital
• Partnership:

  • Legal relationship formed by agreement between two or more individuals to carry on a business as co-workers
  • Advantages: easy to establish, partners can combine expertise, distributed workload
  • Disadvantages: possibility for disagreements, full liability, slower decision-making, lack of continuity
• Corporation:

  • Business organization with separate legal personality from owners
  • Ownership in a stock corporation is represented by shares of stock
  • Advantages: owners have limited liability, shares of ownership are transferable, attracts more investors
  • Disadvantages: incorporation is costly, highly regulated, may result in double taxation, not easy to dissolve
• Business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities
• The term “business” also refers to the organized efforts and activities of individuals to produce and sell goods and services for profit
• Ethics, also called moral philosophy, is the discipline concerned with what is morally good and bad and morally right and wrong
• Values tell us what’s good – they are the things we strive for, desire and seek to protect
• Principles tell us what’s right – outlining how we may or may not achieve our values
• Purpose is your reason for being – it gives life to your values and principles
• Business ethics is an applied ethics defined as written and unwritten codes of principles and values that govern decisions and actions of individuals within an organization
• Business ethics apply not only to how businesses interact with the world at large but also to their one-on-one dealings with single customers
• Social responsibility means that individuals and companies have a duty to act in the best interest of their environment and society as a whole
• Social responsibility, as it applies to business, is known as corporate social responsibility (CSR)