Lesson 3.2: Factors Influencing Organizational Decisions

Factors in Business Organization

  • Assets and resources needed

  • Time involvement

  • Operational management

  • Total work

Key Issues

  • Liability: Unlimited personal liability in sole proprietorships can be a discouraging factor as insurance may not cover losses

  • Financing: Access to money is limited by sole proprietorships from banks

  • Tax Implications: C Corporations are subject to double taxation, but can gain advantages through providing health insurance to gain tax deductions

Management

  • Public and private ownership comes with varying levels of information released to the public

    • The Mars candy company is still private as a majority family-owned business

  • Diversification across multiple offerings reduce risk

Non-Profits

Cooperatives

  • Owned and operated by groups of individuals

  • Created to help members, not gain profit

  • Voluntarily and democratically controlled

    • Up to 80% of the profits can go back into the business while 20% goes to members

  • First invented in 1752 by Benjamin Franklin for fire insurance

Consumer Cooperative

  • Like some regional electricity companies

  • Profits can lower the cost of products sold to members

    • No income tax on earnings

  • Some energy companies are examples of this

Service Cooperative

  • Type of consumer cooperative that provides a service

  • Financial Cooperative: Type of service cooperative that provides finanicial services to members

    • Credit unions are an example of this

Producer Cooperative

  • Type of cooperative that helps members sell products, usually for farmers selling crops, livestock, or fish

Non-Profit Organizations

  • Includes museums, hospitals, schools

  • Tax-exempt organizations

Professional Organizations

  • Organizations that serve to improve the image, working conditions, and skill levels of people in organizations

Business Organizations

  • Trade groups that represent business in an area

Trade Associations

  • Nonprofits that promote the interests of private industries

Labor Unions

  • Types of business organizations in an area for member benefits

  • Serve to promote safer work conditions, better hours, and greater pay