chapter 4 forms of business ownership business today

Chapter 4Chapter 4

Forms of Business Forms of Business OwnershipOwnership

BusinessBusiness TodayToday

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How to Categorize Companies by Sector

Growth of the Service Sector– Factors in Service Sector Growth

• Increase demand for service• Demographic changes• Number & complexity of goods increasing• Complex global economy• Technology

Service businesses

Goods-producing businesses

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How to Categorize Companies by Sector

Growth of the Service Sector– Service Sector Segments

• Retailing & wholesaling• Finance & insurance• Transportation & utilities• Other services

Capital-intensive businesses

Labor-intensive businesses

Barriers to entry

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How to Categorize Companies by Sector

Production’s Revival– Manufacturing– Construction– Mining– Agriculture

Commodity business

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Categorizing Companies

Sole Proprietorship– Advantages

• Ease of establishment• Work for yourself• Make your own decisions (hours)• Keep all the profits• Privacy

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Categorizing Companies

Sole Proprietorship– Disadvantages

• Limited financial resources• Pay more for credit• Unlimited liability• Limited life

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Categorizing Companies

Partnerships– Advantages

• Easy to form• Diversity of skills brought to

the business• Increase the chances that

the organization will endure

General partnership

Limited partnership

Master limited partnership (MLP)

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Categorizing Companies

Partnerships– Disadvantages

• Unlimited liability• Interpersonal problems

– Strategic Business Partnerships• Consortium• Cooperatives

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Categorizing Companies

Corporations– Advantages

• Limited Liability• Liquidity• Produce goods more efficiently• Reach more customers• Finance projects internally

Shareholders

Stock

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Categorizing Companies

Corporations– Disadvantages

• Required to follow certain government rules

• Required to publish finance & operations information

• Corporate profits are taxed twice

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Corporations– Types of Public Corporations

• Government-owned corporations• Quasi-government corporations

Categorizing Companies

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Corporations– Types of Private Corporations

• Open corporation• Closed corporation• S corporation• Limited liability companies• Subsidiary corporations• Holding companies

Categorizing Companies

Publicly traded

Not publicly traded

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Categorizing Companies

Corporate Structure and Governance– Shareholders– Board of Directors– Officers

• CEO

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Mergers & Acquisitions

Types of Mergers– Horizontal Merger– Vertical Merger– Conglomerate Merger

How Mergers Occur– Hostile Takeover

Merger

Acquisition

Divestiture

Trusts

Tender offer

Proxy fight

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Mergers & Acquisitions

Current TrendsThe DebateMerger & Acquisition Defenses

Poison Pill Shark Repellent

Golden Parachute White Knight