forms of business ownership
DESCRIPTION
Forms of Business Ownership. Business Ownership. Three Common Forms. Sole Proprietorships. Partnerships. Corporations. Sole Proprietorship. Advantages. Disadvantages. Ease of establishment Self-satisfaction Privacy Tax advantages. Unlimited liability Personal pressure - PowerPoint PPT PresentationTRANSCRIPT
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 1
Forms of Forms of Business OwnershipBusiness Ownership
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 2
Business OwnershipBusiness Ownership
Three Common FormsThree Common Forms
SoleProprietorships
SoleProprietorships PartnershipsPartnerships CorporationsCorporations
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 3
Ease of establishment
Self-satisfaction
Privacy
Tax advantages
Unlimited liability
Personal pressure
Difficult to get funding
Limited life
Sole ProprietorshipSole Proprietorship
Advantages Disadvantages
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 4
Business Business PartnershipsPartnerships
General PartnershipsGeneral Partnerships Limited PartnershipsLimited Partnerships
UnlimitedUnlimitedLiabilityLiability
UnlimitedUnlimitedLiabilityLiability
Equal Equal PartnersPartners
Equal Equal PartnersPartners
ShareShareOwnershipOwnership
ShareShareOwnershipOwnership
LimitedLimitedLiabilityLiability
LimitedLimitedLiabilityLiability
UnequalUnequalPartnersPartners
UnequalUnequalPartnersPartners
PassivePassiveInvestorsInvestors
PassivePassiveInvestorsInvestors
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 5
Easy to EstablishEasy to EstablishEasy to EstablishEasy to Establish Tax AdvantagesTax AdvantagesTax AdvantagesTax Advantages
Strength in NumbersStrength in NumbersStrength in NumbersStrength in Numbers Diversity of SkillsDiversity of SkillsDiversity of SkillsDiversity of Skills
Extended LifeExtended LifeExtended LifeExtended LifeIncreased CapitalIncreased CapitalIncreased CapitalIncreased Capital
Partnership AdvantagesPartnership Advantages
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 6
Partnership Partnership DisadvantagesDisadvantages
UnlimitedLiability
UnlimitedLiability
InterpersonalProblems
InterpersonalProblems
UnproductivePartners
UnproductivePartners
ManagingPartner
ManagingPartnerLaw SuitsLaw SuitsDebtsDebts
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 7
Partnership AgreementPartnership Agreement
Decision-MakingAuthority
DisputeResolution
Divisionof Profits
ExpectedContributions
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 8
CorporationsCorporations
Enter Into ContractsEnter Into Contracts
Buy and Sell PropertyBuy and Sell Property
Sue and Be SuedSue and Be Sued
Face Limited LiabilityFace Limited Liability
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 9
Ownership of CorporationsOwnership of Corporations
Shareholders Shareholders
Shareholders
Shareholders
Shareholders
Shareholders
Last Claim on DistributedProfits and Assets
Cash or Stock Dividends
Full Voting Rights
Common Stock
First Claim on Dividendsand Assets
Cash or Stock Dividends
Minimal Voting Rights
Preferred Stock
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 10
Public Versus Private Public Versus Private OwnershipOwnership
PublicPublicCorporationCorporation
PublicPublicCorporationCorporation
PrivatePrivateCorporationCorporation
PrivatePrivateCorporationCorporation
Not PubliclyNot PubliclyTradedTraded
Not PubliclyNot PubliclyTradedTraded
FewFewShareholdersShareholders
FewFewShareholdersShareholders
PubliclyPubliclyTradedTradedPubliclyPubliclyTradedTraded
ManyManyShareholdersShareholders
ManyManyShareholdersShareholders
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 11
Advantages Advantages of “Going Public”of “Going Public”
• Ready supply of capital
• Increased liquidity
• Enhanced visibility
• Independent market value
• Increased flexibility
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 12
Disadvantages Disadvantages of “Going Public”of “Going Public”
• High cost
• SEC filing requirements
• Reduced ownership control
• Demands of public exposure
• Pressure for quarterly results
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 13
CorporationsCorporations
Access to capital
Limited liability
Increased liquidity
Unlimited life span
Excess paperwork
Burdensome costs
Double taxation
Disclosure requirements
Advantages Disadvantages
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 14
Types of CorporationsTypes of Corporations
Subchapter SCorporation
Limited Liability Company
SubsidiaryCorporation
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 15
Corporate GovernanceCorporate Governance
CommonShareholders
•Individuals
•Companies
•Non-profits
•Pensions
•Mutual Funds
Boardof Directors
•Dividends
•Corporate Affairs
•Strategic Plans
•Select Officers
•Finances
CorporateOfficers
•Chief Executive
•Chief Financial
•Chief Operations
Employees ofthe Company
•Operations
•Finance
•Marketing
•Personnel
•Engineering
Elect Appoint Hire
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 16
Reform: Board-Related Reform: Board-Related IssuesIssues
CompositionComposition
EducationEducation
LiabilityLiability
RecruitingRecruiting
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 17
Business CombinationsBusiness Combinations
MergersMergersMergersMergers Consolidations Consolidations Consolidations Consolidations
Leveraged Leveraged Buy-OutsBuy-Outs
Leveraged Leveraged Buy-OutsBuy-OutsAcquisitionsAcquisitionsAcquisitionsAcquisitions
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 18
Types of Business Types of Business MergersMergers
VerticalVertical
HorizontalHorizontal
ConglomerateConglomerate
Market ExtensionMarket Extension
Product ExtensionProduct Extension
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 19
Mergers and Mergers and AcquisitionsAcquisitions
AdvantagesAdvantagesAdvantagesAdvantages
Economies of ScaleEconomies of ScaleEconomies of ScaleEconomies of Scale
EfficienciesEfficienciesEfficienciesEfficiencies
SynergiesSynergiesSynergiesSynergies
DisadvantagesDisadvantagesDisadvantagesDisadvantages
High-Risk Corporate DebtHigh-Risk Corporate DebtHigh-Risk Corporate DebtHigh-Risk Corporate Debt
Management DistractionsManagement DistractionsManagement DistractionsManagement Distractions
Culture ClashesCulture ClashesCulture ClashesCulture Clashes
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 20
Trends in Mergers and Trends in Mergers and AcquisitionsAcquisitions
Year Number Value (in billions)
1970
1975
1980
1985
1990
1995
2000
2003
5,152
2,297
1,889
3,001
2,074
3,510
11,123
8,232
$16
$12
$44
$180
$108
$356
$1,269
$530
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 21
Defenses AgainstDefenses AgainstMergers and AcquisitionsMergers and Acquisitions
White KnightWhite KnightWhite KnightWhite Knight
Shark RepellentShark RepellentShark RepellentShark Repellent
Poison PillPoison PillPoison PillPoison Pill
Hostile Hostile TakeoversTakeoversHostile Hostile
TakeoversTakeovers
Tender OffersTender OffersTender OffersTender Offers
Proxy FightsProxy FightsProxy FightsProxy Fights
© Prentice Hall, 2007 Excellence in Business, 3e Chapter 5 - 22
Strategic Alliances Strategic Alliances and Joint Venturesand Joint Ventures
Gain CredibilityGain Credibility
Expand MarketsExpand Markets
Access TechnologyAccess Technology
Diversity OfferingsDiversity Offerings
Share Best PracticesShare Best Practices