BA 101 Introduction to Business 5. Forms of Business Ownership
Business Ownership Three Common Forms Sole Proprietorships Partnerships Corporations
Sole Proprietorship Advantages Disadvantages ü Ease of establishment ü Unlimited liability ü Self-satisfaction ü Personal pressure ü Privacy ü Difficult to get funding ü Tax advantages ü Limited life
Business Partnerships General Partnerships Limited Partnerships Equal Partners Unequal Partners Share Ownership Unlimited Liability Passive Investors Limited Liability
Partnership Advantages Easy to Establish Tax Advantages Strength in Numbers Diversity of Skills Increased Capital Extended Life
Partnership Disadvantages Unlimited Liability Debts Law Suits Interpersonal Problems Managing Partner Unproductive Partners
Partnership Agreement Division of Profits Decision-Making Authority Dispute Resolution Expected Contributions
Corporations Enter Into Contracts Buy and Sell Property Sue and Be Sued Face Limited Liability
Ownership of Corporations Shareholders Shareholders Common Stock Preferred Stock Full Voting Rights Minimal Voting Rights Cash or Stock Dividends Last Claim on Distributed Profits and Assets First Claim on Dividends and Assets
Public Versus Private Ownership Public Corporation Many Shareholders Publicly Traded Private Corporation Few Shareholders Not Publicly Traded
Advantages of “Going Public” n Ready supply of capital n Increased liquidity n Enhanced visibility n Independent market value n Increased flexibility
Disadvantages of “Going Public” n High cost n SEC filing requirements n Reduced ownership control n Demands of public exposure n Pressure for quarterly results
Corporations Advantages Disadvantages Access to capital Excess paperwork Limited liability Burdensome Increased liquidity Double Unlimited life span Disclosure costs taxation requirements
Corporate Governance Elect Common Shareholders Appoint Board of Directors Hire Corporate Officers Employees of the Company • Individuals • Dividends • Operations • Companies • Corporate Affairs • Chief Executive • Finance • Non-profits • Strategic Plans • Chief Financial • Marketing • Pensions • Select Officers • Chief Operations • Personnel • Mutual Funds • Finances • Engineering
Business Combinations Mergers Consolidations Acquisitions Leveraged Buy-Outs
Types of Business Mergers Vertical Horizontal Conglomerate Market Extension Product Extension
Mergers and Acquisitions Advantages Disadvantages Economies of Scale High-Risk Corporate Debt Efficiencies Management Distractions Synergies Culture Clashes
Defenses Against Mergers and Acquisitions Tender Offers Hostile Takeovers Poison Pill Shark Repellent Proxy Fights White Knight
Strategic Alliances and Joint Ventures Gain Credibility Expand Markets Access Technology Diversity Offerings Share Best Practices
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