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Selecting the Proper Form of Business Ownership and Exploring Business Combinations

Selecting the Proper Form of Business Ownership and Exploring Business Combinations. Owning a Business. Sole proprietorship Partnership Corporation. Popularity of Business Ownership Forms. Sole proprietorships 72% Corporations 20% Partnerships 8%. Sole Proprietorship. Advantages.

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Selecting the Proper Form of Business Ownership and Exploring Business Combinations

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  1. Selecting the Proper Form of Business Ownership and Exploring Business Combinations Business In Action 3e

  2. Owning a Business • Sole proprietorship • Partnership • Corporation Business In Action 3e

  3. Popularity of Business Ownership Forms • Sole proprietorships 72% • Corporations 20% • Partnerships 8% Business In Action 3e

  4. Sole Proprietorship Advantages Disadvantages • Ease of establishment • Self-satisfaction • Privacy • Tax advantages • Unlimited liability • Personal pressure • Difficult to get funding • Limited life Business In Action 3e

  5. Business Partnerships • General partnerships • Equal partners • Share ownership • Unlimited liability • Limited partnerships • Unequal partners • Passive investors • Limited liability Business In Action 3e

  6. Advantages of Partnerships • Easy to establish • Tax advantages • Strength in numbers • Diversity of skills • Increased capital • Extended life Business In Action 3e

  7. Disadvantages of Partnerships • Unlimited liability • Debts • Law suits • Interpersonal problems • Managing partner • Unproductive partners Business In Action 3e

  8. Partnership Agreement • Division of profits • Decision-making authority • Expected contributions • Dispute resolution Business In Action 3e

  9. Corporations • Enter into contracts • Own and sell property • Sue and be sued • Enjoy limited liability Business In Action 3e

  10. Ownership of Corporations • Shareholders • Common stock • Preferred stock Business In Action 3e

  11. Who Owns a Corporation? • Public • Many stockholders • Publicly traded • Private • Few stockholders • Not publicly traded Business In Action 3e

  12. Corporations Advantages Disadvantages • Access to capital • Limited liability • Increased liquidity • Unlimited life span • Excess paperwork • Burdensome costs • Double taxation • Disclosure requirements Business In Action 3e

  13. Types of Corporations • Subchapter S corporation • Limited liability company • Subsidiary corporation Business In Action 3e

  14. Corporate Governance Common Shareholders Board of Directors Corporate Officers Employees of the Company • Individuals • Companies • Non-profits • Pensions • Mutual Funds • Dividends • Corporate Affairs • Strategic Plans • Select Officers • Finances • Chief Executive • Chief Financial • Chief Operations • Operations • Finance • Marketing • Personnel • Engineering Business In Action 3e

  15. Business Combinations • Mergers • Consolidations • Acquisitions • Leveraged buyouts Business In Action 3e

  16. Types of Business Mergers • Vertical • Horizontal • Conglomerate • Market extension • Product extension Business In Action 3e

  17. Economies of Scale High-Risk Corporate Debt Efficiencies Management Distractions Synergies Culture Clashes Mergers, Consolidations, and Acquisitions Advantages Disadvantages Business In Action 3e

  18. Trends in Mergers and Acquisitions Year Number Value (in billions) 1970 5,152 $16 1975 2,297 $12 1980 1,889 $44 1985 3,001 $180 1990 2,074 $108 1995 3,510 $356 2000 11,123 $1,269 2003 8,232 $530 Business In Action 3e

  19. Defenses Against Mergers and Acquisitions • Types • Tender offer • Proxy fight • Defenses • Poison pill • Golden parachute • Shark repellent • White knight Business In Action 3e

  20. Expand Market Share Attain Specific Goals Access Technology Share Strengths Diversity Offerings Spread Cost Share Best Practices Minimize Risk Alternative Business Forms Strategic Alliance Joint Venture Business In Action 3e

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