Forms of Business Ownership

1. Forms of Business Ownership Excellence in Business, 3e

2. Business Ownership Three Common Forms Sole Proprietorships Partnerships Corporations Excellence in Business, 3e

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

4. General Partnerships Limited Partnerships Equal Partners Unequal Partners Share Ownership Unlimited Liability Passive Investors Limited Liability Business Partnerships Excellence in Business, 3e

5. Partnership Advantages Easy to Establish Tax Advantages Strength in Numbers Diversity of Skills Increased Capital Extended Life Excellence in Business, 3e

6. Unlimited Liability Interpersonal Problems Debts Law Suits Managing Partner Unproductive Partners Partnership Disadvantages Excellence in Business, 3e

7. Partnership Agreement Division of Profits Dispute Resolution Decision-Making Authority Expected Contributions Excellence in Business, 3e

8. Enter Into Contracts Buy and Sell Property Sue and Be Sued Face Limited Liability Corporations Excellence in Business, 3e

9. Common Stock Preferred Stock Full Voting Rights Minimal Voting Rights Cash or Stock Dividends Cash or Stock Dividends Last Claim on Distributed Profits and Assets First Claim on Dividends and Assets Ownership of Corporations Shareholders Shareholders Shareholders Shareholders Shareholders Shareholders Excellence in Business, 3e

10. Public Corporation Private Corporation Many Shareholders Publicly Traded Few Shareholders Not Publicly Traded Public Versus Private Ownership Excellence in Business, 3e

11. Advantages of “Going Public” • Ready supply of capital • Increased liquidity • Enhanced visibility • Independent market value • Increased flexibility Excellence in Business, 3e

12. Disadvantages of “Going Public” • High cost • SEC filing requirements • Reduced ownership control • Demands of public exposure • Pressure for quarterly results Excellence in Business, 3e

13. Corporations Advantages Disadvantages • Access to capital • Limited liability • Increased liquidity • Unlimited life span • Excess paperwork • Burdensome costs • Double taxation • Disclosure requirements Excellence in Business, 3e

14. Subchapter S Corporation Limited Liability Company Subsidiary Corporation Types of Corporations Excellence in Business, 3e

15. Corporate Governance Elect Appoint Hire 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 Excellence in Business, 3e

16. Composition Education Liability Recruiting Reform: Board-Related Issues Excellence in Business, 3e

17. Business Combinations Mergers Consolidations Acquisitions Leveraged Buy-Outs Excellence in Business, 3e

18. Types of Business Mergers Vertical Horizontal Conglomerate Market Extension Product Extension Excellence in Business, 3e

19. Advantages Disadvantages Economies of Scale High-Risk Corporate Debt Efficiencies Management Distractions Synergies Culture Clashes Mergers and Acquisitions Excellence in Business, 3e

20. 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 Excellence in Business, 3e

21. Defenses AgainstMergers and Acquisitions Tender Offers Poison Pill Hostile Takeovers Shark Repellent Proxy Fights White Knight Excellence in Business, 3e

22. Strategic Alliances and Joint Ventures Gain Credibility Expand Markets Access Technology Diversity Offerings Share Best Practices Excellence in Business, 3e