Understanding Business Ownership & Combinations: Advantages, Disadvantages, and Governance

1. Forms of Business Ownership and Business Combinations Excellence in Business, Revised Edition

2. Forms of Business Ownership • Sole proprietorship • Partnership • Corporation Excellence in Business, Revised Edition

3. Popularity of Business Ownership Forms • Sole proprietorships 73% • Corporations 20% • Partnerships 7% Excellence in Business, Revised Edition

4. 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, Revised Edition

5. Business Partnerships • General partnerships • Share ownership • Unlimited liability • Limited partnerships • Passive investors • Limited liability Excellence in Business, Revised Edition

6. Advantages of Partnerships • Easy to establish • Tax advantages • Strength in numbers • Diversity of skills • Increased capital • Extended life Excellence in Business, Revised Edition

7. Disadvantages of Partnerships • Unlimited liability • Debts • Law suits • Interpersonal problems • Managing partner • Unproductive partners Excellence in Business, Revised Edition

8. Partnership Agreement • Division of profits • Decision-making authority • Expected contributions • Dispute resolution Excellence in Business, Revised Edition

9. Corporations • Enter into contracts • Own and sell property • Sue and be sued • Enjoy limited liability Excellence in Business, Revised Edition

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

11. Types of Corporations • Subchapter S • Limited liability • Subsidiary Excellence in Business, Revised Edition

12. Types of Corporations • Alien • Foreign • Domestic Excellence in Business, Revised Edition

13. Corporate Governance • Common shareholders • Board of directors • Corporate officers • Employees of the company Excellence in Business, Revised Edition

14. Shareholder’s Rights • Common stock • Preferred stock • Voting privileges • Dividends • Return on investment • Investment risk Excellence in Business, Revised Edition

15. Shareholder’s Power • Public • Many stockholders • Publicly traded • Private • Few stockholders • Not publicly traded Excellence in Business, Revised Edition

16. Public Stock Ownership • Advantages • Increased liquidity • Enhanced visibility • Independent market value • Flexibility Excellence in Business, Revised Edition

17. Public Stock Ownership • Disadvantages • Cost of going public • SEC filing requirements • Increased public exposure • Loss of control Excellence in Business, Revised Edition

18. Responsibilities of the Board of Directors • Declaring dividends • Guiding corporate affairs • Reviewing long-term plans • Selecting corporate officers • Overseeing financial performance Excellence in Business, Revised Edition

19. The Topic of Board Reform • Independence • Compensation • Duties • Integrity Excellence in Business, Revised Edition

20. Business Combinations • Mergers • Consolidations • Acquisitions • Leveraged buyouts Excellence in Business, Revised Edition

21. Economies of Scale High-Risk Corporate Debt Efficiencies Management Distractions Synergies Culture Clashes Mergers, Consolidations, and Acquisitions Advantages Disadvantages Excellence in Business, Revised Edition

22. Current Corporate Trends • Shed unprofitable acquisitions • Focus on core business • Economic slowdown • Political uncertainty • Global market saturation • Shareholders • Wall Street Excellence in Business, Revised Edition

23. Hostile Takeovers • Types • Tender offer • Proxy fight • Defenses • Poison pill • Golden parachute • Shark repellent • White knight Excellence in Business, Revised Edition

24. 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 Excellence in Business, Revised Edition