Chapter 4: Choosing A Form Of Business Ownership

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Chapter 4: Choosing a Form of Business Ownership

Sole Proprietorships (71.8%) (4%)

oMost large corps started out as sole prop

oAdv: Ease of startup/closure, Pride of ownership, Reten%on of all

pro&ts, No special taxes, Flexibility of being own boss

oDisadv: Unlim liab, Lack of con%nuity, Lack of money, Limited

management skills, Di1 in hiring emps

oLimited amt one person can do; To reduce this prob is to have more

owners

Partnerships (8.7%) (15%)

oType of Partners: General partners, Limited partners, Master limited

partnership

oarticle of Partnerships: An agrmnt lis%ng and explrng the terms of

the partnership

Who has &nal decision, Each partner’s duties, Invmt

each partner makes, How much pro&t/loss each partner

receives/responsible for, What happens of partner

wants to dissolve partnership or dies

oAdv: Ease of startup, Availability of capital and credit, Personal

interest (concern w/ opera%on, mo%va%on w/ each other), Combined

bus skills and knowledge, Reten%on of pro&ts, No special taxes

oDisadv: Unlim liab, Management disagr, Lack of con%nuity, Frozen

investment (easy to put money in, but di1 to take out)

corporation (19.5%) (81%)

oCorporation: “Is an ar%&cial person, invisible, intangible, and exis%ng

only in contempla%on of the law”; Exists only on paper

oCorp does not guarantee success, Form a corp if it suits needs

oTypes: Closed corp, Open corp, domestic, Foreign, Alien, S-Corp, LLC,

Govnt-owned corp, Not-for-pro&t corp

oMay Req Legal Help In: Choosing type of ownership, construction of

partnership agrmnt, Inc a bus, Reg a corp’s stock, Obtaining

oConglomerate Merger: Merger that takes place b/w &rms of comp di1

industries

Trends for the Future

oTakeover advocates say:

Corps that are taken over are made more pro&table and

produc%ve

Proceeds from the sale of non-core subsidiaries help

pay o1 debt or enhance the company

oTakeover opponents say:

Takeover threats force managers to spend %me on

defense rather than vital business ac%vi%es

The only people who bene&t are investment bankers,

brokerage &rms, and takeover artist who manipulate

corps

oMergers during the &rst part of the 21st century will be the result of

cash-rich companies looking to enhance their posi%on in the

marketplace

oThere will be more mergers involving companies or investors from

other countries

oFuture mergers and acquisition will be driven by solid business logic

and the desire to compete internationally

oThere will be more leveraged buyouts

A purchase arrangement that allows a &rm’s managers

and emps or a group of investors to purchase the

company

Table of Advantages and Disadvantages:

Sole Proprietorship General Partnership C Corpora!on

Protec!ng Against

Liability

DiEcult DiEcult Easy

Raising Money DiEcult DiEcult Easy

Ownership

Transfer

DiEcult DiEcult Easy

Preserving

DiEcult DiEcult Easy

Join Venture: An agrmnt b/w two or more groups to form a bus en%ty in order to achieve a

speci&c goal or to op for a speci&c pd of %me

Limited Liability: A feature of corp ownership that limits each owner’s &nancial liab to the amt of

money that he or she has paid for the corp’s stock

Limited Partner: A person who inv money in a bus but has no mngmnt resp or liab for losses

beyond the amt inv

Limited-Liability Corpora!on (LLC): A form of bus ownership that combines the bene&ts of a corp

and a partnership while avoiding some of the restriction and disadv of those forms of ownership

Master Limited Partnership (MLP)/Publicly Traded Partnership (PTP): A lim partnership that has

unites of ownership that can be traded on sec exchanges much like shares of ownerships in corp

Merger: The purchase of one corp by another

Not-for-Pro4t Corpora!on: A corp organized to provide a social, educa%onal, religious, or other

service rather than to earn a pro&t

Open Corpora!on: A corp whose stock can be bought and sold by any indv

Partnership: A voluntary assoc of two or more persons to act as co-owners of a bus for pro&t

Preferred Stock: Stock owned by indv or &rms who usually do not have voting rights but whose

claims on dividends are paid before those of common stock owners

Proxy Fight: A technique used to gather enough stockholder votes to control a targeted co

Proxy: A legal form lis%ng issues to be decided at a stockholders’ meeting and enabling

stockholders to transfer their vo%ng rights to some other indv(s)

S-Corpora!on: A corporation that is taxed as though it were a partnership; <100 of certain

stockholders

Sole Proprietorship: A bus that is owned (and usually op) by one person

Stock: Shares of ownership of a corp

Stockholder: A person who owns a corp’s stock

Syndicate: A temp assoc of indvs or &rms organized to perform a speci&c task that req a large amt

of capital

Tender o5er: An offer to purchase the stock of a &rm targeted for acquisi%on at a price just high

enough to tempt stockholders to sell their shares

Unlimited Liability: A legal concpt that holds a bus owner personally resp for all the debts of the

bus

Chapter 9: A8rac!ng and Retaining the Best Employees

Human Resources Management: An Overview

oHRM: All the ac%vi%es involved in acquiring, maintaining, and