copyright © cengage learning. all rights reserved.4 | 1 chapter four choosing a form of business...

Copyright © Cengage Learning. All rights reserved. 4 | 1

Chapter Four

Choosing a Form of

Business Ownership


Learning Objectives

1. Describe the advantages and disadvantages of sole proprietorships.

2. Explain the different types of partners and the importance of partnership agreements.

3. Describe the advantages and disadvantages of partnerships.

4. Summarize how a corporation is formed.5. Describe the advantages and disadvantages

of a corporation.


Learning Objectives

6. Examine special types of corporations, including S-corporations, limited-liability companies, government-owned corporations, and not-for-profit corporations.

7. Discuss the purpose of a cooperative, joint venture, and syndicate.

8. Explain how growth from within and growth through mergers can enable a business to expand.

Chapter 4 Outline

– Sole Proprietorships• Advantages of Sole Proprietorships• Disadvantages of Sole Proprietorships• Beyond the Sole Proprietorship

– Partnerships• Types of Partners• The Partnership Agreement• Advantages of Partnerships• Disadvantages of Partnerships• Beyond the Partnership

– Corporations• Corporate Ownership• Forming a Corporation• Corporate Structure• Advantages of Corporations• Disadvantages of Corporations

Chapter 4 Outline (cont.)

– Special Types of Business Ownership• S-Corporations• Limited-Liability Companies• Government-Owned Corporations• Not-for-Profit Corporations

– Cooperatives, Joint Ventures, and Syndicates• Cooperatives• Joint Ventures• Syndicates

– Corporate Growth• Growth from Within• Growth Through Mergers and Acquisitions• Current Merger Trends


Sole Proprietorships

• A business that is owned (and usually operated) by one person

• The simplest form of business ownership and the easiest to start

• Many large businesses began as a small struggling sole proprietorships

• The most widespread form of business ownership


Advantages and Disadvantages of Sole Proprietorships

ADVANTAGES DISADVANTAGES

• A voluntary association of two or more persons to act as co-owners of business for profit

• Less common form of ownership than sole proprietorship or corporation

• No legal limit on the maximum number of partners; most have only 2

• Large accounting, law, and advertising partnerships have multiple partners

• Partnerships are usually a pooling of special talents or the result of a sole proprietor taking on a partner


Partnerships


Types of Partners

• General partner

• Limited partner


The Partnership Agreement

• Articles of partnership


Advantages and Disadvantages of Partnerships



Corporations

• An artificial person created by law with most of the legal rights of a real person, including the rights to start and operate a business, to buy or sell property, to borrow money, to sue or be sued, and to enter into binding contracts

• There are 5.6 million corporations in the U.S.

• They comprise only 20% of all businesses, but they account for 83.8 % of sales revenues


Corporate Ownership

• Corporate ownership

– Stock

– Stockholder

– Closed corporation

– Open corporation


Forming a Corporation

• Incorporation

• Where to incorporate

– Domestic corporation

– Foreign corporation

– Alien corporation


Forming a Corporation (cont’d)

• Articles of incorporation

– Articles of incorporation includes

• Stockholders’ rights

– Common stock

– Preferred stock

– Dividend

– Proxy


Forming a Corporation (cont’d)

• Organizational meeting

– The last step in forming a corporation

– Board members are directly responsible to stockholders for how they operate the firm


Corporate Structure

• Board of directors– The top governing body of a corporation, the members

of which are elected by the stockholders

– Responsible for setting corporate goals, developing strategic plans to meet those goals, and the firm’s overall operation

– Outside directors: experienced managers or entrepreneurs from outside the corporation who have specific talents

– Inside directors: top managers from within the corporation


Corporate Structure (cont’d)

• Corporate officers

– The chairman of the board, president, executive vice presidents, corporate secretary, treasurer, and any other top executive appointed by the board

– Implement the chosen strategy and direct the work of the corporation, periodically reporting results to the board and stockholders


Hierarchy of Corporate Structure

• Stockholders exercise a great deal of influence through their right to elect the board of directors


Advantages and Disadvantages of Corporations


• S-corporations

– Advantages

– S-corporation criteria

• Limited-liability company (LLC)

– Advantages

– Difference between LLC and S-corporation


Special Types of Business Ownership


Special Types of Business Ownership (cont’d)

• Government-owned corporations

– Purpose

– Examples

• Not-for-profit corporations


Cooperatives, Joint Ventures, Syndicates

• Cooperatives

• Joint ventures

• Syndicates


Corporate Growth

• Growth from within

• Growth through mergers and acquisitions

• Current merger trends

– Takeover advocates say

– Takeover opponents say

copyright © cengage learning. all rights reserved.4 | 1 chapter four choosing a form of business...

Documents

learning objectives

legal rights

special types of corporations

multiple partners partnerships

advertising partnerships

common form of ownership

different types of partners

co owners of business