Types of Business Structures International Business Types of Business Structures Presented By Mrs. Bowden

List advantages and disadvantages of a sole proprietorship. Today we will: Describe and differentiate between the different legal entity structures List advantages and disadvantages of a sole proprietorship. List advantages and disadvantages of a partnership. List advantages and disadvantages of a corporation.

Sole Proprietorship sole proprietorship a business that is owned exclusively by one person

Advantages of a Sole Proprietorship minimal government regulation accurate tax records certain employment laws Sole proprietorship is the most common form of U.S. business ownership.

Disadvantages of a Sole Proprietorship It can be difficult to raise money for the business. You bear the burden of all the risks. If the business fails, your personal assets can be jeopardized.

Question Time Why do you think sole proprietorships are the most common types of business ownership?

Partnership partnership Advantages of a partnership include: a business owned by two or more people Advantages of a partnership include: multiple sources of capital risks are spread among partners minimal government regulation

Disadvantages of a partnership include: responsibilities and profits are shared can be held liable for errors of partners

rights to audit accounting documents profit distribution salaries length of partnership conditions under which partnership can be dissolved asset distribution upon dissolution of partnership

Partnership Agreements outline the rights and responsibilities of each of the owners including business name names of partners investment by each partner delegation of management duties accounting method used

Corporation corporation share of stock a business that has the legal rights of a person but is independent of its owners share of stock a unit of ownership in a corporation The individual or group that owns most shares maintains control of the company.

board of directors dividends a group of people who meet several times a year to make important decisions affecting the company in addition to strategic decisions, they also determine dividend payments dividends distributions of corporate profits to shareholders The board of directors is not involved in the daily management of the company.

Advantages of Incorporation In a corporation, personal liability is limited to the amount of money each shareholder invested in the company. Personal assets of shareholders are protected. Corporations can raise money by selling stock.

Disadvantages of a Corporation The disadvantages of a corporation include: A lawyer is required to establish a corporation because a corporation is complex. costly

- Articles of incorporation need to be well written. Corporations are subject to more government regulation that other types of businesses. Income is taxed twice. corporate income individual income

S Corporation S corporation a corporation organized under Subchapter S of the Internal Revenue Code not taxed as a business If the business looses money, owners can use the losses to offset other sources of personal income. tax break

Limited Liability Company Limited Liability Company (LLC) offers the limited liability protections of a corporation to its owners not subjected to the rules of an S corporation provides the benefits of partnership taxation and limited personal liability may be limited to a business life of 30 years

Question Time What is the main advantage of opening as a corporation?

When to Get Legal Advice Learning some basics about the laws affecting businesses will help you handle minor legal issues independently. Sometimes you will need to hire a lawyer.

contract agreement consideration a legally binding agreement between two or more persons or parties agreement one party offers or agrees to something and the other party accepts consideration what is exchanged for the promise

capacity the parties are legally able to enter into a binding agreement legality a contract cannot have anything in it that is illegal or that would result in illegal activities

What are the three ways we can legally structure Let’s Review What are the three ways we can legally structure our own business??

Which one sounds most appealing to you and why? QUESTION TIME Which one sounds most appealing to you and why?

Today we will: Describe opportunities of traditional and non traditional business ventures

Introduction Cooperative strategy A strategy in which firms work together to achieve a shared objective One of 3 means firms use to grow and improve performance (mode) Internal development, mergers and acquisitions, and cooperation

Primary Type of Cooperative Strategy: Strategic Alliances A cooperative strategy in which firms combine some of their resources and capabilities to create a competitive advantage Involve firms with some degree of exchange and sharing of resources and capabilities to co-develop, sell, and service goods or services Major type of strategic alliance Joint Venture Two or more firms create a third legally independent company to share some of their resources and capabilities to develop a competitive advantage Partners typically own equal percentages and contribute equally to the ventures operations

Reasons Firms Develop Strategic Alliances Why firms develop strategic alliances They allow partners to create value that they couldn’t develop by acting independently They allow partners to enter markets more quickly and with greater market penetration possibilities Most firms lack the full set of resources and capabilities needed to reach their objectives They are a prime vehicle for firm growth – mode of entry into new product or geographic markets Can account for 25% of sales revenue in large firms

Reasons Firms Develop Strategic Alliances Strategic alliances can be used to Reduce competition Gain market power Enhance a firm’s competitive capabilities Gain access to resources and new (restricted) markets Take advantage of opportunities Build strategic flexibility Help the firm innovate Provide for a new source of revenue and for firm growth Enhance organizational response times Gain new knowledge and experiences Overcome trade barriers Establish better economies of scale and scope Lower costs

Question Time What is the main difference between a strategic alliance and a joint venture?