© Prentice Hall, 2007Excellence in Business, 3eChapter Forms of Business Ownership

© Prentice Hall, 2007Excellence in Business, 3eChapter Business Ownership Three Common Forms Sole Proprietorships Sole Proprietorships Partnerships Corporations

© Prentice Hall, 2007Excellence in Business, 3eChapter Ease of establishment Self-satisfaction Privacy Tax advantages Unlimited liability Personal pressure Difficult to get funding Limited life Sole Proprietorship AdvantagesDisadvantages

© Prentice Hall, 2007Excellence in Business, 3eChapter Business Partnerships General Partnerships Limited Partnerships UnlimitedLiabilityUnlimitedLiability EqualPartnersEqualPartners ShareOwnershipShareOwnershipLimitedLiabilityLimitedLiability UnequalPartnersUnequalPartners PassiveInvestorsPassiveInvestors

© Prentice Hall, 2007Excellence in Business, 3eChapter Easy to Establish Tax Advantages Strength in Numbers Diversity of Skills Extended Life Increased Capital Partnership Advantages

© Prentice Hall, 2007Excellence in Business, 3eChapter Partnership Disadvantages Unlimited Liability Unlimited Liability Interpersonal Problems Interpersonal Problems Unproductive Partners Unproductive Partners Managing Partner Managing Partner Law Suits Debts

© Prentice Hall, 2007Excellence in Business, 3eChapter Partnership Agreement Decision-Making Authority Dispute Resolution Division of Profits Expected Contributions

© Prentice Hall, 2007Excellence in Business, 3eChapter Corporations Enter Into Contracts Buy and Sell Property Sue and Be Sued Face Limited Liability

© Prentice Hall, 2007Excellence in Business, 3eChapter Ownership of Corporations Shareholders Last Claim on Distributed Profits and Assets Cash or Stock Dividends Full Voting Rights Common Stock First Claim on Dividends and Assets Cash or Stock Dividends Minimal Voting Rights Preferred Stock

© Prentice Hall, 2007Excellence in Business, 3eChapter Public Versus Private Ownership PublicCorporationPublicCorporationPrivateCorporationPrivateCorporation Not Publicly Traded TradedFewShareholdersFewShareholdersPubliclyTradedPubliclyTradedManyShareholdersManyShareholders

© Prentice Hall, 2007Excellence in Business, 3eChapter Advantages of “Going Public” Ready supply of capital Increased liquidity Enhanced visibility Independent market value Increased flexibility

© Prentice Hall, 2007Excellence in Business, 3eChapter Disadvantages of “Going Public” High cost SEC filing requirements Reduced ownership control Demands of public exposure Pressure for quarterly results

© Prentice Hall, 2007Excellence in Business, 3eChapter Corporations  Access to capital  Limited liability  Increased liquidity  Unlimited life span  Excess paperwork  Burdensome costs  Double taxation  Disclosure requirements AdvantagesDisadvantages

© Prentice Hall, 2007Excellence in Business, 3eChapter Types of Corporations Subchapter S Corporation Limited Liability Company Subsidiary Corporation

© Prentice Hall, 2007Excellence in Business, 3eChapter Corporate Governance Common Shareholders Individuals Companies Non-profits Pensions Mutual Funds Board of Directors Dividends Corporate Affairs Strategic Plans Select Officers Finances Corporate Officers Chief Executive Chief Financial Chief Operations Employees of the Company Operations Finance Marketing Personnel Engineering ElectAppointHire

© Prentice Hall, 2007Excellence in Business, 3eChapter Reform: Board-Related Issues Composition Education Liability Recruiting

© Prentice Hall, 2007Excellence in Business, 3eChapter Business Combinations MergersMergersConsolidationsConsolidations LeveragedBuy-OutsLeveragedBuy-OutsAcquisitionsAcquisitions

© Prentice Hall, 2007Excellence in Business, 3eChapter Types of Business Mergers Vertical Horizontal Conglomerate Market Extension Product Extension

© Prentice Hall, 2007Excellence in Business, 3eChapter Mergers and Acquisitions AdvantagesAdvantages Economies of Scale EfficienciesEfficiencies SynergiesSynergiesDisadvantagesDisadvantages High-Risk Corporate Debt Management Distractions Culture Clashes

© Prentice Hall, 2007Excellence in Business, 3eChapter Trends in Mergers and Acquisitions YearNumberValue (in billions) ,152 2,297 1,889 3,001 2,074 3,510 11,123 8,232 $16 $12 $44 $180 $108 $356 $1,269 $530

© Prentice Hall, 2007Excellence in Business, 3eChapter Defenses Against Mergers and Acquisitions White Knight Shark Repellent Poison Pill HostileTakeoversHostileTakeovers Tender Offers Proxy Fights

© Prentice Hall, 2007Excellence in Business, 3eChapter Strategic Alliances and Joint Ventures Gain Credibility Expand Markets Access Technology Diversity Offerings Share Best Practices