1. © Prentice Hall, 2005Business In Action 3eChapter 4 - 1 Selecting the Proper Form of Business Ownership and Exploring Business Combinations

2. © Prentice Hall, 2005Business In Action 3eChapter 4 - 2 Owning a Business Sole proprietorship Partnership Corporation

3. © Prentice Hall, 2005Business In Action 3eChapter 4 - 3 Popularity of Business Ownership Forms Sole proprietorships 72% Corporations 20% Partnerships 8%

4. © Prentice Hall, 2005Business In Action 3eChapter 4 - 4 Sole Proprietorship Advantages  Ease of establishment  Self-satisfaction  Privacy  Tax advantages Disadvantages  Unlimited liability  Personal pressure  Difficult to get funding  Limited life

5. © Prentice Hall, 2005Business In Action 3eChapter 4 - 5 Business Partnerships General partnerships –Equal partners Share ownership Unlimited liability Limited partnerships –Unequal partners Passive investors Limited liability

6. © Prentice Hall, 2005Business In Action 3eChapter 4 - 6 Advantages of Partnerships Easy to establish Tax advantages Strength in numbers Diversity of skills Increased capital Extended life

7. © Prentice Hall, 2005Business In Action 3eChapter 4 - 7 Disadvantages of Partnerships Unlimited liability –Debts –Law suits Interpersonal problems –Managing partner –Unproductive partners

8. © Prentice Hall, 2005Business In Action 3eChapter 4 - 8 Partnership Agreement Division of profits Decision-making authority Expected contributions Dispute resolution

9. © Prentice Hall, 2005Business In Action 3eChapter 4 - 9 Corporations Enter into contracts Own and sell property Sue and be sued Enjoy limited liability

10. © Prentice Hall, 2005Business In Action 3eChapter 4 - 10 Ownership of Corporations Shareholders –Common stock –Preferred stock

11. © Prentice Hall, 2005Business In Action 3eChapter 4 - 11 Who Owns a Corporation? Public –Many stockholders –Publicly traded Private –Few stockholders –Not publicly traded

12. © Prentice Hall, 2005Business In Action 3eChapter 4 - 12 Corporations Advantages  Access to capital  Limited liability  Increased liquidity  Unlimited life span Disadvantages  Excess paperwork  Burdensome costs  Double taxation  Disclosure requirements

13. © Prentice Hall, 2005Business In Action 3eChapter 4 - 13 Types of Corporations Subchapter S corporation Limited liability company Subsidiary corporation

14. © Prentice Hall, 2005Business In Action 3eChapter 4 - 14 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

15. © Prentice Hall, 2005Business In Action 3eChapter 4 - 15 Business Combinations Mergers Consolidations Acquisitions Leveraged buyouts

16. © Prentice Hall, 2005Business In Action 3eChapter 4 - 16 Types of Business Mergers Vertical Horizontal Conglomerate Market extension Product extension

17. © Prentice Hall, 2005Business In Action 3eChapter 4 - 17 Mergers, Consolidations, and Acquisitions AdvantagesDisadvantages Economies of Scale Efficiencies Synergies High-Risk Corporate Debt Management Distractions Culture Clashes

18. © Prentice Hall, 2005Business In Action 3eChapter 4 - 18 Trends in Mergers and Acquisitions YearNumberValue (in billions) 1970 1975 1980 1985 1990 1995 2000 2003 5,152 2,297 1,889 3,001 2,074 3,510 11,123 8,232 $16 $12 $44 $180 $108 $356 $1,269 $530

19. © Prentice Hall, 2005Business In Action 3eChapter 4 - 19 Defenses Against Mergers and Acquisitions Types –Tender offer –Proxy fight Defenses –Poison pill –Golden parachute –Shark repellent –White knight

20. © Prentice Hall, 2005Business In Action 3eChapter 4 - 20 Alternative Business Forms Strategic Alliance Joint Venture Expand Market Share Access Technology Diversity Offerings Share Best Practices Attain Specific Goals Share Strengths Spread Cost Minimize Risk