1. Copyright © 2009 Pearson Education Canada5-1 Chapter 5 Selecting the Proper Form of Business Ownership and Exploring Business Combinations

2. Copyright © 2009 Pearson Education Canada5-2 FORMS OF BUSINESS OWNERSHIP OWNERSHIP The Three Most Common Forms Partnership Soleproprietorship Corporation

3. Copyright © 2009 Pearson Education Canada5-3 Sole Proprietorship Advantages Ease of establishment Self-satisfaction Privacy Owner keeps all the profits Tax advantages Disadvantages Unlimited liability Personal pressure Difficult to get funding Limited life

4. Copyright © 2009 Pearson Education Canada5-4 Business Partnerships General Partnerships Limited Partnerships UnlimitedliabilityUnlimitedliability EqualpartnersEqualpartners ShareownershipShareownershipLimitedliabilityLimitedliability UnequalpartnersUnequalpartners PassiveinvestorsPassiveinvestors

5. Copyright © 2009 Pearson Education Canada5-5 Easy to establish Tax advantages Strength in numbers Diversity of skills Extended life Increased capital Advantages of Partnerships

6. Copyright © 2009 Pearson Education Canada5-6 Disadvantages of Partnerships Unlimited liability Unlimited liability Interpersonal problems Interpersonal problems Unproductive partners Unproductive partners Decision- making complications Decision- making complications Law suits Sharing profits Sharing profits

7. Copyright © 2009 Pearson Education Canada5-7 Partnership Agreement Decision-making authority Dispute resolution Division of profits Expected contributions

8. Copyright © 2009 Pearson Education Canada5-8 Corporations Enter into contracts contracts Own and sell property Own and sell property Sue and be sued Sue and be sued Enjoy limited liability liability

9. Copyright © 2009 Pearson Education Canada5-9 Ownership of Corporations Shareholders Last claim on distributed profits and sssets Cash or stock dividends Full voting rights Common Stock First claim on dividends and assets Cash or stock dividends Minimal voting rights Preferred Stock

10. Copyright © 2009 Pearson Education Canada5-10 Who Owns a Corporation? PublicOwnershipPublicOwnershipPrivateOwnershipPrivateOwnership Not publicly traded tradedFewshareholdersFewshareholdersPubliclytradedPubliclytradedManyshareholdersManyshareholders

11. Copyright © 2009 Pearson Education Canada5-11 Corporations Advantages Access to capital Limited liability Increased liquidity Unlimited life span Disadvantages Excess paperwork Double taxation Disclosure requirements

12. Copyright © 2009 Pearson Education Canada5-12 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

13. Copyright © 2009 Pearson Education Canada5-13 Cooperatives: Another Model Organized and controlled by members who pool their resources to create benefits for themselves and their clients.

14. Copyright © 2009 Pearson Education Canada5-14 Cooperatives: Another Model Advantages Bargaining power Democratic structure Surplus earnings distribution Limited liability Disadvantages Longer decision-making processes Extensive record keeping Less incentive to invest in additional capital Potential conflict among members

15. Copyright © 2009 Pearson Education Canada5-15 BusinessCombinations Mergers Consolidations Acquisitions LeveragedBuyouts

16. Copyright © 2009 Pearson Education Canada5-16 Mergers and Acquisitions AdvantagesDisadvantages Economies of scale Efficiencies Synergies High risk from debt Managementdistractions Culture clashes

17. Copyright © 2009 Pearson Education Canada5-17 Defenses Against Hostile Takeovers Tender Offer Proxy Fight WhiteknightWhiteknightSharkrepellentSharkrepellentGoldenparachuteGoldenparachutePoisonpillPoisonpill

18. Copyright © 2009 Pearson Education Canada5-18 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