Copy of business in action notes.pdf

CHAPTER 5 The three most common forms of business ownership are sole proprietorship, partnership, and corporation. Description Sole proprietorship Partnership Corporation A business owned by a 2 or + people. They need resources and leadership but need fundraising capabilities. General: Joint a...

CHAPTER 5 The three most common forms of business ownership are sole proprietorship, partnership, and corporation. Description Sole proprietorship Partnership Corporation A business owned by a 2 or + people. They need resources and leadership but need fundraising capabilities. General: Joint authority Limited: One acts like a general partner Limited liability: The maximum amount they are liable for is whatever amount each invested in business. MLP: Raise money by selling units of ownership LLP: Protect individual partners in certain professions. The legal entity is distinct from individuals with the power to own property and conduct business. Owned by shareholders, the stock of a public corporation is sold, and a few individuals own the supply of a private corporation. single person. Getting paid for performing a service without being in a company makes you a sole proprietorship. Pros Privacy, flexibility, control, fewer limitations on personal income, and personal satisfaction. Simplicity, single layer of taxation, more resources, cost sharing, broader skill and experience base, longevity Ability to raise capital, liquidity, longevity, limited liability Cons Financial liability, demands on the owner, limited managerial perspective, resource limitations, no employee benefits for the owner, finite life span. Unlimited liability, potential for conflict, expansion, succession, and termination issues. Cost and complexity, reporting requirements, managerial demands, possible loss of control, double taxation, and short-term stock market orientation. Corporate governance SHAREHOLDERS - Some people manage the business and are elected and called the board of directors. They are groups elected by shareholders as representatives for the company's direction and the selection of top executives. - The shareholders own stock and present the coming year's plans and the previous year's results. They vote through a proxy, which is a document. - Shareholder activism is when shareholders pressure management on matters ranging from executive pay to corporate responsibility. BOARD OF DIRECTORS - They select officers, guide corporate affairs, review plans, make decisions, etc. - They are paid by annual fee and stock options. Board-related issues: Composition, education, liability, independent board chairs, recruiting challenges CORPORATE OFFICERS - Of the top executives who run a corporation, the highest ranking is the CEO. Mergers and acquisitions - Merger is an action when two companies combine in a single entity - An acquisition is an action taken by one company to buy a controlling interest in the voting stock of another company. - A hostile takeover refers to the acquisition of another company against the wishes of management. - LBO is the acquisition of a company´s publicly traded stock using borrowed funds. Advantages: Rare event for many firms, but others use them as a strategic tool to expand year after year. It increases their buying power, larger size, and increase revenue. Some risks are they come up with the money, decide which managers will be in charge, merge marketing and sales efforts, reconcile information systems and deleing with redundant employees, and mess up corporate cultures. Strategic alliances are long-term partnerships between companies to develop sell, and produce. It has less risk and work than permanently integrating two companies. A joint venture refers to companies that create an operation that is more tightly integrated than a strategic alliance. It keeps the original companies intact.