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Profissional Documentos
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Choosing a
Form of
Business
Ownership
Nickels
McHugh
McGraw-Hill/Irwin
Understanding Business, 8e
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CHAPTER
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McHugh
1-1
5-1
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Basic Forms of
Business Ownership
Type of Ownership
Number
Sales
Sole Proprietorship
72%
6%
Partnership
8%
13%
Corporation
20%
81%
5-2
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Sole Proprietorship
Advantages
Ease of start/end
Be your own boss
Pride of ownership
Leave a legacy
Retain profit
No special taxes
Disadvantages
Unlimited liability
Limited financial
resources
Management difficulty
Time commitment
Few fringe benefits
Limited growth
Limited life span
5-3
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Types of Partnerships
Genera
l
Limite
d
GP
GP
GP
Passive
Investor
GP
Passive
Investor
GP
Passive
Investo
r
5-4
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New Forms of
Partnerships
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Partnership
Advantages
More financial
resources
Shared
management
Longer survival
No Special
Taxes
Disadvantages
Unlimited
liability
Division of
profits
Disagreements
among
partners
Difficult to
5-6
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Types of Corporations
Conventional C
S Corporation
Limited Liability Companies
5-7
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Corporations
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Corporation
Advantages
Limited liability
More money for
investment
Size
Perpetual life
Ease of ownership
change
Ease of drawing
talented
employees
Separation of
ownership/mgmt.
Disadvantages
Extensive
paperwork
Double taxation
Two tax returns
Size
Termination
difficult
Conflict with
Stockholder &
Board
Initial cost
5-9
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Worlds Largest
Corporations
1. Citigroup
2. General Electric
3. American Intl Group
4. Bank of America
5. HSBC Group
6. ExxonMobil
7. Royal Dutch/Shell
8. BP
9. ING Group
10. Toyota Motor
11.UBS
12.Wal-Mart Stores
13.Royal Bank of Scotland
14.JP Morgan Chase
15.Berkshire Hathaway
16.BNP Paribas
17.IBM
18.Total
18.Verizon Communication
20.Chevron Texaco
5-10
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Americas Largest
Private Companies
Revenue 2004
(In Millions)
1.
2.
3.
4.
5.
$66,669
60,000
19,100
PricewaterhouseCoopers / accounting
18,700
18,686
5-11
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Americas Oldest
Companies
Company
Year Started
Type of Company
1702
Conveyer Belts
1717
Insurance
1752
Insurance
Contributorship
Dexter
1767
D. Landreth Seed
1784
Seeds
1784
Banking
Philadelphia
5-12
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5-13
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5-14
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S Corporations
No more than 100 1 class of stock
shareholders
<25% of income
Individual or
can be passive
Estates
Benefits change
U.S. citizens or
with new tax
permanent
rules
residents
5-15
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Limited Liability
Companies
Advantages
Limited Liability
Tax Choice
Flexible Ownership
Rules
Flexible Profit &
Loss Distribution
Operating Flexibility
Disadvantages
No Stock
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Types of Mergers
Horizontal
Vertical
Conglomerate
No
Relationship
between
companies
5-17
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Leveraged Buyout
Individual
Loan
= Purchase of
Company
Purchase Loan
Company =
Collateral
5-18
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Companies Overpay to
Acquire Another Firm
Acquiring Company
Overestimates Cost Savings
and Synergies
Managers Disagree About
Integrating Operations
Obsession with Cost Cutting Hurts Business,
Costing Top Employees & Customers
5-19
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Franchise System
Franchise
Agreement
Franchisor
Franchisee
5-20
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Franchise Contract
Franchisor, Inc.
Branded
Product/Servic
e
Performanc
e
$$$$$
Monitoring
Franchisee
5-21
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Franchisor
Assigns Territory
May Provide
Financial Aid/Advice
Offers Merchandise/
Supplies at
Competitive Price
Provides
Training/Support
Business
Expansion Using
O.P.M.
5-22
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Franchisee
5-23
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Franchises
Advantages
Management &
marketing assistance
Personal ownership
Recognized name
Financial advice &
assistance
Disadvantages
5-24
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Cost of Fast-Food
Franchise
Company
Initial Fee
Royalty
Burger King
$50,000
8.5%
McDonalds
$45,000
8%
Wendys
$25,000
8%
Dominos
None
8.5%
Subway
$10,000
11.5%
Krispy Kreme
$40,000
5.5%
5-25
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How to Avoid a
Franchise Lemon!
1.
2.
3.
4.
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Benefits of a
Home-Based Franchise
choice
Opportunity to expand
using technology
Self-motivation
5-27
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Technology- Faster
Customer Service
Access to International
Markets
5-28
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Cooperatives
Farm Cooperative
Owned & Controlled by People
Who Use It
Pool of Resources
Economic Power
5-29