Intro of BUS Chapter 5

Conglomerate Merger

The joining of firms in completely unrelated industries

Which is the easiest form of business to start up?

Sole proprietorship

Acquisition

one company's purchase of the property and obligations of another company

Merger

the result of two firms joining to firm one company

Ending a partnership can be difficult because of problems deciding

the worth of a retiring partner's share how to distribute assets how a partner can retire

attributes of a corporation

liability separate from owners legal entity state chartered

Disadvantages of Franchising

1) Large start up cost 2) Share profit 3) Management regulation 4) Coattail effects 5) Restrictions on selling 6) Fraudulent franchisors

Advantages of Franchising

1) Management and marketing assistance 2) Personal ownership 3) National recognized name 4) Financial advice and assistance 5) Lower Failure rate

Benefits of Sole Proprietorship

1. Ease of starting and ending the business 2. Being your own boss 3. Pride of ownership 4. Leaving a legacy 5. Retention of company profit 6. No special taxes

The order in which members of a corporation are chosen in order to separate ownership from management.

1. Owners/stockholders elect board of directors 2. Board of directors hire officers of the corporation 3. officers hire managers of the corporation 4. Managers ire employees

Disadvantages of Sole Proprietorship

1. Unlimited liability: any debts or damages incurred by the business are your debts, even if it means selling your home 2. Limited financial resources 3. Management difficulties 4. Overwhelming time commitment 5. Few fringe benefits 6. Limited growth 7. Limited life span

Disadvantages of Corporations

Initial cost Extensive paperwork Double taxation Two tax returns Size Difficulty of termination Possible conflict with stockholders and board of directors

Disadvantages of home based franchises

Isolation Long hours

Advantages of Corporations

Limited Liability Ability to raise more money for investment Size Perpetual life Ease of ownership change Ease of attracting talented employees Separation of ownership from management

Advantages of LLC

Limited Liability Choice of taxation Flexible ownership rules Flexible distribution of profits and losses Operating Flexibility

If a sole proprietor dies, is incapacitated, or retires, the business no longer exist.

Limited Life span

an advantage of a partnership?

Longer survival rate because they are more disciplined and the business's life is based on all the partners

Advantages of Partnerships

More financial resources Shared management Longer survival No special taxes

Disadvantages of LLC

No stock, so ownership is nontransferable Limited life span Fewer incentives Taxes Paperwork

Advantages of home based franchises

Relief from commuting stress Extra family time Low overhead expanses

Disadvantages of Partnerships

Unlimited liability Division of profits Disagreements among partners Difficult to terminate

The result of two firms joining to form one is called.....

a merger

Mater Limited partnership

a partnership that looks much like a corporation, but is taxed like a partnership and thus avoids the corporate income tax

Limited Partnership

a partnership with one or more general partners and one or more limited partnership

Conventional Corporation

a state- charted legal entity with authority to act and have liability separate from its owners (stockholders)

General Partnership

all owners share in iperating the busness and in assuming liability for all the business debts

General Partnership

all owners share in operating the business and in assuming liability for the business debts

Leveraged Buyout (LBO)

an attempt by employee management or a group of investors to buy out the stockholders in a company

General Partner

an owner who has unlimited liability and is active in managing the firm

Limited Partner

an owner who invests money in the business but enjoys limited liability

S Corporations

an unique government creation that looks like a corporation but is taxed like sole proprietorship and partnership

Franchising Agreement

and arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory

Reverse royalties

are sent to franchisees who believe their sales were hurt by franchisor's site

Among the reasons that disagreements can ruin a partnership are

arguing over profits disagreement over workload opposing management styles

in a leveraged buyout, employees, managers, or investors finance the purchase of the company by

borrowing against its assets

Cooperatives

business owned and controlled by the people who use them with similar needs who pool their resources for mutual gain

Limited partnership

has partners who do not share in operating the business

LLCs do not have to submit articals of organization and an operating agreemen, but do no have to:

hold annual meetings keep minutes file weitten resoulution

Among the advantages of farm cooperatives for their members is that they

increase economic power do not pay taxes as corporations do

Limited Liability

liability for the debts of the business is limited to the amount the limited partner puts into the company; personal assets are not at risk

Limited Liability Partnership

limits partners' risk of losing their personal assets to the outcome of only their own acts and omissions and those of people under their supervision.

Limited Liability Companies (LLC)

similar to an s corporation but without the eligibility requirements

Vertical merger

soft drink company and an artificial sweeter maker could be considered a

Vertical Merger

the joining of two firms in different stages of related businesses

Horizontal Merger

the joining of two firms in the same industry

Horizontal Merger

two firms in the same industry that allows the companies to diversify or expand their products