Marketing 111 Chapters 5 and 6

Conventional (C) Corporation

- A state-chartered legal entity with authority to act and have liability separate from its owners (its stockholders). - Enables many people to share in ownership.

S Corporations

- A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships. - Have shareholders, directors, and employees, plus the benefit of limited liability. - Profits are taxed only as the personal income of the shareholders.

Small Business Administration (SBA)

A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans.

Horizontal merger

The joining of two firms in the same industry.

Home-Based Franchises (Disadvantages)

- 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 Partnerships

- More financial resources. - Shared management and pooled/complementary skills and knowledge - Longer survival. - No special taxes

Home-Based Franchises (Advantages)

- Relief from commuting stress. - Extra family time. - Low overhead expenses.

Disadvantages of Partnerships

- Unlimited liability. - Division of profits. - Disagreements among partners. - Difficulty of termination.

Disadvantages of Franchises

1.Large start-up costs. 2.Shared profit. 3.Management regulation. 4.Coattail effects. 5.Restrictions on selling. 6.Fraudulent franchisors.

Advantages of LLCs

1.Limited liability. 2.Choice of taxation. 3.Flexible ownership rules. 4.Flexible distribution of profits and losses. 5.Operating flexibility.

Advantages of Franchises

1.Management and marketing assistance. 2.Personal ownership. 3.Nationally recognized name. 4.Financial advice and assistance. 5.Lower failure rate.

Disadvantages of LLCs

1.No stock; ownership is nontransferable. 2.Fewer incentives. 3.Taxes. 4.Paperwork.

Major Types of Partnerships: ex .. General partnership

A partnership in which all owners share in operating the business and in assuming liability for the business's debts.

Corporation

A legal entity with authority to act and have liability separate from its owners.

Limited liability partnership (LLP)

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

Master limited partnership (MLP)

A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.

Small Business Investment Company (SBIC)

A program through which private investment companies licensed by the SBA lend money to small businesses.

Franchise agreement

An arrangement whereby someone with a good idea for a business (franchisor) sells the rights to use the business name and sell a product or service (franchise) to others (franchisees) in a given territory.

Leveraged buyout (LBO)

An attempt by employees, management, or a group of private investors to buy out the stockholders in a company.

Incubators

Centers that offer new businesses low-cost offices with basic business services.

Intrapreneurs

Creative people who work as entrepreneurs within corporations

Micropreneurs

Entrepreneurs willing to accept the risk of starting and managing a business that remains small, lets them do the work they want to do, and offers them a balanced lifestyle.

Venture capitalists

Individuals or companies that invest in new businesses in exchange for partial ownership of those businesses.

Conglomerate merger

The joining of firms in completely unrelated industries.

Vertical merger

The joining of two companies in different stages of related businesses.

Disadvantages of Sole Proprietorships: ex.. Unlimited liability

The responsibility of business owners for all debts of the business.

Limited Liability Companies

are similar to an S corporation but without the special eligibility requirements.

Disadvantages of Corporations

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