Business, Chapter 4

board of directors

A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization, which can include a non-profit organization or a government agency or corporation.

horizontal merger vs. vertical merger

A horizontal merger is a merger or business consolidation that occurs between firms that operate in the same space, as competition tends to be higher and the synergies and potential gains in market share are much greater for merging firms in such an industry. A vertical merger is a merger between two companies that operate at separate stages of the production process for a specific finished product. A vertical merger occurs when two or more firms, operating at different levels within an industry's supply chain, merge operations.

private vs. public vs. quasi-public corporation

A privately held company or close corporation is a business company owned either by non-governmental organizations or by a relatively small number of shareholders or company members which does not offer or trade its company stock (shares) to the general public on the stock market exchanges, but rather the company's stock is offered, owned and traded or exchanged privately. A public company is a company whose shares are traded freely on a stock exchange. A quasi-public corporation is a type of corporation in the private sector that is backed by a branch of government that has a public mandate to provide a given service. Most quasi-public corporations began as government agencies, but have since become separate entities.

articles of partnership

A voluntary contract between/among two or more persons to place their capital, labor, and skills into business, with the understanding that there will be a sharing of the profits and losses between/among partners.

Advantages and disadvantages of sole proprietorships

Advantages: A sole proprietor has complete control and decision-making power over the business. Sale or transfer can take place at the discretion of the sole proprietor. No corporate tax payments Minimal legal costs to forming a sole proprietorship Few formal business requirements Disadvantages: The sole proprietor of the business can be held personally liable for the debts and obligations of the business. Additionally, this risk extends to any liabilities incurred as a result of acts committed by employees of the company. All responsibilities and business decisions fall on the shoulders of the sole proprietor. Investors won't usually invest in sole proprietorships.

s-corporation

An S corporation, for United States federal income tax purposes, is a closely held corporation (or, in some cases, a limited liability company or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code.

initial public offering (IPO)

Initial public offering (IPO) or stock market launch is a type of public offering in which shares of a company usually are sold to institutional investors that in turn, sell to the general public, on a securities exchange, for the first time.

limited liability company

It is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

meaning of limited/unlimited liability

Limited: Where a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership. If a company with limited liability is sued, then the claimants are suing the company, not its owners or investors. Unlimited: The legal obligations general partners and sole proprietors because they are liable for all business debts if the business can't pay its liabilities.

mergers vs. acquistion

The merger means the fusion of two or more than two companies voluntarily to form a new company. When one entity purchases the business of another entity, it is known as Acquisition.

difference between domestic, alien, and foreign corporation

a domestic corporation is able to conduct business in other states or other parts of the country where it has filed its articles of incorporation. A foreign corporation is a business that is incorporated in a different country from which it originates

shareholders

an owner of shares in a company.

Advantages and disadvantages of corporations

the liability of the partners for the debts of the business is unlimited each partner is 'jointly and severally' liable for the partnership's debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts there is a risk of disagreements and friction among partners and management each partner is an agent of the partnership and is liable for actions by other partners if partners join or leave, you will probably have to value all the partnership assets and this can be costly.

Advantages and disadvantages of partnerships

two heads (or more) are better than one your business is easy to establish and start-up costs are low more capital is available for the business you'll have greater borrowing capacity high-calibre employees can be made partners there is opportunity for income splitting, an advantage of particular importance due to resultant tax savings partners' business affairs are private there is limited external regulation it's easy to change your legal structure later if circumstances change.