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