Bài giảng Economics - Chapter 5 Options for Organizing Business

Chapter FiveOptions forOrganizing BusinessSole ProprietorshipA business owned and operated by one individual.5-1Advantages and Disadvantagesof Sole ProprietorshipAdvantagesEase and cost of formationSecrecyDistribution and use of profitsControl of the businessGovernment regulationTaxationClosing the businessDisadvantagesUnlimited liabilityLimited sources of fundsLimited skillsLack of continuityLack of qualified employeesTaxation5-2PartnershipAn association of two or more persons who carry on as co-owners of a business for profit.5-3The Difference between General and Limited PartnersGeneral partner A person who assumes full co-ownership of a businessLimited partner A person who contributes capital to a business but is not active in managing it5-4Advantages and Disadvantages of PartnershipsAdvantagesEase of organizationAvailability of capital and creditCombined knowledge and skillsDecision makingRegulatory controlsDisadvantagesUnlimited liabilityBusiness responsibilityLife of the partnershipDistributions of profitsLimited sources of fundsTaxation5-5CorporationA legal entity created by the state, whose assets and liabilities are separate from its owners.5-6Board of DirectorsShareholdersTypes of CorporationsPrivate Corporation owned by only one person or a few people closely involved in its management.Public Corporation whose stock anyone may buy, sell, or trade.Subsidiary Corporation in which the majority of the stock is owned by another corporation known as the parent company5-7aTypes of CorporationsHolding Corporation that controls one or more companies through ownership of their common stock.Crown Corporations owned and operated by a federal, provincial, or local government.Non-profit Corporation that focuses on providing service rather than earning a profit.5-7bAdvantages and Disadvantages of CorporationsAdvantagesLimited liabilityTransfer of ownershipPerpetual lifeExternal sources of fundsExpansion potentialDisadvantagesDouble taxationForming a corporationDisclosure of informationEmployee-owner separation5-8Microsoft enables business of all sizes to grow5-9Merger, Acquisition, and LBOMerger The combination of two companies (usually corporations) to form a new companyAcquisition The purchase of one company by another, usually by buying its stock5-10aMerger, Acquisition, and LBOLeveraged Buyout (LBO) A purchase in which a group of investors borrow money from banks and other institutions to acquire a company (or division of one) using the assets of the purchased company to guarantee repayment of the loan.5-10bMergers in Various Industries5-11Source: “The Urge to Merge,” Business Week,March 22, 1999, p. 8.Electric, Gas, &Sanitary ServicesBroadcastingComputer Software,Supplies, & ServicesAutomotive Products& AccessoriesLeisure & Entertainment05101520Percent25Oil & GasCommunicationsFinancialServicesPercent Of AllMergers AndAcquisitionsBy Value19951998Solve the Dilemmaa. What are some of the advantages and disadvantages of Thomas Bryan forming a corporation?b. What are the advantages and disadvantages of their forming a partnership?c. Which organizational form do you think would be best for Thomas and Bryan’s company and why?5-12Explore Your Career OptionsAre salary and advancement opportunities the most important considerations is evaluating a job offer?5-13Additional Discussion Questions and Exercises1. What is meant by “double taxation” for corporate income?2. What is the difference between crown corporations and nonprofit corporations?3. In a leveraged buyout (LBO), what assets or collateral do the investors use to guarantee repayment of the loan to pay back the banks or other institutions from which they borrowed money?5-14Chapter 5 Quiz5-15a1. A corporation doing business in the country in which it is chartered is know as a. a nonprofit corporation. b. a domestic corporation. c. a foreign corporation.  d. a crown corporation.2. Which one of the following is considered an advantage of the sole proprietorship form of organization? a. ease of business dissolution b. unlimited liability c. limited sources of funds d. limited life of the businessChapter 5 Quiz5-15b3. At one time, the Ford family owned all of the stock in the Ford Motor Company. Such family ownership of a corporation is typical of a  a. public corporation. b. crown corporation. c. private corporation.  d. nonprofit corporation.4. Owners of a common stock a. have a claim to any profits before any stockholders do. b. carry a cumulative claim to dividends. c. have no say in running the company. d. elect the board of directors.Multiple Choice Questions about the Video5-161. What was a consequence of keeping Pattison privateThe business developed only in Canada.The business’s expansion was unlimited.Pattison felt he maintained control of the companies’ growth and sales.None of the aboveAll of the above.Pattison’s focus on sales isEffective in turning around companies.Hurts moraleToo one dimensionalRiskyHurtful to the long run viability of the companies