Forms of Ownership
Forms of Ownership BUS 10123-002
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This 3 page Class Notes was uploaded by Amy Turk on Friday May 20, 2016. The Class Notes belongs to BUS 10123-002 at Kent State University taught by Dr. Diane DeRubertis in Spring 2015. Since its upload, it has received 10 views. For similar materials see Exploring Business in Business at Kent State University.
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Date Created: 05/20/16
FORMS OF OWNERSHIP Sole Proprietorship ● owned and operated by one person ● most common form of business in the US ● 15-20 million in US ○ ¾ of all businesses ● men 2x more likely than women to start own business ○ restaurants ○ hair salons ○ flower shops ○ dog kennels ○ independent grocery stores Partnership ● an association of two or more person who carry on as co-owners of a business profit ● articles of partnership = legal documents that set forth the basic agreement between partners ● general partnership = involves a complete sharing in both the management and the liability ● limited partnership = at least one general partner, who assumes unlimited liability and at least one limited partner whose liability is limited to his investment in the business ● keys to success ○ keep profit sharing and ownership at 50-50 ○ different and complementary skill sets ○ honesty ○ face-to-face communications ○ share info ○ experience ○ family is priority ● relationships, not partnerships Corporations ● legal entities created by the state whose assets and liabilities are separate from its owners ○ created under the laws of the state ○ have most of the rights of the people ○ typically owned by shareholders ● articles of incorporation = legal documents with basic info about the business with the appropriate state office (often the secretary of state) ● types of incorporations ○ domestic corporation = does business in the state where it’s chartered ○ foreign corporation = does business in other states ○ alien corporation = does business outside the nation in which it’s incorporated ● types of corporations ○ private = owned by one or a few people closely involved in managing the business ○ public = anyone can buy, sell, or trade its stock ○ initial public offering = private company wishing to go public to rase capital and expand ■ sells stock on public markets for the first time ○ quasi-public = owned and operated by the federal, state, or local gov’t ■ NASA ■ US postal service ○ non-profit = provides a service rather than earns a profit but is not owned by a gov’t entity ■ Mercy corps ● elements of corporation = a group of people elected by the stockholders to oversee the general operation of the corporation ○ sets the long-range objectives ○ inside directors = people who serve on a board and are employed by the corporation ○ outside directors = people who serve on a board who are not directly affiliated with the corporation ■ usually executives of other corporation ● stock ownership ○ preferred stock = special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do ○ common stock = stock whose owners have voting rights in the corporation, yet do not receive preferential treatment regarding dividends ● transfer of ownership ● expansion potential Other Types of Ownership ● joint venture = partnership established for a specific project or for a limited time ○ control can be divided equally, or with one party taking more responsibility ● S-corporation (S-corp) = taxed as though it were a partnership (no double-taxation) with restrictions on shareholders ○ very popular with entrepreneurs because it eliminates double-taxation ○ combines the taxation structure of partnerships with legal environment of C-corporations ○ qualifications ■ only 1 class of stock ■ less than 100 shareholders ■ shareholders must be US citizens ● limited liability company (LLC) = form of ownership that provides limited liability and taxation like a partnership but places fewer restrictions on members ● cooperative (co-op) = people or small businesses that have banded together to reap the benefits of belonging to a larger organization ○ popular with small farmers and artisans ○ gives small producers more power as a group Trends in Ownership ● merger = the combination of two companies (usually corporations) to form a new company ○ horizontal = similar companies ○ vertical = different but related levels ○ conglomerate = unrelated companies ● acquisition = purchase of one company by another, usually by buying its stock or assuming its debts ○ corporate raider = company who wants to take over other company ■ first offers to buy some or all of its stock at a premium in a tender offer ○ poison pill = allows stockholders to buy more shares of a stock at lower prices than the current market value to head off a hostile takeover ○ shark repellant = management requires a large majority of stockholders to approve a takeover ○ white knight = a more acceptable firm who is willing to acquire a threatened company ● leveraged buyout = a group of investors borrow money from banks and other institutions to acquire a company ○ mergers/acquisitions have been criticized ○ executives have to focus excessively on avoiding takeovers, not on managing the business