Download Sole Proprietorship

Chapter 8
Business Combinations
Types of Business Structures
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Sole Proprietorships
Partnerships
Corporations
Sole Proprietorship
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business owned and
managed by one
individual who receives
all the profits and bears
all the losses
Most common type of
business (about 72%)
5% of total sales
“mom and pop shops”
Carol Brooks Antiques,
Dana’s, B and B Tax
Sole Proprietorship: Benefits
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Easy to start/end
Control over profits/operations
Pride of ownership
Lower taxes (no corporate taxes)
Less government regulation
Sole Proprietorships: Costs
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Unlimited liability
Difficulty in raising financial capital
Management knowledge may be limited
Limited life
Attracting employees may be more difficult
compared to partnerships/corporations
Size limits efficiency
Partnerships
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business owned and
managed by two or more
individuals who receive
all the profits and bear all
the losses
General or limited-What
is the difference?
Law firms, dr. offices,
accounting firms, etc.
Around 8% of businesses
Approx. 9% of sales
Partnerships: Benefits
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Easier to raise capital
Shared liability
Partners combine managerial skills (efficiency)
Personal satisfaction
Lower taxes (no corp. taxes)/fewer regulations
Relatively easy to start
Attract employees (comparatively)
Partnerships: Costs
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Unlimited liability (even though shared)
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Responsible for the actions of ALL partners
Shared profits
Possible conflicts between partners
Possible instability after death of a partner (limited
life)
Corporations
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Business owned by
stockholders and has
rights and
responsibilities as if it
were a person
Approximately 20% of
businesses
87% of sales
Chartered within a state
Includes multinationals,
conglomerates
ADVANTAGES of a
CORPORATION
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Limited liability for owners
Unlimited life
Raising capital is easier (access to
resources)
Hire professional managers to run company
Easy to transfer ownership of company
DISADVANTAGES OF A
CORPORATION
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Difficult and expensive to start (charter)
Owners have no say in company’s operations
Corporate profits are taxed twice (double
taxation)
More government regulation than other
combinations
What is bankruptcy?
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There are several different types of bankruptcy
filings and each is known by the title of the chapter
of the Federal Bankruptcy Act in which they appear.
Each chapter contains a different set of laws and
rules.
The two most common types of bankruptcy are
Chapter 7 and Chapter 13.
Federal Law and Courts have jurisdiction over
bankruptcy cases
Ch. 8
Business Growth and Expansion
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Reinvestment: reinvest cash flow or payout
dividends
Mergers
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Why?
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Improve efficiency
Improve products
Eliminate rivals
Change image
Ch. 8
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Types of Mergers
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Vertical (flower)
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Companies who make products/services in different
stages of production
US Steel
Raw materials-processing-final product-transportation
Horizontal (paperclip chain)
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A-B-C
Companies make same/similar products
Two banks, two grocery stores, etc.
Ch. 8
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Alliances
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Conglomerate
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McDonalds and Disney
Business involved in different sectors of the
economy (4)
Diversification
Multinational
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“citizen” of different countries
Other types of combinations
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Franchises
Cooperatives
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Producer (OceanSpray, SunMaid, Florida Natural)
Consumer (college bookstores, Sams Club*)
Service (credit unions like MAX, Guardian or ASE,
Dixie Electric, Central Alabama Electric
Cooperative)
Non-Profits
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YMCA, Boy Scouts of America, AMTRAK,
American Cancer Society
Stop here!!!!!!
Ch 8: Non Profits
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Characteristics
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Incorporated (unlimited life, limited liability)
No stocks, dividends or taxes
Surplus?
Baptist Hospital is an example
So is the United Way, Chamber of Commerce,
American Medical Association, YMCA, Amtrak,
etc.
Types of Non Profits
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Cooperatives: Voluntary association to
conduct economic activities beneficial to
members
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Consumer: benefits buyer (college bookstores)
Producer: benefits seller (Sunmaid, Florida
Natural)
Service: benefits members (MFTCU, Dixie
Electric)
Other examples of Non Profits
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Labor Unions: AFL-CIO
Professional or Business Organizations
(AEA, ADA, ABA, AMA): licensing,
standards, lobbying
Chamber of Commerce
Better Business Bureau
Government: USPS, Amtrak