Understanding business 11th by mchugh nickels chap005

Compare the advantages and disadvantages of corporations and summarize the differences between C corporations, S corporations and limited liability companies... • Sole Proprietorship

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How to Form a

Business

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3 Compare the advantages and disadvantages of

corporations and summarize the differences

between C corporations, S corporations and limited liability companies.

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4 Define and give examples of three types of corporate

mergers, and explain the role of leveraged buyouts and taking a firm private.

5 Outline the advantages and disadvantages of

franchises, and discuss the opportunities for diversity

in franchising and the challenges of global

franchising.

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Auntie Anne’s

• Started selling pretzels when her family was living paycheck

to paycheck

• Now Auntie Anne’s has over 1,200 locations and brings in over $410 million!

• Beiler sold the company in

2005 to start focusing on charity work

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In 2013, this company became the largest firm in

terms of revenue to be taken private through a leveraged buyout. After closing the $25 million deal, the founder now controls a 75% stake of the company he started in his dorm room

Name that company!

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• Sole Proprietorship  A business owned, and

usually managed, by one person.

• Partnership  Two or more people legally agree to become coowners of a business.

• Corporation  A legal entity with authority to act

and have liability apart from its owners.

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FORMS of BUSINESS OWNERSHIP

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% of small business owners

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• Most people who start businesses in the U.S. are sole proprietors. What are the advantages and

disadvantages of sole proprietorships?

• Why would unlimited liability be considered a

major drawback to sole proprietorships?

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OTHER FORMS of PARTNERSHIPS

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• Master Limited Partnership  A partnership that looks much like a corporation, but is taxed like a

partnership and thus avoids the corporate income

tax.

• Limited Liability Partnership  Limits partners’

risk of losing their personal assets to the outcomes of only their own acts and omissions and those of

people under their supervision.

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ADVANTAGES of PARTNERSHIPS

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the subcontractor out of business. Accepting the bid will improve your chances of getting a big job. Your partner wants to take the bid:

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CONVENTIONAL CORPORATIONS

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ADVANTAGES of CORPORATIONS

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MANAGEMENT

LO 43

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The Ten Largest Private Corporations in the U.S.

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DISADVANTAGES of CORPORATIONS LO 43

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EVEN the BIG GUYS MAKE MISTAKES LO 43

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B CORPORATIONS LET SUSTAINABILITY SET SAIL

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WHO CAN INCORPORATE? LO 43

• Anyone truckers, doctors, plumbers, athletes and small business owners can incorporate

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America’s Oldest Corporations

LO 43

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S CORPORATIONS LO 43

• S Corporation  A unique government creation that looks like a corporation, but is taxed like sole

proprietorships and partnerships.

• S corporations have shareholders, directors and employees, plus the benefit of limited liability

• Profits are taxed only as the personal income of the shareholder

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you be sued? Why or why not?

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• Merger  The result of two firms joining to form one company.

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TYPES of MERGERS LO 44

• Vertical Merger  The joining of two firms in

different stages of related businesses.

• Horizontal Merger  The joining of two firms in the same.

• Conglomerate Merger  The joining of firms in

completely unrelated industries.

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• In 2012, foreign investors poured $166 billion into U.S. companies

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