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Ownership

Reporting

Disclosure and Oversight

Ways of Raising Cash

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2005 # of Firms % Firms All Corporations 3,324,260 16% C-Corporations S-Corporations Sole Proprietorships Partnerships Total 1,048,758 2,275,502 15,750,475 1,623,202 20,697,937 5% 11% 76% 8% 100%

Total Revenue % (000) Revenue $21,857,896,027 83.60% $17,435,464,986 $4,422,431,041 $1,047,830,449 $3,247,021,603 $26,152,748,079

Average Sales $6,575,267

66.70% $16,624,870 16.90% $1,943,497 4.00% 12.40% $66,527 $2,000,380

Type of Entity

Who owns Who the manages company? (runs) the company?
StockExecutives

To whom do the managers of the company report?

How is the entity Who pays taxes? formed? How long can the company exist?
• File Articles of Incorporation • with the Secretary of State in a specific state. It can last forever Corporation (on profits) Shareholders (on dividends received)

Who is responsible if How and where there is debt or the can the company company does raise money? something wrong and is sued?
The corporation owners can protect their personal assets Sell more shares on the public exchanges or sell debt by issuing bonds. They also utilize bank financing.

Corporation holders

Board of Directors (must have outside directors)

SCorporation

Stockholders – not more than 100

Executives

Board of Directors

1. Form a 1. corporation in the state of your choice. 2. 2. Obtain the formal consent of the corporation's shareholders. 3. File a form with the IRS electing this form of taxation File Articles of 1. Incorporation with the Secretary of 2. State in a specific state. 30 years (depending on the state)

S-Corporations do The corporation – not pay taxes as a owners can protect corporation. their personal assets Owners report their share of profits or losses in the company on their personal tax returns.

Sell stock. They also utilize bank financing.

LLC – Limited Liability Company

Owners are Members called Members

Themselves

LLC’s do not pay The corporation –The taxes as a company. members’ personal liability is limited to The income of the the amount invested in LLC is taxed to the the LLC members on their personal tax returns, according to the percentage of their interest in the company.

They do not have stock, so they must rely on bank financing or reinvesting profits.

Type of Entity

Who owns the company ?

Who manages (runs) the company?

To whom do the managers of the company report?
No one but themselves

How is the Who pays taxes? Who is entity formed? responsible if there is debt or How long can the company does the company something wrong exist? and is sued?
Two or more persons decide to conduct a business or trade. A verbal agreement between the partners is enough. There are no filing or registration requirements. As long as all the partners are alive and want the business to continue Profits (or losses) are distributed to the partners in the same percentage as each partner’s share (ownership) in the partnership. The partners pay regular income tax and can also deduct losses from their other income. Partnership debt and other liabilities are the responsibility of the partners and extend to their personal assets

How and where can the company raise money?

The partners General Partnership

The partners

Partners may invest more of their personal money, they obtain bank financing, and reinvest the profits.

All Partners (The partnership is limited to 35 members.)

Only the General Partners (If the limited partner gets involved in management, they risk losing their liability protection.)

The General Partners

As long as all the General Partners are alive and want the business to continue

Limited Partnership

Profits (or losses) are distributed to the partners in the same percentage as each partner’s share (ownership) in the partnership. The partners pay regular income tax and can also deduct losses from their other income.

Limited partners are not liable for partnership debt and only their investment is at risk.

Partners may invest more of their personal money, they obtain bank financing, and reinvest the profits.

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Franchisor
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Franchisee
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OTHER TYPES OF BUSINESS ORGANIZATION

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• Novartis and Bayer Schering AG

OTHER BUSINESS VOCABULARY

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• management buyout

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Merger • • • • • • •

Takeover/Acquisition

Merger • • • •

Takeover/Acquisition

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• Friendly bid • Hostile Bid • White Knight

• Poison Pill

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