Business in

Action 7e
Bovée/Thill
 Forms of
Ownership

Chapter 5 Business in
Action 7e
Bovée/Thill
Exhibit 6.3 Business Start-Up Options

6-3
Exhibit 5.1 Forms of Business Ownership

Copyright © 2015 Pearson Education, Inc. 5-4

 Sole Proprietorships

• Sole proprietorship‫ا لملكية ا لفردية‬

 A business owned by a single person
• Unlimited liability – ‫ا لمسئولية غير ا لمحدوده‬
‫ا لكاملة‬
 A legal condition under which any damages
or debts incurred by a business are the
owner’s personal responsibility
 ‫مسئولية كالة من المالك‬

Copyright © 2015 Pearson Education, Inc. 5-5

 Advantages of Sole Proprietorships

• Simplicity
• Single layer of taxation
• Privacy
• Flexibility and control
• Fewer limitations on personal income
• Personal satisfaction

Copyright © 2015 Pearson Education, Inc. 5-6

Disadvantages of Sole Proprietorships

• Financial liability‫لية‬55‫لما‬55‫لمسئولية ا‬55‫ا‬

• Demands on the owner
• Limited managerial perspective
• Resource limitations
• No employee benefits for the owner
• Finite life span ‫ضيمحدود‬5‫الفترا‬55‫لعمر ا‬55‫ا‬

Copyright © 2015 Pearson Education, Inc. 5-7

 Partnerships

• Partnership ‫ا لشراكة‬
 An unincorporated company owned by two or
more people ‫كثر‬5‫شخصينأو أ‬55‫ركة غير مسجلة مملوكة ل‬55‫ش‬
• Limited liability ‫ش راكة محدوده‬
 A legal condition in which the maximum
amount each owner is liable for is equal to
whatever amount each invested in the
business

Copyright © 2015 Pearson Education, Inc. 5-8

 Partnerships (cont.)

• General partnership ‫ش راكة عامة‬

 A partnership in which all partners have joint
authority to make decisions for the firm and
joint liability for the firm’s financial obligations
• Limited partnership ‫ذاتمسئولية محدوده‬
 A partnership in which one or more persons
act as general partners, run the business,
and have the same unlimited liability as sole
proprietors
Copyright © 2015 Pearson Education, Inc. 5-9
 Partnerships (cont.)

• Master Limited Partnership (MLP)

‫ا لشراكة ا لمحدوده ا لرئيسية‬
 A partnership that is allowed to raise money
by selling units of ownership to general public
partnerships and can bring together business
professionals with diverse skill sets and
perspectives. 5‫ام‬5‫لع‬55‫لتداولا‬55‫ ل‬5‫ألسهم‬55‫زء منا‬5‫طرح ج‬
 ‫للتوسع واكتساب خبرات‬

Copyright © 2015 Pearson Education, Inc. 5-10

 Partnerships (cont.)

• Limited Liability Partnership

(LLP) ‫ا لشراكة ذاتا لمسئولية ا لمحدوده‬
 A partnership in which each partner has
unlimited liability only for his or her own
actions and at least some degree of limited
liability for the partnership as a whole

Copyright © 2015 Pearson Education, Inc. 5-11

 Advantages of Partnerships

• Simplicity
• Single layer of taxation
• More resources
• Cost sharing
• Broader skill and experience base
• Longevity‫ضي‬5‫الفترا‬55‫لعمر ا‬55‫طولا‬

Copyright © 2015 Pearson Education, Inc. 5-12

 Disadvantages of Partnerships

• Unlimited liability 5‫مسئولية غير محدوده‬

• Potential for conflict ‫ع‬5‫را‬55‫شوء ص‬55‫ن‬
• Expansion, succession, and termination
issues ‫اء‬5‫ نإله‬55‫لخالفة – ا‬55‫ – ا‬5‫لتوسع‬55‫ا‬

Copyright © 2015 Pearson Education, Inc. 5-13

The Partnership Agreement ‫كة‬5‫لشرا‬55‫تفاقية ا‬5‫ا‬

• A partnership agreement should

address investment percentages, profit-
sharing percentages, management
responsibilities and other expectations of
each owner, decision-making strategies,
succession and exit strategies, criteria for
admitting new partners, and dispute-
resolution procedures.‫لمنازعات‬55‫سوية ا‬555‫تت‬5‫جراءا‬5‫ا‬

Copyright © 2015 Pearson Education, Inc. 5-14

 Corporations

• Corporation ‫ا لشركة‬
 A legal entity, distinct‫ختلف‬555‫ ت‬from any individual
persons, that has the power to own property
and conduct business
• Shareholders‫ا لمساهمين‬
 Investors who purchase shares of stock in a
corporation

Copyright © 2015 Pearson Education, Inc. 5-15

 Corporations (cont.)

• Private corporation • Public corporation

‫ا لشركة ا لخاصه‬ ‫ا لشركة ا لع امة‬
 A corporation in  A corporation in
which all the stock is which stock is sold
owned by only a few to anyone who has
individuals or the means to buy it
companies and is
not made available
for purchase by the
public

Copyright © 2015 Pearson Education, Inc. 5-16

 Advantages of Corporations

• Ability to raise capital

• Liquidity
• Longevity
• Limited liability

Copyright © 2015 Pearson Education, Inc. 5-17

 Advantages of Corporations (cont.)

• Liquidity ‫ا لسيولة‬
 A measure of how easily and quickly an asset
such as corporate stock can be converted
into cash by selling it

Copyright © 2015 Pearson Education, Inc. 5-18

 Disadvantages of Corporations

• Cost and complexity

• Reporting requirements
• Managerial demands
• Possible loss of control
• Double taxation
• Short-term orientation of the stock market

Copyright © 2015 Pearson Education, Inc. 5-19

 Special Types of Corporations

• S Corporation
 A type of corporation that combines the
capital-raising options and limited liability of a
corporation with the federal taxation
advantages of a partnership
 ‫من المزايا تجنب ازدواجية الضرائب‬

Copyright © 2015 Pearson Education, Inc. 5-20

 Special Types of Corporations (cont.)

• Limited Liability Company (LLC)‫ش ركة ذات‬

‫مسئولية محدوده‬
 A structure that combines limited liability with
the pass-through taxation‫لتمريرية‬55‫ئبا‬5‫لضرا‬55‫ا‬
benefits of a partnership; the number of
shareholders is not restricted, nor is
members’ participation in management

Copyright © 2015 Pearson Education, Inc. 5-21

 Special Types of Corporations

• Benefit Corporation ‫ش ركاتذاتمنفعه‬

 A profit-seeking corporation whose charter
specifies a social or environmental goal that
the company must pursue in addition to profit
 ‫ هدف بيئي أو اجتماعي أو تنموي‬+ ‫ربح‬

Copyright © 2015 Pearson Education, Inc. 5-22

Exhibit 5.2 Corporate Structures

Copyright © 2015 Pearson Education, Inc. 5-23

 Mergers and Acquisitions

• Merger ‫ا الندماج‬ • Acquisition ‫ا الستحواذ‬

 An action taken by  An action taken by
two companies to one company to
combine and buy a controlling
perform as a single interest in the
entity voting stock of
another company

Copyright © 2015 Pearson Education, Inc. 5-24

 Advantages of Mergers and
Acquisitions
• Increase their buying power as a result of
their larger size
• Increase revenue by cross-selling
products to each other’s customers
• Increase market share by combining
product lines
• Gain access to new expertise, systems,
and teams of employees
Copyright © 2015 Pearson Education, Inc. 5-25
 Disadvantages of Mergers and
Acquisitions
• Executives have to agree on how the
merger will be financed
• Managers need to decide who will be in
charge after they join forces
• Marketing departments need to figure out
how to blend product lines, branding
strategies, and advertising and sales efforts
• Companies must often deal with layoffs

Copyright © 2015 Pearson Education, Inc. 5-26

Exhibit 5.4 Types of Mergers

5-27
 Strategic Alliances and
Joint Ventures
• Strategic alliance • Joint venture
‫ا لتحا لفاتا الستراتيجية‬ ‫ا لمشاريع ا لمشتركة‬
 A long-term  A separate legal
partnership entity established
between companies by two or more
to jointly develop, companies to
produce, or sell pursue shared
products business objectives

Copyright © 2015 Pearson Education, Inc. publishing as Prentice Hall 5-28

Exhibit 6.4 Why New Businesses Fail

Copyright © 2015 Pearson Education, Inc. 6-29