Drill 4/21 1. What is a limited liability partnership?
2. What type of jobs usually engage in limited liability partnerships?
Types of Partnerships 1. General partnership
Most common type Partners share equally in both responsibility and liability If there is no agreement the partnership falls under the
rules of the Uniform Partnership Act (UPA) 2. Limited Partnership
Only one member has unlimited liability (general partner) The other partner contributes only money (limited
partner) No management Can only lose their initial investment
Types of Partnerships 3. Limited liability partnership (LLP)
All partners are limited partners They are limited in their liability for the other
partners mistakes Usually only allowed for lawyers, doctors,
dentists and accountants
Business OrganizationsCorporations, Mergers and Multinationals
Corporations A corporation is a legal entity, or being,
owned by individual stockholders, each of whom faces limited liability for the firms debt.
Stockholders own shares of the company A corporation has legal identity separate from
that of its owners It is legally an individual
Corporations 20% of all businesses in the U.S. are
corporations Account for 90% of all sales Generate 70% of all the net income of the U.S.
Types of Corporations Closely held corporations
Issue very little stock, usually to family members Publicly held corporation
Many shareholders who trade on the open market
Advantages of Incorporation 1. Advantages for stockholders
Limited Liability – can only lose the amount that was invested
Shares of stocks are transferable – can sell stock and get money in return
With a Partner Pg. 200
Questions 8-11
We will go over at the end of class and it will be collected
Drill 4/22 1. What are two advantages of incorporating?
2. What is a disadvantage of a corporation?
Advantages of Incorporation 2. Advantages for the corporation
Greater potential for growth Issue more stocks Raise money by borrowing it – bonds
Ability to hire experts Job specialization
Long life Can exist indefinitely
Disadvantages of a Corporation Difficulty and Expense of Start-Up
Certificate of Incorporation Corporate name Statement of purpose Length of time (for perpetuity) Founder’s names and addresses Headquarters Method of fundraising Rules for management
Disadvantages of a Corporation Double taxation
Corporations must pay taxes on income Stockholders have to pay taxes on dividends Taxes on the sale of the stock – capital gains
taxes
Disadvantages of a Corporation Loss of Control
Managers and Boards of Directors run the company not the owners
Conflict of interests
Disadvantages of a Corporation More Regulation
Corporations are more regulated than any other type of business
Corporate Combinations As a corporation continues to grow it may
decide to merge or combine with another firm Three types of combinations
Horizontal Merger Joining of two or more firms competing in the
same market with the same good or service Companies merge to meet economies of scale
or improve efficiency The government scrutinizes horizontal
mergers carefully
Example
Horizontal Merger
Oil well Oil well Oil well Oil well Oil well
Refinery Refinery Refinery Refinery
Trucking Trucking Trucking Trucking Trucking
Gas Station Gas Station Gas Station Gas Station Gas Station Gas Station Gas Station
Vertical Merger The joining of two or more firms involved in
the different stages of producing the same good or service
Ability to be self-reliant in the production of a good
Not as heavily regulated as horizontal mergers
Example
Vertical Merger
Oil well Oil well Oil well Oil well Oil well
Refinery Refinery Refinery Refinery
Trucking Trucking Trucking Trucking Trucking
Gas Station Gas Station Gas Station Gas Station Gas Station Gas Station Gas Station
Conglomerates Firms that buy other companies that produce
totally unrelated products By definition they have to be at least three
businesses that make unrelated products No one company earns the majority of the
profit Not regulated at all
Multinationals Corporations that operate in more than one
country at a time. Headquarters in one country and branches in
other countries Must obey the law and pay taxes in each of
the countries they operate Account for $3 trillion of assets worldwide
Inside The Googleplex Answer the following questions on your own
sheet of paper: 1) How has Google made its money? How
much has the company’s value increased since it went public?
2) What perks do Google employees get? How does this affect their competition?
3) What does “20% of the time” mean? 4) What factors could finally bring Google
down?
Multinationals Advantages
Provide jobs and products worldwide Create a higher standard of living for poorer nations
Spread new technologies and production techniques around the world
Disadvantages Influence the culture and politics in the countries which
they operate Low wages and poor work conditions for much of the
labor creating the product