Textbook Notes (381,224)
CA (168,409)
UTSC (19,325)
MGT (1,095)
MGTA01H3 (583)
Chapter 4

Chapter 4 Notes

2 Pages
110 Views

Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird

This preview shows half of the first page. Sign up to view the full 2 pages of the document.
Chapter 4 Understanding Legal Forms of Business Organization Notes
Organizing Options (Forms of Business Ownership)
The Sole Proprietorship
x sole proprietorship : a business owned and operated by one person
x legally, a business set up as a sole proprietorship is not considered a separate legal entity
Advantages of a Sole Proprietorship
x some advantages of a sole proprietorship include freedom, ease of formation, and tax benefits
Disadvantages of a Sole Proprietorship
x unlimited liability : personal liability for all debts of the business
x disadvantages include lack of continuity: sole proprietorship dissolves when owner dies; sole proprietorship depends on
resources of one person whose managerial and financial limitations may constrain the business; hard to borrow money
The Partnership
x partnership : a form of organization established when two or more persons agree to combine their financial, managerial, and
technical abilities for the purpose of operating a business for profit
x general partnerships : a type of partnership in which all partners are jointly liable for the obligations of the business
x limited partnerships : a type of partnership in which at least one general partner (who has unlimited liability) and one or more
limited partners; the limited partners cannot participate in the day-to-day management of the business or they risk the loss of
their limited liability status
x general partners : partners who are actively involved in the managing the firm and have unlimited liability
x limited partners : partners who don’t participate actively in the business and whose liability is limited to the amount they
invested in the partnership
Advantages of a Partnership
x advantages include: ability to grow by adding talent and money; somewhat easier time borrowing funds; can also invite new
partners to join by investing money; simple to organize, with few legal requirements; there is some sort of partnership agreement
that is private document; not legal entities; partners are taxed as individuals
Disadvantages of a Partnership
x disadvantages include: unlimited liability; lack of continuity; transferring of ownership; provides little or no guidance in
resolving conflict between the partners
The Corporation
x corporation : separate legal entity that is liability for its own debts and whose owners’ liability is limited to their investment
x shareholders : persons who own shares in a corporation
x board of directors : a group of individuals elected by firm’s shareholders and charged with overseeing, and taking legal
responsibility for, the corporation’s actions
x inside directors : members of corporation’s board of directors who are also full-time employees of the corporation
x outside directors : members of corporation’s board of directors who are not also employees of the corporation
x chief executive officer : the person responsible for the firm’s overall performance
Types of Corporations
x public corporation : a business whose shares are widely held and available for sale to the general public
x private corporation : shares are held by a small group of individuals and is not usually available for sale to the general public
x initial public offering (IPO) : sale of shares in a company for the first time to the general investing public
Advantages of Incorporation
x limited liability : the liability of investors is limited to their personal investments in the corporation
x other advantages include: continuity; advantages in raising money through shares, and lenders
x shares : a share of ownership in a corporation
Disadvantages of Incorporation
x disadvantages include: cost for new firm in forming a corporation; also need legal help in meeting government regulations
Redrawing Corporate Boundaries
x several trends in redrawing corporate boundaries have become evident in recent years including acquisitions and mergers,
divestitures and spinoffs, employee-owned corporations, strategic alliances, and subsidiary/parent corporations
Acquisitions and Mergers
x acquisition : one firm buys another firm and absorbs it into its operations
x mergers : the union of two companies to form a single new business
x horizontal merger : a merger of two firms that have previously been direct competitors in the same industry
x vertical merger : a merger of two firms that have previously had a buyer-seller relationship
x conglomerate merger : a merger of two firms in completely unrelated business
x friendly takeover : acquisition in which management of acquired company welcomes the firm’s buyout by another company
x hostile takeover : acquisition in which the management of the acquired company fights the firm’s buyout by another company
Divestitures and Spinoffs
x divestiture : occurs when a company sells part of its existing business operations to another company
x spinoff : strategy of setting up one or more corporate units as new, independent corporations
www.notesolution.com

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Description
Chapter 4 Understanding Legal Forms of Business Organization Notes Organizing Options (Forms of Business Ownership) The Sole Proprietorship N sole proprietorship : a business owned and operated by one person N legally, a business set up as a sole proprietorship is not considered a separate legal entity Advantages of a Sole Proprietorship N some advantages of a sole proprietorship include freedom, ease of formation, and tax benefits Disadvantages of a Sole Proprietorship N unlimited liability : personal liability for all debts of the business N disadvantages include lack of continuity: sole proprietorship dissolves when owner dies; sole proprietorship depends on resources of one person whose managerial and financial limitations may constrain the business; hard to borrow money The Partnership N partnership : a form of organization established when two or more persons agree to combine their financial, managerial, and technical abilities for the purpose of operating a business for profit N general partnerships : a type of partnership in which all partners are jointly liable for the obligations of the business N limited partnerships : a type of partnership in which at least one general partner (who has unlimited liability) and one or more limited partners; the limited partners cannot participate in the day-to-day management of the business or they risk the loss of their limited liability status N general partners : partners who are actively involved in the managing the firm and have unlimited liability N limited partners : partners who dont participate actively in the business and whose liability is limited to the amount they invested in the partnership Advantages of a Partnership N advantages include: ability to grow by adding talent and money; somewhat easier time borrowing funds; can also invite new partners to join by investing money; simple to organize, with few legal requirements; there is some sort of partnership agreement that is private document; not legal entities; partners are taxed as individuals Disadvantages of a Partnership N disadvantages include: unlimited liability; lack of continuity; transferring of ownership; provides little or no guidance in resolving conflict between the partners The Corporation N corporation : separate legal entity that is liability for its own debts and whose owners liability is limited to their investment N shareholders : persons who own shares in a corporation N board of directors : a group of individuals elec
More Less
Unlock Document


Only half of the first page are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit