Drill 4/21 1. What is a limited liability partnership? 2. What type of jobs usually engage in limited liability partnerships?

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