FORMS OF BUSINESS OWNERSHIP

Sole Proprietorships

A sole proprietorship is a business owned and run by one individual. Many

small service businesses, farms, and home-based businesses are sole

proprietorships.

Advantages

Simple to establish - just need licenses and can start operating

Single layer of taxation - profits flow through to owner's personal

taxes

Privacy - little required financial reporting

Flexibility and control - owner makes all decisions

No limits on personal income from business

Personal satisfaction of working for oneself

Disadvantages

Unlimited liability - owner responsible for all debts and damages

Demanding on owner - long hours, isolation, no time off

Limited management perspective - relies on skills of just one person

Resource constraints - limited capital and no access to investors

No employee benefits for owner

Finite life - business may fold when owner dies

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Partnerships

A partnership is a business co-owned by two or more individuals.

Partnerships allow pooling of resources and skills beyond what sole

proprietors can offer.

There are two main types:

General partnership - all partners share authority, profits, and

liability

Limited partnership - some partners manage the business while

others are investors with limited liability

Advantages

Simple to establish

Single taxation

More resources - partners combine money, assets, skills

Cost sharing

Broader experience base

Potential for greater longevity

Disadvantages

Unlimited liability for general partners

Potential for conflict between partners

Issues with expanding, replacing, or removing partners

A detailed partnership agreement is critical to clarify rights,

responsibilities, and procedures.

Corporations

A corporation is a legal entity owned by shareholders but operated by

corporate officers under guidance from a board of directors. Corporations

can raise large amounts of capital by selling stock shares.

Advantages

Ability to raise capital through sale of stock

Liquidity of publicly traded stock

Potential for indefinite life

Limited liability for shareholders

Disadvantages

More complex and expensive to establish

Ongoing reporting requirements

Demands on management time

Possible loss of control to shareholders

Double taxation on profits

Pressures for short-term stock price gains

Special Corporation Types

S-Corp - Combines limited liability with partnership tax treatment

LLC - Liability protection with partnership taxation

Public vs. private corporations

Benefit corporations - For-profit and social/environmental goal

Corporate Governance

Corporate governance oversees policies, systems, and relationships to

ensure effective, legal operations. The three key players are:

Shareholders

Elect board of directors

Most have little direct influence except large institutional investors

Shareholder activism pressuring companies on issues is increasing

Board of Directors

Hired by shareholders

Guide strategy and select corporate officers

Mix of inside directors from company and outside experts

Corporate Officers

Led by CEO

Actually run day-to-day operations

Implement board guidance and decisions

Growth Through Mergers and Acquisitions

Companies can purchase other companies or partner with them to quickly

gain resources like technology, expertise, brands, distribution channels,

etc.

Merger - Two companies combine into one entity

Acquisition - One company buys controlling interest in another

Advantages

Increased size, revenue, market share

Expand capabilities and expertise

Reduce overlapping investments/capacities

Acquire proven teams

Disadvantages

Complex to integrate operations, systems, cultures

Can lose focus on customers during integration

Most fail to achieve goals

Risks massive costs if deal performs poorly

Comprehensive processes for pursuing and integrating deals are key for

companies that rely heavily on M&A for growth.

Divestitures - Companies may also split off units as separate businesses

to increase shareholder value, provide strategic focus, or refocus business

portfolio.

Key Takeaways

Many options exist for structuring a new business

Each structure has tradeoffs to consider regarding control, risk,

access to capital

Corporations rely on shareholders, boards, and officers for

governance

M&A and divestitures allow shifting business portfolios for strategic

growth

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