Forms Of Business Ownership and Organization
(Part II)

Hello and welcome to my Cafe on the second half of Chapter 5. I will be covering pages 147-161. In this Cafe we will be going over franchising, different forms of private business ownership, public and collective business ownership, organizing a corporation and what happens when businesses come together. The cafe is set up where each section lists the definitions and then a short slide show goes into further details, to view the slideshow in fullscreen you can click on the four-arrows button at the bottom right corner of the slideshow.

Franchising:

First we will discuss franchising and what it takes from both parties to create a successful franchise relationship.

Definitions:

  1. Franchising is a contractual business agreement between a manufacturer or other supplier, and a dealer such as a restaurant operator or retailer.
  2. Franchisee is an individual or business firm purchasing a franchise.
  3. Franchisor is a firm whose products are sold to customers by the franchisee.

For more information on Franchising please flip through the following slides.

Some think that buying into a franchise is the least risky way to own your own business. It's like having the freedom of a business owner, but still having the safety net of a large corporation. Next we discuss the many different forms of private business ownership.  

Different Forms of Private Business Ownership:

In this section we will go over the three main types of business ownership as well as the advantages and disadvantages of each.

Definitions:

  1. Sole Proprietorship is a form of business ownership in which there is no legal distinction between the sole proprietor's status as an individual and his or her status as a business owner.
  2. Partnership is an association of two or more persons who operate a business as co-owners by voluntary legal agreement
  3. Corporation is a legal organization with assets and liabilities separate from those of its owner(s)
  4. S Corporations are corporations that do not pay corporate taxes on profits; instead, profits are distributed to shareholders, who pay individual income taxes.
  5. Limited-Liability Corporation (LLC) are corporations that secure the corporate advantage of limited liability while avoiding the double taxation characteristic of a traditional corporation.
  6. Employee Ownership is a form of business ownership in which workers buy shares of stock in the company that employs them.
  7. Not-for-Profit Corporations are organizations whose goals do not include pursuing a profit.

We have outlined the different types of private business ownership, but that doesn't cover all the types of ownership a company may experience. Next we look at Public and Collective ownership.

Public and Collective Business Ownership:

Public ownership is also known as government ownership, since these companies are government owned. Collectives are also called Co-Op's and businesses can benefit greatly from this arrangement.

Definitions:

  1. Public Ownership is when a unit or agency of government (local, state, or federal) owns and operates an organization.
  2. Cooperative or Co-Op ownership is when owners of small businesses join forces to operate all or part of the activities in their firm or industry.  

So now we know more about the different types of businesses, in the next section we dive more into corporations and really what it takes to organize one.

Organizing A Corporation:

Incorporating is not a easy process. The agency I work for just recently became incorporated. It took about 5 months and there was a ton of forms to fill out and have signed. So while exploring this section I got a better understanding of what was going on. Here we will discuss the different types of corporations, stocks and what a Board of Directors is for.

Definitions:

  1. Domestic Corporations operate in the state in which they are incorporated.
  2. Foreign Corporations do business in other states and,
  3. Alien Corporations do business in other nations.
  4. Stockholders are owners of a corporation due to their purchase of stock in the corporation
  5. Preferred Stock are shares that give owners limited voting rights, and the right to receive dividends or assets before owners of common stock.
  6. Common Stock are shares that give owners voting rights but only residual claims to the firms's assets and income distributions.
  7. Board Of Directors is the governing body of a corporation normally elected by the stockholders.

Alright, so far we have gone over franchising, private and public business ownership and how a corporation is organized. The last thing we have to talk about is what happens when businesses join forces.

When Businesses Join Forces:

There are many reasons for businesses to come together and many ways as well. In this section we will discuss the difference between a merger and a acquisition, the different types of mergers and what a joint venture is.

Definitions:

  1. Merger is an agreement in which two or more firms combine to form one company.
  2. Acquisition is an agreement in which one firm purchases another.
  3. Vertical Merger are mergers that combine firms operating at different levels in the production and marketing process
  4. Horizontal Merger is a merger that joins firms in the same industry for the purpose of diversification, increasing customer bases, cutting costs, or expanding product lines.
  5. Conglomerate Merger is a merger that combines unrelated firms, usually with the goal of diversification, spurring sales growth, or spending a cash surplus in order to avoid a takeover attempt.
  6. Joint Ventures are partnerships between companies formed for a specific undertaking.

The following slides go into more detail.

We have pretty much covered all the different types of business ownership. As we just touched base on each one, they each could be explored more. With all the different laws and regulations that come into play one chapter wouldn't hold it all.

My questions to you are:

  1. What are some companies that have merged with other companies? What about companies that acquired another company? How have these companies changed, if at all?
  2. If the company you were working for offered employee stock ownership plans, would you participate, if not why?

Thank you for reading!