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    Alternative Forms of BusOrg

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    natalie clyde mates
    This document discusses alternative forms of business organization including sole proprietorships, partnerships, corporations, and hybrid forms. Sole proprietorships have one owner but limited capital, while partnerships have more capital but unlimited liability. Corporations have limited liability but double taxation. Hybrid forms like limited liability partnerships and limited liability companies combine aspects of partnerships and corporations. The document also covers agency conflicts that can arise between managers and shareholders and mechanisms to address them like performance incentives, shareholder involvement, and hostile takeovers.

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    Alternative Forms of BusOrg

    Uploaded by

    natalie clyde mates
    52 views16 pages
    This document discusses alternative forms of business organization including sole proprietorships, partnerships, corporations, and hybrid forms. Sole proprietorships have one owner but limited capital, while partnerships have more capital but unlimited liability. Corporations have limited liability but double taxation. Hybrid forms like limited liability partnerships and limited liability companies combine aspects of partnerships and corporations. The document also covers agency conflicts that can arise between managers and shareholders and mechanisms to address them like performance incentives, shareholder involvement, and hostile takeovers.

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    alternative forms of BusOrg

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    This document discusses alternative forms of business organization including sole proprietorships, partnerships, corporations, and hybrid forms. Sole proprietorships have one owner but limited capital, while partnerships have more capital but unlimited liability. Corporations have limited liability but double taxation. Hybrid forms like limited liability partnerships and limited liability companies combine aspects of partnerships and corporations. The document also covers agency conflicts that can arise between managers and shareholders and mechanisms to address them like performance incentives, shareholder involvement, and hostile takeovers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    52 views16 pages

    Alternative Forms of BusOrg

    Uploaded by

    natalie clyde mates
    This document discusses alternative forms of business organization including sole proprietorships, partnerships, corporations, and hybrid forms. Sole proprietorships have one owner but limited capital, while partnerships have more capital but unlimited liability. Corporations have limited liability but double taxation. Hybrid forms like limited liability partnerships and limited liability companies combine aspects of partnerships and corporations. The document also covers agency conflicts that can arise between managers and shareholders and mechanisms to address them like performance incentives, shareholder involvement, and hostile takeovers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 16

    ALTERNATIVE

    FORMS OF
    BUSINESS
    ORGANIZATION
    SO L E
    I E T O R S H I P
    P RO P R
    SOLE PROPRIETORSHIP

    Benefits: Drawback:
    ✓Oldest, most common, Simplicity in decision Difficult to come up with a

    and simplest form of making sizable amount of capital

    Easy and inexpensive to Has complete control


    business organization. form over the business

    ✓One owner Subject to few Proprietor has unlimited


    government regulations personal liability

    ✓Owner is inseparable Taxes are determined at Life of the company is


    the personal income tax limited to the life of the
    from the business rate of the owner. proprietor
    N E R S H I P
    P A RT
    PARTNERSHIP

    ✓ Exists when 2 or more Advantage: Disadvantage:


    persons combine their Low cost and ease of
    Unlimited liability
    resources to conduct formation

    business earn profit, and Two heads (or more) are


    better than one
    Limited life

    distribute among themselves


    More capital is available Difficulty of transferring
    the results of their operations. for the business ownership

    ✓ Contract evidencing its Difficulty of amassing a


    existence – Articles of large amount of capital

    Partnership
    O R A T I O N
    CO RP
    CORPORATION
    ✓ Legal business entity
    created by the government. Advantage: Disadvantage:

    ✓ Considered as separate and Limited liability Double taxation


    distinct from its owners and
    executives. Unlimited life Costly or Expensive

    ✓ Contract evidencing the Ease of transferability of Difficulty of making


    existence of a corporation is ownership. decisions

    Articles of Incorporation.
    ✓ The articles of incorporation
    present the rights and
    limitations of the entity.
    HYBRID FORMS OF
    OWNERSHIP
    Limited
    Liability
    Limited
    Company
    Liability Limited
    (LLC)
    Limited Liability
    Partnership Partnership
    (LLLP) (LLP)
    Sub-S
    Corporation
    ✓Composed of at least one general
    partner and the rest are limited
    partners.
    Limited ✓Limited partners do not have
    Liability control of the operations.
    Partnership ✓Limited partners are liable only
    (LLP) for the amount of their
    investments.
    ✓This specific makes the LLP a
    hybrid because although the firm
    is a partnership, it has the benefit
    of a corporation-like firm where
    the owners are not obliged to pay
    company debts with their personal
    properties.
    ✓A business structure for private
    companies in the United States
    ✓One that combines aspects of
    Limited partnerships and corporations
    Liability ✓Rather than shareholders,
    Company business owners of limited liability
    (LLC) companies are referred to as
    members.
    C Y S
    I P
    N
    E N S H
    r
    u
    of
    p er
    o th s

    G
    A A T I O
    r
    n
    r
    l
    g no on
    a a rs es
    o ys pe vic e
    o f er tim -
    so mp p o r s e ion y
    E L r
    pe l) e rou nde sam cis orit n
    a pa r g re e de th a
    i o , Y
    R e
    e v e
    ri
    c
    n n ,t t o t
    n (p rso y) d a ga ing ag EN IP .
    h
    t es u
    a en C t
    h ns pe nc an ele ak e G SH ts
    W o g e d m t h A N xis
    r s ( a t o IO e
    ❏ pe AT
    L
    AGENCY
    CONFLICTS
    ✓ Conflict of interest if the manager is also a
    partial owner of the same firm.
    ✓ Manager’s primary goal is to maximize the
    size of the firm, and by doing so he stabilizes
    job security for himself and for all the
    employees of the firm, and ultimately, increase
    his position, status, perquisites (privileges)
    and salary, thus the shareholder’s primary
    goal of wealth maximization might be set
    aside.
    AGENCY
    COSTS
    ✓ Audit costs – geared toward
    monitoring managerial
    actions, and restructuring the
    company that would regulate
    undesirable managerial
    actions.
    CONTROL
    MECHANISM
    ✓ Ways to encourage managers to
    perform for the interest of
    shareholders.
    ➢ Provide performance-based
    incentive plan
    ➢ Straight involvement by
    shareholders (institutional)
    TAKEOVER
    ✓ Shareholders in some cases do
    hostile takeovers.
    ✓ In this situation, managers of firms
    acquired by the shareholders are
    terminated.
    ✓ Managers who are retained, lose
    independence and autonomy, thus
    ‘twisting’ the manager’s arm to
    perform measures that would
    maximize the company’s share prices
    and ultimately maximizes the firm’s
    wealth.
    T H A N K
    YO U !

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