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Unformatted text preview: AEM220, Introduction to Business Management Wednesday 1/30 Business Ownership Forms of business ownership; Corporate governance Forms of Business Ownership Sole proprietorship A business owned and managed by one person A legal form of business with two or more owners A legal entity with authority to act and have liability separate from its owners The right to use a specific business's name and sell its products or services in a given territory Partnership Corporation Franchise Cooperatives A business owned and controlled by the people who use it producers, consumers, or workers with similar needs who pool their resources for mutual gain. Ownerships, Parnerships and Corporations Sole Proprietoships Ease of start/end Be your own boss Unlimited liability Limited financial resources Difficulty in mgmt. Time commitment Few fringe benefits Limited growth Limited life span Pride of ownership Retain profit No special taxes Partnerships More financial resources Unlimited liability Division of profits Shared mgmt. Longer survival Disagreements among partners Difficult to terminate Corporations More money for investment Initial cost Limited liability Separation of ownership/mgmt. Ease of ownership change Paperwork Two tax returns Termination difficult Double taxation Perpetual life Size Franchises + Management & marketing ass't + Personal ownership + Recognized name + Financial advice & ass't + Lower failure rate - High start-up costs - Shared Profit - Management regulation - Coattail effects - Restrictions on selling - Fraudulent franchisors Cooperatives A business owned and controlled by the people who use it producers, consumers, or workers with similar needs who pool their resources for mutual gain; Eg. Greenstar Markets. Over 100 million people are members of over 47,000 cooperatives in the U.S.A. Avoid Uncommitted directors; "Dead-weight" members Lack of transparency Lack of enough capital "Not-for-profit" organizations Organization whose primary objective is to support some issue or matter of private interest or public concern for non-commercial purposes; Main characteristics (US) No profits, profit distribution or stock issuance; Does not pay taxes; Monetary contributions to not for profit organizations are not included in taxable income. 501-c3 section of the US tax code. Corporate governance The relationship of a company to its shareholders and, more broadly, to society The Board of Directors The Sarbanes-Oxley Act Public Company Accounting Oversight Board Prohibit audit firms from doing a variety of non-audit work for their clients Independent audit committees Forbid company loans to company executives Top executives must certify company accounts Protects whistleblowers Section 404 makes managers responsible for maintaining an "adequate internal control structure and procedures for financial reporting"; and demands that companies' auditors "attest" to the management's assessment of these controls and disclose any "material weaknesses". Takeaways There are many ways to organize a business; In terms of flexibility and ability to grow, the corporation form is the most successful form of organization in the U.S. economy Functional and divisional form Mergers and acquisitions Franchising and cooperatives are alternative ways to exercise entrepreneurial control over organizations. ...
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This note was uploaded on 02/21/2008 for the course AEM 2200 taught by Professor Perez,p.d. during the Winter '07 term at Cornell University (Engineering School).
- Winter '07