Advantages of Partnerships.docx - Advantages of Partnerships Simplicity Single layer of taxation More resources Cost sharing Broader skill and

Advantages of Partnerships.docx - Advantages of...

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Advantages of PartnershipsSimplicitySingle layer of taxationMore resourcesCost sharingBroader skill and experience baseLongevityUnlimited liabilityPotential for conflictExpansion, succession, and termination issuesA partnership agreement should address investment percentages, profit-sharing percentages, management responsibilities and other expectations of each owner, decision-making strategies, succession and exit strategies, criteria for admitting new partners, and dispute-resolution procedures.CorporationCorporation A legal entity, distinct from any individual persons, that has the power to own property and conduct businessShareholders Investors who purchase shares of stock in a corporationPrivate corporation A corporation in which all the stock is owned by only a few individuals or companies and is not made available for purchase by the publicPublic corporation A corporation in which stock is sold to anyone who has the means to buy itAdvantages of CorporationsAbility to raise capitalLiquidity A measure of how easily and quickly an asset such as corporate stock can be converted into cash by selling itLongevityLimited liabilityDisadvantages of CorporationsCost and complexityReporting requirementsManagerial demandsPossible loss of controlDouble taxationShort-term orientation of the stock market
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Corporate StructuresSpecial Types of CorporationsS corporation A type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnershipLimited liability company (LLC)A structure that combines limited liability with the pass-through taxation benefitsof a partnershipThe number of shareholders is not restricted, nor is members’ participation in managementBenefit corporation A profit-seeking corporation whose charter specifies a social or environmental goal that the company must pursue in addition to profitCorporate GovernanceBoard of directors A group of professionals elected by shareholders as their representatives, with responsibility for the overall direction of the company and the selection of top executivesCorporate governance Describes all the policies, procedures, relationships, and systems in place to oversee the successful and legal operation of the enterprise
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Also refers to the responsibilities and performance of the board of directors specificallyShareholdersProxy A document that authorizes another person to vote on behalf of a shareholder ina corporationShareholder activism Activities undertaken by shareholders to influence executive decision making in areas ranging from strategic planning to social responsibilityCorporate OfficersCorporate officers The top executives who run a corporationChief executive officer (CEO)The highest-ranking officer of a corporationMergers and AcquisitionsMerger An action taken by two companies to combine and perform as a single entityAcquisition An action taken by one company to buy a controlling interest in the voting stock of another companyHostile takeover Acquisition of another company against the wishes of managementLeveraged buyout (LBO)Acquisition of a company’s publicly traded stock, using funds that are primarily borrowed, usually with the intent of using some of the acquired assets to pay back the loans used to acquire the companyAdvantages of Mergers and AcquisitionsIncrease their buying power as a result of their larger size Increase revenue by cross-selling products to each other’s customersIncrease market share by combining product lines Gain access to new expertise, systems, and teams of employeesDisadvantages of Mergers and AcquisitionsExecutives have to agree on how the merger will be financed.
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  • Spring '18
  • Corporation, legal entity, • S corporation, federal taxation advantages, pass-through taxation benefits

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