Chapter 1 - 1 BA 3341 Business Finance Nataliya...

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Unformatted text preview: 1 BA 3341 Business Finance Nataliya Polkovnichenko, Senior Lecturer 2 • Forms of Business Organizations • The Finance Model of the Firm • The Role of the Financial Manager • Goal of the Corporation • Agency Problems • Financial Markets and the Corporation 3 In terms of organization, businesses falls into the following four categories: • Sole Proprietorships • Partnerships • Corporations • Hybrid forms (of the above basic 3 types) They differ in their ownership, taxation form and the liability limitation. 4 • Manager is the sole owner ; bears all the costs and keeps all the profits after taxes • Personal liability for the business activity is unlimited • Firm profit is taxed only once 5 • Several entrepreneurs come together to set up a business, by pooling money and expertise • A partnership agreement sets out how management decisions are taken, profits are shared etc. • Unlimited personal liability • Firm profit is taxed only once 6 • A legal entity separate from its owners (shareholders) • Limited liability for the business activity from its owners • Firm profit is double taxed 7 Corporate Profit= $1 Corporate Tax=$0.35 Dividends=$0.65 Double Taxation Of Corporate Profit Corporation Corporation Owners G o v e r n m e n t 35% Personal Income Tax=$0.16 25% 8 Unlimited liability Personal tax on profits Corporations Limited liability Corporate tax on profits + Personal tax on dividends Sole Proprietorships Partnerships 9 • Combine the features of the above 3 basic types. Some examples are: – Limited Partnership (LP): An LP has both limited liability partners and at least, one unlimited liability partner. – Limited Liability Partnership (LLP): All partners have limited liability, but partners are taxed as partners, avoiding double taxation....
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This note was uploaded on 11/24/2009 for the course BA 3341 taught by Professor Polkovnichenko during the Fall '08 term at University of Texas at Dallas, Richardson.

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Chapter 1 - 1 BA 3341 Business Finance Nataliya...

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