1-27 Entrepreneurship and Forms of Business Ownership

Two tax returns termination difficult ease of

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Unformatted text preview: tion difficult Ease of ownership change Double taxation Perpetual life Size Partnership – Corporation Hybrids Partnership Limited Partnerships A partnership with general partners (partners that contribute money partnership and management, and are fully liable) and limited partners (partners that only contribute money and run only the risk of that investment); that S Corporations A corporate-like ownership structure that avoids double taxation; Limited Liability Companies Partnership-like ownership structure that avoids unlimited liability and Partnership-like double taxation; double Limited Liability Partnership Partnership-like ownership structure that avoids unlimited liability. The Board of Directors The Corporate governance Corporate • • The relationship of a company to its shareholders and, more broadly, to society The Problems of Corporate Governance The Agency Problem Potential conflicts of interest between principals (eg. shareholders/ stakeholders) and agents (managers, especially top executives); Moral Hazard occurs when a party insulated from risk behaves differently than it would behave if it were fully exposed to the risk. Conflict of Interest occurs when an individual is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other. The Profit Motive American corporations on average run a net financial surplus of 1.7 percent of the gross domestic product — a drastic change from the previous 40 years, when they had maintained an average deficit of 1.2 percent of G.D.P. More recent studies have indicated that companies in Europe, Japan and China are also running unprecedented surpluses. The reason for all this saving … is that public companies have become obsessed with quarterly earnings. To show short-term profits, they avoid investing in future growth. To develop new products, buy new e...
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