Drill 4/21  1. What is a limited liability partnership?  2. What type of jobs usually engage in limited liability partnerships?

Types of Partnerships  1. General partnership Most common type Partners share equally in both responsibility and liability If there is no agreement the partnership falls under the rules of the Uniform Partnership Act (UPA)  2. Limited Partnership Only one member has unlimited liability (general partner) The other partner contributes only money (limited partner)  No management  Can only lose their initial investment

Types of Partnerships  3. Limited liability partnership (LLP) All partners are limited partners They are limited in their liability for the other partners mistakes Usually only allowed for lawyers, doctors, dentists and accountants

Business Organizations Corporations, Mergers and Multinationals

Corporations  A corporation is a legal entity, or being, owned by individual stockholders, each of whom faces limited liability for the firms debt.  Stockholders own shares of the company  A corporation has legal identity separate from that of its owners It is legally an individual

Corporations  20% of all businesses in the U.S. are corporations Account for 90% of all sales Generate 70% of all the net income of the U.S.  Types of Corporations Closely held corporations  Issue very little stock, usually to family members Publicly held corporation  Many shareholders who trade on the open market

Advantages of Incorporation  1. Advantages for stockholders Limited Liability – can only lose the amount that was invested Shares of stocks are transferable – can sell stock and get money in return

With a Partner  Pg. 200 Questions 8-11  We will go over at the end of class and it will be collected

Drill 4/22  1. What are two advantages of incorporating?  2. What is a disadvantage of a corporation?

Advantages of Incorporation  2. Advantages for the corporation Greater potential for growth  Issue more stocks  Raise money by borrowing it – bonds Ability to hire experts  Job specialization Long life  Can exist indefinitely

Disadvantages of a Corporation  Difficulty and Expense of Start-Up Certificate of Incorporation  Corporate name  Statement of purpose  Length of time (for perpetuity)  Founder’s names and addresses  Headquarters  Method of fundraising  Rules for management

Disadvantages of a Corporation  Double taxation Corporations must pay taxes on income Stockholders have to pay taxes on dividends Taxes on the sale of the stock – capital gains taxes

Disadvantages of a Corporation  Loss of Control Managers and Boards of Directors run the company not the owners Conflict of interests

Disadvantages of a Corporation  More Regulation Corporations are more regulated than any other type of business

Corporate Combinations  As a corporation continues to grow it may decide to merge or combine with another firm  Three types of combinations

Horizontal Merger  Joining of two or more firms competing in the same market with the same good or service  Companies merge to meet economies of scale or improve efficiency  The government scrutinizes horizontal mergers carefully Example

Horizontal Merger Oil well Refinery Trucking Gas Station

Vertical Merger  The joining of two or more firms involved in the different stages of producing the same good or service  Ability to be self-reliant in the production of a good  Not as heavily regulated as horizontal mergers Example

Vertical Merger Oil well Refinery Trucking Gas Station

Conglomerates  Firms that buy other companies that produce totally unrelated products  By definition they have to be at least three businesses that make unrelated products  No one company earns the majority of the profit  Not regulated at all

Multinationals  Corporations that operate in more than one country at a time. Headquarters in one country and branches in other countries  Must obey the law and pay taxes in each of the countries they operate  Account for $3 trillion of assets worldwide

Inside The Googleplex  Answer the following questions on your own sheet of paper: 1) How has Google made its money? How much has the company’s value increased since it went public? 2) What perks do Google employees get? How does this affect their competition? 3) What does “20% of the time” mean? 4) What factors could finally bring Google down?

Multinationals  Advantages Provide jobs and products worldwide  Create a higher standard of living for poorer nations Spread new technologies and production techniques around the world  Disadvantages Influence the culture and politics in the countries which they operate Low wages and poor work conditions for much of the labor creating the product