Options for Organizing Business
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Based on the information provided, there are pros and cons to both a partnership and corporation that Thomas and Bryan should consider for their new company. A partnership may provide more flexibility initially but involves unlimited liability, while a corporation provides liability protection but involves more legal requirements. They'll need to weigh their options based on their specific goals and risk tolerance. An LLC could also be a good option as it offers liability protection like a corporation but tax benefits of a partnership. Overall the best structure depends on their needs and preferences.
Options for Organizing Business
- 1. Introduction to Business Dr. Herris Simandjuntak, SE, MM Chapter 4 : Options for Organizing Business Presented by Cut Fitri Handayani Markus Tanuwijaya Purwedi Darminto
- 2. The Three Basic Types of Business Organizations The Sole Proprietorship: Bill’s Barber Shop The Partnership: Johnson & Wiley, CPA’s The Corporation: Boeing, Microsoft
- 3. Comparison of Sole Proprietorships, Partnerships, and Corporations 7% 5% 88% 13% 15% Sales ($billions) 72% 20% 7% Net Income ($billions) 73% Corporations Proprietorships Partnerships Number Source: U.S. Bureau of the Census, Statistical Abstract of the U.S., 2000, 120th edition (Washington,DC: U.S. Government Printing Office, 2000), p. 535.
- 4. The Sole Proprietorship A business owned A business owned and operated by and operated by one individual. one individual.
- 5. Advantages and Disadvantages of the Sole Proprietorship Advantages • Ease and cost of formation • Secrecy • Distribution and use of profits • Control of the business • Government regulation • Easy to close the business Disadvantages • Unlimited liability • Limited sources of funds • Limited skills • Lack of continuity • Lack of qualified employees
- 6. The Partnership An association of An association of two or more persons two or more persons who carry on as who carry on as co-owners of a co-owners of a business for profit. business for profit.
- 7. Types of Partnerships General partnership: Limited partnership: Joint venture: Partners completely share in the management of the business. One general partner with unlimited liability and one limited partner with limited liability. A partnership established for a specific project or a limited time.
- 8. Advantages and Disadvantages of Partnerships Advantages Advantages •• Ease of organization Ease of organization •• Availability of capital Availability of capital and credit and credit •• Combined knowledge Combined knowledge and skills and skills •• Decision making Decision making •• Regulatory controls Regulatory controls Disadvantages Disadvantages •• Unlimited liability Unlimited liability •• Business responsibility Business responsibility •• Life of the partnership Life of the partnership •• Distributions of profits Distributions of profits •• Limited sources of funds Limited sources of funds •• Taxation Taxation
- 9. The Corporation A legal entity created by the state, whose assets and liabilities are separate from its owners. The Board of Directors The Stockholders
- 10. The Articles of Incorporation 1. Name and address of the corporation 2. Objectives of the corporation 3. Classes of stock (common, preferred, voting, nonvoting) and the number of shares for each class of stock to be issued. 4. Expected life of the corporation (usually forever). 5. Financial capital required at the time of incorporation.
- 11. The Articles of Incorporation 6. Provisions for transferring shares of stock between owners. 7. Provisions for the regulation of internal corporate affairs. 8. Address of the business office registered with the state of incorporation. 9. Names and addresses of the initial board of directors. 10. Names and addresses of the incorporators.
- 12. Types of Corporations • Domestic • Foreign • Alien Does business in the state in which it is chartered Does business in states other than the state where it is chartered Does business outside of the nation where it is incorporated
- 13. Types of Corporations Private Corporation owned by only one person or a few people closely involved in its management. Public Corporation whose stock anyone may buy, sell, or trade.
- 14. Types of Corporations Quasi-public Owned and operated by a federal, state, or local government Nonprofit Focus is on providing a service not making a profit
- 15. Business Organization in Indonesia 1. 2. Perorangan - UD Persekutuan a. b. 3. 4. Persekutuan dengan firma – Fa Persekutuan komanditer - CV Koperasi Perseroan Terbatas (PT) a. b. c. d. e. f. g. PT Tertutup PT Terbuka PT Penanaman Modal Dalam Negeri (PMDN) PT Penanaman Modal Asing (PMA) PT Persero Perusahaan Jawatan (Perjan) Perusahaan Umum (Perum) Source: id.wikipedia.org/wiki/Jenis_badan_usaha
- 16. America’s Top 10 The Largest US Corporations • • • • • Company Exxon Mobil Wal-Mart Stores Cevron ConocoPhillips General Motors • • • • • Revenues $452,926 million $446,950 million $245,621 million $237,272 million $150,276 million Source: “Global 500: The World’s Largest Corporations, “ Fortune, July 23, 2012, F-1
- 17. Indonesia’s Top 10 The Largest Indonesia Corporations • • • • • Company Astra International Telkom (Persero) HM. Sampoerna BRI (Persero) Bank Mandiri (Persero) • • • • • Revenues Rp. 188,053 billion Rp. 77,143 billion Rp. 66,626 billion Rp. 58,000 billion Rp. 56,917 billion Source: Kompas.com, 100 perusahaan terbesar di Indonesia versi Fortune 100, Juli 2013
- 18. The Elements of a Corporation • The Board of Directors – Inside directors – Outside directors • Stock Ownership – Preferred stock – Common stock
- 19. Advantages and Disadvantages of Corporations Advantages: Advantages: •• Limited liability Limited liability •• Transfer of ownership Transfer of ownership •• Perpetual life Perpetual life •• External sources of External sources of funds funds •• Expansion potential Expansion potential Disadvantages: Disadvantages: •• Double taxation Double taxation •• Forming a corporation Forming a corporation •• Disclosure of Disclosure of information information •• Employee-owner Employee-owner separation separation
- 20. Other Types of Ownership • The S-corporation • The Limited Liability Company (LLC) • The Cooperative (Co-op)
- 21. How Do Corporations Grow? •• Expanding Expanding operations operations •• New Product New Product Development Development •• Market Market Expansion Expansion •• •• •• Mergers Mergers Acquisitions Acquisitions Leveraged Leveraged Buyouts Buyouts (LBO) (LBO)
- 22. Merger Merger Merger The combination of two The combination of two companies (usually companies (usually corporations) to form a corporations) to form a new company. new company. -- Horizontal merger Horizontal merger -- Vertical merger Vertical merger -- Conglomerate merger Conglomerate merger
- 23. Acquisition Acquisition Acquisition The purchase of one The purchase of one company by another, company by another, usually by buying its usually by buying its stock. That stock. That company may company may become a subsidiary become a subsidiary of the buyer. of the buyer.
- 24. Leveraged Buyout (LBO) A purchase in which a group of investors borrow money from banks and other institutions to acquire a company (or division of one) using the assets of the purchased company to guarantee repayment of the loan. FAST FACT: Worldwide LBOs are on the decline. More LBOs occur in Europe than in U.S.
- 25. How about Indonesia? 1. Mergers 1. Acquisitions 1. PT Bank CIMB Niaga (Bank Niaga + Lippo Bank) PT Bumi Serpong Damai Tbk mengakuisisi tiga anak usaha grup Sinar Mas (PT Duta Pertiwi Tbk, PT Sinar Mas Wisesa, PT Sinar Mas Teladan) PT Bank Rakyat Indonesia Tbk mengakuisisi PT Bank Agro PT Bakrie Sumatera Plantations Tbk mengakuisisi enam anak usaha Domba Mas Leveraged Buyout (LBO) PT Benakat Petroleum Energy Tbk terhadap PT Elnusa Tbk Akuisisi PT Apexindo Pratama Duta oleh PT Mitra International Resources Tbk Source: http://ivansibarani.blogspot.com/2012/03/perusahaan-yang-melakukan-merger.html Source: http://www.indonesiafinancetoday.com/read/3487/Leverage-Buyout-Perlu-Perspektif-Jangka-Panjang
- 26. Solve the Dilemma 1. 2. 3. What are some of the advantages and disadvantages of Thomas and Bryan forming a corporation? What are the advantages and disadvantages of their forming a partnership? Which organizational form do you think would be best for Thomas and Bryan’s company and why?