Franchising is Typically Done by Cooperatives Partnerships Llc Corporations – Franchising is Typically Done by Cooperatives Partnerships Llc Corporations

Forms of Business Ownership

By the terminate of the chapter, you should exist able to:

  1. Place the questions to inquire in choosing the appropriate course of buying for a business.
  2. Draw the sole proprietorship and partnership forms of arrangement, and specify the advantages and disadvantages.
  3. Identify the unlike types of partnerships, and explain the importance of a partnership agreement.
  4. Explicate how corporations are formed and how they operate.
  5. Talk over the advantages and disadvantages of the corporate course of ownership.
  6. Examine special types of business buying, including limited liability companies, cooperatives, and not-for-profit corporations.
  7. Define mergers and acquisitions, and explicate why companies are motivated to merge or acquire other companies.

Who would accept thought it? Ii ex-hippies with strong interests in social activism would cease up starting one of the best-known ice cream companies in the country—Ben & Jerry’s. Perhaps it was meant to be. Ben Cohen (the “Ben” of Ben & Jerry’s) e’er had a fascination with ice cream. As a child, he fabricated his ain mixtures past smashing his favorite cookies and candies into his ice cream.

Ben Cohen and Jerry Greenfield, of Ben and Jerry's ice cream fame, casually dressed in the audience of a theatre
Ben Cohen and Jerry Greenfield from licensed CC By SA

But it wasn’t until his senior year in high school that he became an official “ice cream human being,” happily driving his truck through neighborhoods filled with kids eager to buy his ice cream pops. After loftier school, Ben tried college only it wasn’t for him. He attended Colgate University for a year and a half earlier he dropped out to return to his real love: existence an ice cream human being. He tried college again—this time at Skidmore, where he studied pottery and jewelry making—but, in spite of his option of courses, still didn’t like it.

In the concurrently, Jerry Greenfield (the “Jerry” of Ben & Jerry’s) was following a similar path. He majored in pre-med at Oberlin College in the hopes of one day becoming a doctor. But he had to give up on this goal when he was not accepted into medical school. On a positive note, though, his college education steered him into a more than lucrative field: the world of ice cream making. He got his first peek at the ice cream industry when he worked every bit a scooper in the student deli at Oberlin. So, 14 years after they showtime met on the junior high school track team, Ben and Jerry reunited and decided to go into water ice cream making large time. They moved to Burlington, Vermont—a higher town in need of an ice cream parlor—and completed a $5 correspondence course from Penn Land on making water ice cream. Later getting an A in the form—non surprising, given that the tests were open volume—they took the plunge: with their life savings of $eight,000 and $4,000 of borrowed funds they set an ice cream shop in a fabricated-over gas station on a busy street corner in Burlington.[1]
 The next big determination was which form of business concern ownership was best for them. This chapter introduces yous to their options.

Innovation, Scientific discipline and Economical Development Canada (ISED) defines a business based upon the number of paid employees. For this reason, self-employed and “indeterminate” businesses are more often than not not included in the present publication every bit they do not have paid employees.

Accordingly, this publication defines an SME (small-to-medium enterprise) as a business institution with one–499 paid employees, more than specifically:

  • A small business organization has one to 99 paid employees.
  • A medium-sized business has 100 to 499 paid employees.
  • A large concern has 500 or more paid employees.

ISED also categorizes businesses with ane-4 employees as micro-enterprises.

“As of December 2015, there were 1.17 million employer businesses in Canada, equally shown in Tabular array 1.1-1. Of these, 1.14 meg (97.9 percent) businesses were pocket-sized businesses, 21,415 (1.eight percent) were medium-sized businesses and 2,933 (0.three percent) were large enterprises.” (Industry Canada)

Charts detailing the number of businesses in each province and territory further categorized by size of businesses based on number of employees. Ontario has 407 174 small businesses, 8 437 medium sized businesses, 1 189 alrge sized businesses for a total of 416 801. For every 1000 inhabitants over the age of 15, Ontario has 36.3 SMEs or small-medium sized enterprises.

If yous’re starting a new business, you have to make up one’s mind which legal form of ownership is best for you and your business concern. Do yous want to ain the business yourself and operate as a sole proprietorship? Or, exercise y’all want to share buying, operating equally a partnership or a corporation? Before nosotros discuss the pros and cons of these iii types of ownership, allow’s address some of the questions that you lot’d probably enquire yourself in choosing the appropriate legal form for your business.

  1. In setting up your business organization, practice you want to minimize the costs of getting started? Do you hope to avoid complex government regulations and reporting requirements?
  2. How much control would you like? How much responsibility for running the business are you willing to share? What nearly sharing the profits?
  3. Do y’all desire to avoid special taxes?
  4. Practice you lot have all the skills needed to run the business?
  5. Are you likely to become along with your co-owners over an extended period of time?
  6. Is it important to you that the business organisation survive yous?
  7. What are your financing needs and how do you plan to finance your visitor?
  8. How much personal exposure to liability are you willing to accept? Exercise you experience uneasy about accepting personal liability for the deportment of fellow owners?

No single form of ownership will give you everything you lot desire. You’ll have to brand some trade-offs. Considering each selection has both advantages and disadvantages, your job is to decide which one offers the features that are most important to you. In the following sections we’ll compare three ownership options (sole proprietorship, partnership, corporation) on these eight dimensions.

Sole Proprietorship and Its Advantages

In a sole proprietorship, you make all important decisions and are generally responsible for all day-to-mean solar day activities. In substitution for assuming all this responsibility, you lot go all the income earned by the business. Profits earned are taxed as personal income, so yous don’t take to pay whatever special federal and provincial income taxes.

Disadvantages of Sole Proprietorships

For many people, all the same, the sole proprietorship is not suitable. The flip side of enjoying complete control is having to supply all the unlike talents that may exist necessary to make the business a success. And when you’re gone, the business dissolves. You also take to rely on your own resources for financing: in effect, you are the business and whatever money borrowed by the concern is loaned to you personally. Even more important, the sole proprietor bears
unlimited liability
 for any losses incurred by the business concern. The principle of unlimited personal liability means that if the business organisation incurs a debt or suffers a ending (say, getting sued for causing an injury to someone), the owner is personally liable. Every bit a sole proprietor, you put your personal assets (your bank business relationship, your car, mayhap even your home) at risk for the sake of your concern. You lot tin lessen your risk with insurance, yet your liability exposure can even so be substantial. Given that Ben and Jerry decided to outset their ice cream business together (and therefore the business was not endemic by only one person), they could non set up their company up as a sole proprietorship.


partnership (or full general partnership) is a business owned jointly past two or more people. Virtually 10 percent of U.S. businesses are partnerships[2] and though the vast majority are pocket-size, some are quite large. For example, the big four public accounting firms, Deloitte, PwC, Ernst & Young, and KPMG,
are partnerships. Setting upward a partnership is more than complex than setting up a sole proprietorship, only it’due south all the same relatively easy and inexpensive. The cost varies co-ordinate to size and complexity. It’s possible to class a simple partnership without the help of a lawyer or an accountant, though information technology’s unremarkably a good idea to go professional communication.

Professionals can help you place and resolve problems that may subsequently create disputes amidst partners.

Provincial and federal governments too support small businesses and offer free resources likewise as opportunities for funding.
Canada Business Network (@canadabusiness #SMEPME) is a collaborative arrangement among federal departments and agencies, provincial and territorial governments and not-for-profit entities.

It offers webinars and other learning events beyond the country. For instance, Ontario’s
Small Business Access, offers workshops, a aid line, funding, and provides up-to-appointment data on legal requirements.

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The Partnership Agreement

The touch of disputes tin can be lessened if the partners take executed a well-planned
partnership agreement
 that specifies everyone’southward rights and responsibilities. The agreement might provide such details as the following:

  • Amount of cash and other contributions to be fabricated by each partner
  • Division of partnership income (or loss)
  • Partner responsibilities—who does what
  • Conditions nether which a partner tin sell an involvement in the company
  • Conditions for dissolving the partnership
  • Conditions for settling disputes

Unlimited Liability and the Partnership

A major trouble with partnerships, as with sole proprietorships, is
unlimited liability: in this instance, each partner is personally liable not only for his or her own actions but also for the actions of all the partners. If your partner in an architectural firm makes a mistake that causes a structure to collapse, the loss your business organization incurs impacts yous just equally much as information technology would him or her. And hither’s the actually bad news: if the business concern doesn’t have the cash or other assets to embrace losses, you tin can be personally sued for the amount owed. In other words, the party who suffered a loss because of the error can sue y’all for your personal assets. Many people are understandably reluctant to enter into partnerships considering of unlimited liability. Sure forms of businesses let owners to limit their liability. These include limited partnerships and corporations.

Express Partnerships

The law permits concern owners to form a
limited partnership
 which has two types of partners: a single general partner who runs the business organisation and is responsible for its liabilities, and whatsoever number of express partners who have limited involvement in the concern and whose losses are limited to the amount of their investment.

Advantages and Disadvantages of Partnerships

The partnership has several advantages over the sole proprietorship. First, information technology brings together a diverse group of talented individuals who share responsibility for running the business organisation. Second, it makes financing easier: the business can describe on the financial resources of a number of individuals. The partners not only contribute funds to the business but can besides apply personal resources to secure bank loans. Finally, continuity needn’t be an issue because partners can concord legally to permit the partnership to survive if one or more than partners die.

However, there are some negatives. Kickoff, as discussed earlier, partners are subject to unlimited liability. Second, being a partner ways that you lot have to share decision making, and many people aren’t comfortable with that situation. Non surprisingly, partners oftentimes take differences of stance on how to run a concern, and disagreements tin escalate to the point of jeopardizing the continuance of the business organisation. 3rd, in addition to sharing ideas, partners as well share profits. This arrangement can work equally long as all partners experience that they’re being rewarded according to their efforts and accomplishments, just that isn’t always the instance. While the partnership course of ownership is viewed negatively by some, information technology was particularly appealing to Ben Cohen and Jerry Greenfield. Starting their ice cream concern as a partnership was cheap and let them combine their express financial resources and utilize their diverse skills and talents. As friends they trusted each other and welcomed shared conclusion making and turn a profit sharing. They were as well not reluctant to be held personally liable for each other’s actions.


corporation (sometimes chosen a regular or C-corporation) differs from a sole proprietorship and a partnership because it’s a legal entity that is entirely carve up from the parties who own it. It can enter into bounden contracts, purchase and sell holding, sue and be sued, exist held responsible for its actions, and be taxed. Once businesses reach any substantial size, information technology is advantageous to organize equally a corporation and then that its owners can limit their liability. Corporations, then, tend to be far larger, on average, than businesses using other forms of ownership.Virtually big well-known businesses are corporations, just and so are many of the smaller firms with which likely you do business.

Ownership and Stock

Corporations are owned by
shareholders who invest money in the business past buying shares of
stock. The portion of the corporation they own depends on the pct of stock they hold. For case, if a corporation has issued 100 shares of stock, and yous ain thirty shares, yous ain 30 pct of the visitor. The shareholders elect a
board of directors, a grouping of people (primarily from outside the corporation) who are legally responsible for governing the corporation. The lath oversees the major policies and decisions fabricated by the corporation, sets goals and holds direction accountable for achieving them, and hires and evaluates the peak executive, generally called the CEO (chief executive officeholder
). The board besides approves the distribution of income to shareholders in the course of cash payments chosen dividends.

Benefits of Incorporation

The corporate class of system offers several advantages, including limited liability for shareholders, greater access to financial resource, specialized management, and continuity.

Limited Liability

The nearly important do good of incorporation is the
limited liability
 to which shareholders are exposed: they are not responsible for the obligations of the corporation, and they can lose no more than than the amount that they take personally invested in the company. Limited liability would have been a big plus for the unfortunate private whose business partner burned down their dry cleaning institution. Had they been incorporated, the corporation would have been liable for the debts incurred past the fire. If the corporation didn’t have enough money to pay the debt, the individual shareholders would not take been obligated to pay anything. They would have lost all the money that they’d invested in the business, just no more.

Financial Resource

Incorporation also makes it possible for businesses to raise funds by selling stock. This is a big advantage equally a company grows and needs more funds to operate and compete. Depending on its size and fiscal forcefulness, the corporation also has an advantage over other forms of business in getting bank loans. An established corporation can borrow its own funds, but when a small business organisation needs a loan, the banking company usually requires that it be guaranteed by its owners.

Specialized Management

Considering of their size and ability to pay high sales commissions and benefits, corporations are more often than not able to attract more than skilled and talented employees than are proprietorships and partnerships.

Continuity and Transferability

Some other advantage of incorporation is
. Because the corporation has a legal life separate from the lives of its owners, it tin (at least in theory) exist forever.

Transferring buying of a corporation is like shooting fish in a barrel: shareholders simply sell their stock to others. Some founders, however, want to restrict the transferability of their stock and so choose to operate equally a privately-held corporation. The stock in these corporations is held by simply a few individuals, who are not immune to sell it to the general public.

Companies with no such restrictions on stock sales are chosen public corporations; stock is available for sale to the general public.

Drawbacks to Incorporation

Like sole proprietorships and partnerships, corporations have both positive and negative aspects. In sole proprietorships and partnerships, for instance, the individuals who own and manage a business are the same people. Corporate managers, however, don’t necessarily own stock, and shareholders don’t necessarily work for the visitor. This situation can be troublesome if the goals of the two groups differ significantly.

Managers, for case, are frequently more than interested in career advocacy than the overall profitability of the company. Stockholders might care more nearly profits without regard for the well-existence of employees. This situation is known as the
agency trouble
, a conflict of interest inherent in a relationship in which ane party is supposed to act in the best interest of the other. It is often quite difficult to forestall self-involvement from entering into these situations.

Another drawback to incorporation—one that frequently discourages small businesses from incorporating—is the fact that corporations are more plush to set. When yous combine filing and licensing fees with bookkeeping and attorney fees, incorporating a business organisation could set up you back past $1,000 to $6,000 or more depending on the size and scope of your business organisation.[3]  Additionally, corporations are subject to levels of regulation and governmental oversight that can place a burden on small businesses. Finally, corporations are subject field to what’s generally called “double taxation.” Corporations are taxed by the federal and provincial governments on their earnings. When these earnings are distributed every bit dividends, the shareholders pay taxes on these dividends. Corporate profits are thus taxed twice—the corporation pays the taxes the offset time and the shareholders pay the taxes the 2d time.

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The Canadian Comparison

“Incorporation: Tax savings, only more paperwork”, a 2017 commodity in
The Globe and Mail,

puts incorporation in to the Canadian perspective:

In Ontario, an incorporated business concern pays a tax rate of xv per cent on the first $500,000 of income each year, thanks to the minor business tax deduction, and 26.5 per cent for anything across that. Rates vary by province. A lower tax rate is one of the key advantages to incorporating a business concern. However, accountants brand the stardom that the taxes aren’t being saved, just instead deferred. That’s because, when the money is taken out of the corporation for personal use, through salary or dividends, the individual winds up paying approximately the same tax charge per unit as if they were a sole proprietor. It’s known as the “theory of integration” in the Canadian tax organisation.

Near accountants recommend business owners incorporate if they tin afford to leave money in the company longer-term with the goal of watching the value of the assets abound.

Some other tax reward comes when information technology’s time to sell the business. The shares of most Canadian private corporations are eligible for a lifetime capital-gains exemption. In 2016, that exemption amounts to the first $824,176 of capital gains from personal income revenue enhancement, per shareholder. If the business concern were a sole proprietorship, any proceeds from the auction of a private corporation would be taxed.

Some other advantage to incorporating is the opportunity to use income splitting among family unit members. If 1 spouse makes more money, yous tin income-carve up. Over all, both spouses will exist in a lower income-tax bracket.

Another advantage of incorporation, beyond taxes, is the ability to shift liability to the corporation and away from the individual. Incorporating can likewise add brownie; some larger companies require contractors to be incorporated before they can be hired.

The disadvantages to incorporation are increased paperwork and administration. That includes the one-time cost to set up the corporation, including accounting and legal fees, which can run to more than than $1,000. Owners likewise have to file two taxation returns, a personal one and a more complicated one for the concern.

V years afterwards starting their ice cream business, Ben Cohen and Jerry Greenfield evaluated the pros and cons of the corporate class of buying, and the “pros” won. The master motivator was the need to raise funds to build a $2 one thousand thousand manufacturing facility. Not only did Ben and Jerry make up one’s mind to switch from a partnership to a corporation, but they too decided to sell shares of stock to the public (and thus become a public corporation). Their auction of stock to the public was a bit unusual: Ben and Jerry wanted the community to ain the company, so instead of offering the stock to anyone interested in buying a share, they offered stock to residents of Vermont only. Ben believed that “business has a responsibility to give back to the community from which it draws its support”.[4] He wanted the company to be owned past those who lined up in the gas station to purchase cones. The stock was and so popular that i in every hundred Vermont families bought stock in the visitor.[5]
 Eventually, as the visitor continued to expand, the stock was sold on a national level.

Other Types of Business Ownership

In add-on to the 3 commonly adopted forms of business organisation—sole proprietorship, partnership, and regular corporations—some business owners select other forms of arrangement to meet their detail needs. We’ll wait at several of these options:

  • Limited liability companies
  • Cooperatives
  • Non-for-profit corporations

Limited Liability Companies

How would y’all like a legal form of organization that provides the attractive features of the three common forms of organisation (corporation, sole proprietorship and partnership) and avoids the unattractive features of these iii system forms? The
express liability visitor (LLC)
 accomplishes exactly that. This class provides business organisation owners with express liability (a cardinal advantage of corporations) and no “double taxation” (a fundamental reward of sole proprietorships and partnerships). Let’due south look at the LLC in more particular.

In 1977, Wyoming became the first country to allow businesses to operate as limited liability companies. Twenty years later on, in 1997, Hawaii became the last land to give its approval to the new organization class. Since then, the express liability visitor has increased in popularity. Its rapid growth was fueled in part by changes in country statutes that permit a limited liability company to have just one member. The tendency to LLCs can exist witnessed by reading visitor names on the side of trucks or on storefronts in your metropolis. It is common to see names such every bit Jim Evans Tree Care, LLC, and For-Cats-Only Veterinarian Clinic, LLC. But LLCs are non limited to pocket-size businesses. Companies such as Crayola, Domino’s Pizza, Ritz-Carlton Hotel Company, and iSold It (which helps people sell their unwanted holding on eBay) are operating nether the limited liability grade of arrangement.
In a express liability company, owners (chosen members rather than shareholders) are not personally liable for debts of the company, and its earnings are taxed only once, at the personal level (thereby eliminating double tax).

Nosotros have touted the benefits of limited liability protection for an LLC. Nosotros now need to signal out some circumstances nether which an LLC member (or a shareholder in a corporation) might be held personally liable for the debts of his or her visitor. A business owner can exist held personally liable if he or she:

  • Personally guarantees a business debt or banking company loan which the visitor fails to pay.
  • Fails to pay employment taxes to the government.
  • Engages in fraudulent or illegal beliefs that harms the company or someone else.
  • Does not treat the company as a divide legal entity, for case, uses company avails for personal uses.


Sunny day outside a corner shot of the exterior of Mountain Equipment Co-op in Ottawa
Source: MEC in Ottawa retrieved from

cooperative (also known every bit a co-op) is a business owned and controlled by those who apply its services. Individuals and firms who belong to the cooperative join together to market products, buy supplies, and provide services for its members. If run correctly, cooperatives increase profits for its producer-members and lower costs for its consumer-members. Cooperatives are fairly mutual in the agricultural community. For example, some 750 cranberry and grapefruit fellow member growers market their cranberry sauce, fruit juices, and dried cranberries through the Ocean Spray Cooperative.[half-dozen] More than three hundred thousand farmers obtain products they need for production—feed, seed, fertilizer, subcontract supplies, fuel—through the Southern States Cooperative.[7] Co-ops also exist outside agriculture. For example, MEC (Mountain Equipment  Co-op), which sells quality outdoor gear, has more than 5 million members across the state, who take each paid $five for their lifetime memberships.The company shares its fiscal success with its members and also gives back 1% of its sales to maintain participation in the outdoors.

Non-for-Profit Corporations

non-for-turn a profit corporation
 (sometimes called a nonprofit) is an organization formed to serve some public purpose rather than for financial gain. Every bit long as the organisation’due south activity is for charitable, religious, educational, scientific, or literary purposes, it can be exempt
from paying income taxes. Additionally, individuals and other organizations that contribute to the not-for-turn a profit corporation can take a taxation deduction for those contributions. The types of groups that normally apply for nonprofit status vary widely and include churches, synagogues, mosques, and other places of worship; museums; universities; and conservation groups.

Since Statistics Canada ended its deep collection of nonprofit statistics in 2008, the nigh recent data available is:

  • 170,000 charitable and non profit organizations in Canada
  • 85,000 of these are registered charities (recognized past the Canada Acquirement Agency).
  • The charitable and nonprofit sector contributes an boilerplate of of total Canadian GDP, more than than the retail trade industry and close to the value of the mining, oil and gas extraction industry
  • Two meg Canadians are employed in the charitable and nonprofit sector
  • Over 13 1000000 people volunteer for charities and nonprofits
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Do you lot call up these numbers have increased or decreased over the terminal decade? Why?

Runway how quickly y’all can match some of the more recent, larger mergers or major corporations.

If you lot practise non come across the embedded match game, access information technology:

The headline read, “Wanted: More than 2,000 in Google hiring spree”.[8]
 The largest Web search engine in the globe was disclosing its plans to grow internally and increase its workforce by more than than 2,000 people, with half of the hires coming from the U.s. and the other half coming from other countries. The added employees will help the company expand into new markets and battle for global talent in the competitive Cyberspace information providers industry. When properly executed, internal growth benefits the firm.

An alternative approach to growth is to merge with or larn another company. The rationale behind growth through merger or conquering is that one + 1 = 3: the combined company is more than valuable than the sum of the two divide companies. This rationale is bonny to companies facing competitive pressures. To grab a bigger share of the market and improve profitability, companies volition want to become more cost efficient past combining with other companies.

Though they are oft used every bit if they’re synonymous, the terms merger and conquering hateful slightly different things. A
merger occurs when two companies combine to form a new company. An
 is the purchase of 1 company past another.

The Canadian Landscape

In June 2013, Shoppers Drug Mart, Canada’due south biggest pharmacy chain merged with Loblaw, Canada’south largest grocery retailer, in a 12.4 billion dollar deal. Rather than cutting into each other’due south market share, the deal allows the ii companies to play on each other’due south strengths. Shoppers has nigh $ane billion in food sales annually, versus Loblaw’s $30 billion. Just Loblaw’s share of the chemist’s shop market is only five per cent, so adding Shoppers health products and services to Loblaw grocery stores allows the food retailer to aggrandize its services in what it sees as a growing sector: wellness, wellness and nutrition. (
). Contrast this merger with an acquisition in that aforementioned year. Sobey’s acquired 200 Safeway stores in Western Canada under a 5.viii billion dollar deal. According to news reports, along with 213 Safeway grocery stores — more than lx percentage of which are in Calgary, Vancouver, Edmonton and Winnipeg — Sobeys volition also learn:

  • 199 in-store pharmacies;
  • 62 gas stations;
  • x liquor stores;
  • 4 primary distribution centres and a related wholesale business concern; and
  • 12 manufacturing facilities.

Sobeys volition as well get $one.8 billion worth of real estate in the deal.

Another example of an acquisition is the buy of Reebok by Adidas for $three.8 billion.[9]
 The bargain was expected to give Adidas a stronger presence in N America and assist the company compete with rival Nike. Once this acquisition was completed, Reebok as a company ceased to exist, though Adidas however sells shoes nether the Reebok brand.

Motives Behind Mergers and Acquisitions

Companies are motivated to merge or acquire other companies for a number of reasons, including the following.

Gain Complementary Products

  • Shoppers Drug Mart began to sell President’s Choice products in its merger with Loblaw.
  • Loblaw is able to add Shoppers health care products to its shelves.
  • Sobey’s gains Safeway’s gas stations and liquors stores in its acquisition.

Attain New Markets or Distribution Channels

  • Sobey’southward acquired access to 12 manufacturing facilities, 4 distribution centres, and a related wholesale business.
  • Loblaw increases access to urban centres where Shoppers are already located, bringing a wider diversity of products to customers in densely populated areas.

Realize Synergies

  • Integration of the companies’ loyalty programs will provide the ii with a vast cognition base of consumers’ buying habits and provide economies of scale — which, the companies estimate, will interpret into savings of about $300 1000000 annually.
  • Loblaw’southward share of the pharmacy market is only five per cent and then adding Shoppers wellness products and services to its grocery stores will allow the nutrient retailer to expand its services in what it sees as a growing sector: health, wellness and nutrition.

The Less-Friendly Choice

Hostile Takeovers: Ben and Jerry’due south

What happens, though, if 1 company wants to acquire some other visitor, simply that company doesn’t desire to be acquired? The consequence could exist a
hostile takeover—an act of assuming control that’south resisted past the targeted company’southward management and its lath of directors. Ben Cohen and Jerry Greenfield, the Water ice Cream Men from above, found themselves in one of these situations: Unilever—a very large Dutch/British visitor that owns three ice cream brands—wanted to buy Ben & Jerry’s, against the founders’ wishes. Most of the Ben & Jerry’s stockholders sided with Unilever. They had little confidence in the power of Ben Cohen and Jerry Greenfield to proceed managing the company and were frustrated with the house’south social-mission focus. The stockholders liked Unilever’due south offer to buy their Ben & Jerry’s stock at almost twice its electric current market price and wanted to accept their profits. In the end, Unilever won; Ben & Jerry’s was acquired by Unilever in a hostile takeover.[10] Despite fears that the company’south social mission would end, it didn’t happen. Though neither Ben Cohen nor Jerry Greenfield are involved in the electric current direction of the visitor, they have returned to their social activism roots and are heavily involved in numerous social initiatives sponsored by the company.

Solidifying the Vocabulary

Utilize this quick action to ensure you understand the vocabulary related to mergers and acquisitions.

Important terms and concepts

  1. A sole proprietorship is a business endemic by only one person.
    • Advantages include: consummate control for the owner, piece of cake and cheap to class, and possessor gets to keep all of the profits.
    • Disadvantages include: unlimited liability for the owner, consummate responsibleness for talent and financing, and business dissolves if the owner dies.
  2. A general partnership is a business organisation endemic jointly past 2 or more people.
    • Advantages include: more resources and talents come with an increment in partners, and the business can continue fifty-fifty subsequently the death of a partner.
    • Disadvantages include: partnership disputes, unlimited liability, and shared profits.
  3. A limited partnership has a single general partner who runs the business organisation and is responsible for its liabilities, plus any number of limited partners who take limited interest in the business and whose losses are limited to the amount of their investment.
  4. A corporation is a legal entity that’s separate from the parties who own it, the shareholders who invest by buying shares of stock. Corporations are governed past a Board of Directors, elected past the shareholders.
    • Advantages include: limited liability, easier access to financing, and unlimited life for the corporation.
    • Disadvantages include: the agency problem, double revenue enhancement, and incorporation expenses and regulations.
  5. A limited liability company (LLC) is similar to an C-corporation, just it has fewer rules and restrictions than an C-corporation. For example, an LLC can have whatever number of members.
  6. A cooperative is a business concern owned and controlled past those who use its services. Individuals and firms who belong to the cooperative bring together together to market products, purchase supplies, and provide services for its members.
  7. A not-for-turn a profit corporation is an organization formed to serve some public purpose rather than for financial gain. It enjoys favorable tax treatment.
  8. A merger occurs when two companies combine to form a new company.
  9. An acquisition is the buy of one company past some other with no new company beingness formed. A hostile takeover occurs when a visitor is purchased fifty-fifty though the company’southward management and Board of Directors exercise not want to be acquired.

Franchising is Typically Done by Cooperatives Partnerships Llc Corporations