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Agribusiness PPT Ch. 6
Agribusiness PPT Ch. 6
Chapter 6
Objectives:
corporations.
Agribusinesses
3 types of corporations:
Subchapter C
Subchapter S Subchapter T
Business Organizations~
Sole proprietorship
organization that is owned by one person most common form of business ownership 19.7 million in US
Partnership
two or more people make a legal agreement to become co-owners of business 2.5 million in US
Corporation
a legal entity with authority to act that has liability separate from that of its owners 2.8 million in US 87% of all sales volume
Sole Proprietorship~
Simple to start Few government regulations or restrictions Only requirement is a license Management and control are solely in the owners hands
No voting is necessary
Unlimited liability
Claim
Can be difficult to accumulate the large amounts of capital required to begin and operate a successful business
Types of Partnerships~
General partnership:
Formalized agreement between 2 people specifying: Resources contributed by each partner Who has decision-making authority How profits will be divided
Limited partnership:
Partners not completely liable for each others debt Person invests in partnership Does not participate in daily business management
Partners can protect their existing personal assets Partners not responsible for the businesss debts beyond the amount of their investment
Wise for each partner to get the advice of a lawyer Prepare yourself before calling the lawyer because of the expense Be sure that your partnership agreement is put in writing Model Business Corporation Act Page 128
Corporations~
General Motors, Ford, IBM, FedEx, Exxon, and John Deere Small businesses may incorporate as well Characteristics:
legal entity separate from the people who own it can own property, pay taxes, make contracts, sue, etc. issue stock new owners called stockholders pay a set price for their shares gets one vote for each share purchased
Types of Corporations~
Subchapter C
sells stock to investors profit-making Board of directors may pay dividends to stockholders
Subchapter S
Subchapter T
Establishing a Corporation~
Bylaws~
Corporations have bylaws in addition to articles of incorporation Describe how the firm is to be operated, from both legal and managerial points of view, and include:
How, when, and where shareholders and directors meetings are held how long directors are to serve Specifics as to each directors authority The duties and responsibilities of officers and the length of their service How stock is issued Other matters, including employment contracts
Figure 6-6
Legal entity that exists separate from it owners Combines the corporate advantage of limited liability with the partnership advantage of single taxation
Advantages of LLC:
liability of member is limited members are not liable for debts of the LLC unless they have given personal guarantees for those debts
Disadvantages of LLC:
work and expense involved in initial formation post formation record-keeping requirements
Cooperatives~
Corporation formed to provide goods and services to members either at cost or as near to cost as possible Not formed to make profits Serve the people who own shares in the organization Agribusiness cooperatives are very popular 3 cooperative types:
Supply
Marketing Service
Supply Cooperatives:
Buy supplies in quantity for resale to members Members save money because items are bought in bulk Can manufacture items rather than buying them to sell
Marketing Cooperatives:
find buyers who will pay the highest price for ag. products
Service Cooperatives:
Statistics on Cooperatives~
Prime Example:
Some co-ops serve the general public Others serve members only Major emphasis always on members Voting stock and investment stock are separate Only common (voting) stock gives a person the right to vote on business matters
each member has one vote only no additional votes for owning extra stock
Critics often contend that co-ops are run by a few elite members
only because many members fail to exercise their right to vote during the annual stock-holders meetings
3 distinguishing characteristics:
Service at cost
any excess earnings are returned to patrons in the form of patronage dividends one member, one vote
Democratic control
Franchises~
Contract in which a franchisor sells to another business the right to use its name and sell its products Franchisee (person purchasing the franchise) buys a system of operation that has proven successful
Franchising sales accounted for nearly 33% of all retail sales in the US in 2004
Consider the pros and cons of each type of agribusiness. Which style is best suited for you as an entrepreneur?