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.
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?
