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Ownership Reporting DisclosureandOversight

Ways ofRaising Cash

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2005 # of Firms % Firms

Total Revenue

(000)

%

Revenue

Average

Sales

All Corporations 3,324,260 16% $21,857,896,027 83.60% $6,575,267

C-Corporations 1,048,758 5% $17,435,464,986 66.70% $16,624,870

S-Corporations 2,275,502 11% $4,422,431,041 16.90% $1,943,497

Sole

Proprietorships 15,750,475 76% $1,047,830,449 4.00% $66,527

Partnerships 1,623,202 8% $3,247,021,603 12.40% $2,000,380

Total 20,697,937 100% $26,152,748,079

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Type of Entity Who owns

the

company?

Who

manages

(runs) the

company?

To whom

do the

managers

of the

company

report?

How is the entity

formed?

How long can

the company

exist?

Who pays taxes? Who is responsible if

there is debt or the

company does

something wrong and

is sued?

How and where

can the company

raise money?

CorporationStock-holders

Executives Board ofDirectors(must haveoutsidedirectors)

File Articles ofIncorporationwith theSecretary ofState in a specificstate.

It can last forever

Corporation (onprofits)

Shareholders (ondividends received)

The corporation -owners can protecttheir personal assets

Sell more shareson the publicexchanges or selldebt by issuingbonds. They alsoutilize bankfinancing.

S-

Corporation

Stock-holders

not morethan 100

Executives Board ofDirectors

1. Form acorporation in the

state of yourchoice.2. Obtain theformal consent ofthe corporation'sshareholders.3. File a formwith the IRSelecting this formof taxation

1. S-Corporations donot pay taxes as a

corporation.2. Owners report theirshare of profits orlosses in thecompany on theirpersonal tax returns.

The corporation owners can protect

their personal assets

Sell stock. Theyalso utilize bank

financing.

LLC LimitedLiability

Company

Owners arecalledMembers

Members Themselves File Articles ofIncorporationwith theSecretary ofState in a specificstate.

30 years(depending onthe state)

1. LLCs do not paytaxes as a company.

2. The income of theLLC is taxed to themembers on theirpersonal tax returns,according to thepercentage of theirinterest in thecompany.

The corporation Themembers personalliability is limited tothe amount invested inthe LLC

They do not havestock, so theymust rely on bankfinancing orreinvestingprofits.

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Type ofEntity

Whoowns thecompany?

Whomanages(runs) thecompany?

To whomdo themanagersof thecompanyreport?

How is theentity formed?

How long canthe companyexist?

Who pays taxes? Who isresponsible ifthere is debt orthe company doessomething wrongand is sued?

How andwhere can thecompany raisemoney?

GeneralPartnership

Thepartners

The partners No one butthemselves

Two or morepersons decide toconduct abusiness or trade.A verbalagreementbetween thepartners isenough. Thereare no filing orregistration

requirements.

As long as all thepartners are aliveand want thebusiness tocontinue

Profits (or losses)are distributed to thepartners in the samepercentage as eachpartners share(ownership) in thepartnership.

The partners payregular income taxand can also deduct

losses from theirother income.

Partnership debt andother liabilities are theresponsibility of thepartners and extend totheir personal assets

Partners mayinvest more oftheir personalmoney, theyobtain bankfinancing, andreinvest theprofits.

LimitedPartnership

All Partners

(The

partnershipis limited to35members.)

Only theGeneralPartners

(If the limitedpartner getsinvolved inmanagement,they risklosing theirliabilityprotection.)

The GeneralPartners

As long as all theGeneral Partnersare alive and want

the business tocontinue

Profits (or losses)are distributed to thepartners in the same

percentage as eachpartners share(ownership) in thepartnership.

The partners payregular income taxand can also deductlosses from theirother income.

Limited partners arenot liable forpartnership debt and

only their investmentis at risk.

Partners mayinvest more oftheir personal

money, theyobtain bankfinancing, andreinvest theprofits.

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Franchisor

Franchisee

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OTHER TYPES OFBUSINESS ORGANIZATION

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Novartis and Bayer Schering AG

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OTHER BUSINESSVOCABULARY

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management buyout

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Merger

Takeover/Acquisition

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Merger

Takeover/Acquisition

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Friendly bid

Hostile Bid

White Knight

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Poison Pill