Five years after starting their ice cream business, Ben Cohen and Jerry Greenfield evaluated the pros and cons of owning the business, and the « professionals » won. The main motivation was the need to raise funds to build a $2 million manufacturing plant. Not only did Ben and Jerry decide to go from a partnership to a public company, but they also decided to sell shares to the public (and thus become a public company). Their sale of shares to the public was somewhat unusual: Ben and Jerry wanted the community to own the company, so they didn`t offer the shares to anyone interested in buying a stock, but only to Vermont residents. Ben believed that « companies have a responsibility to give back to the community from which they get their support. » [4] He wanted the business to be owned by those who lined up at the gas station to buy cones. The stock was so popular that one in a hundred families in Vermont bought shares of the company. [5] Finally, as the company continued to expand, the shares were sold nationally. Another downside of starting a business — which often discourages small businesses from starting a business — is the fact that starting a business costs more. When you combine filing and licensing fees with accounting and lawyer fees, starting a business can cost you anywhere from $1,000 to $6,000 or more, depending on the size and scope of your business. [3] In addition, businesses are subject to government regulation and oversight, which can place a burden on small businesses. Finally, companies are subject to what is known as « double taxation ». Companies are taxed by the federal and state governments on their profits.
When these profits are distributed in the form of dividends, shareholders pay taxes on these dividends. Thus, corporate profits are taxed twice – the company pays taxes the first time and shareholders pay taxes the second time. In addition to the three commonly adopted forms of business organization – sole proprietorships, partnerships, and ordinary businesses – some entrepreneurs choose other forms of organization to meet their particular needs. We`ll look at some of these options: Choose carefully. While you may change your business structure in the future, there may be restrictions depending on your location. This could, among other things, result in tax consequences and involuntary dissolution. Consultation with business consultants, lawyers and accountants can be helpful. The main advantage of incorporation is the limited liability to which shareholders are exposed: they are not responsible for the obligations of the company and cannot lose more than the amount they have personally invested in the company. Limited liability would have been a big plus for the unfortunate person whose business partner burned his cleaners dry. If they had been established, the company would have been liable for the debts incurred by the fire. If the company did not have enough money to pay the debt, individual shareholders would not have been obliged to pay anything.
They would have lost all the money they had invested in the business, but nothing more. In June 2013, Shoppers Drug Mart, Canada`s largest pharmacy chain, merged with Loblaw, Canada`s largest grocery retailer, to complete a $12.4 billion transaction. Instead of reducing each other`s market share, the deal allows both companies to play to each other`s strengths. Consumers make grocery sales of approximately $1 billion annually, compared to $30 billion for Loblaw. However, Loblaw`s share of the pharmacy market is only five per cent, so the addition of Shoppers` health products and services to Loblaw grocery stores allows the grocery retailer to expand its services into what it believes is a growing sector: health, wellness and nutrition. (www.cbc.ca). Compare this merger to an acquisition in the same year. Sobey`s acquired 200 Safeway stores in Western Canada in a $5.8 billion transaction.
According to media reports, in addition to the 213 Safeway grocery stores, more than 60% of which are located in Calgary, Vancouver, Edmonton and Winnipeg, Sobeys will also acquire: One of the first decisions you need to make when starting a business is determining the right legal structure for your business. However, what if a company wants to acquire another business, but that business does not want to be acquired? The result could be a hostile takeover – an act of takeover that the target`s management and board of directors oppose. Ben Cohen and Jerry Greenfield, the Ice Cream Men from above, found themselves in one of these situations: Unilever – a very large Dutch-British company that owns three brands of ice cream – wanted to buy Ben & Jerry`s against the wishes of the founders.
