A business that is owned (and usually operated) by one person is called _________ ________
Sole proprietorships
What is the simplest form of business ownership adn the easiest to start?
Sole proprietorships
What is the most popular form of business ownership?
Sole proprietorships
5 advantages of Sole Proprietorships
Ease of start-up
Pride of ownership
Retention of all
profits
No special taxes
Flexibility of being your own boss
5 disadvantages of sole proprietorshipps
Unlimited liability
Lack of continuity
Lack of
money
Limited management skills
Difficulty in hiring employees
A voluntary association of two or more persons to act as co-owners of a business for profit is called _____________
partnerships
What is a less common form of ownership than sole proprietorship or corporation?
Partnerships
There is a limit on the maximum number of partners in partnerships. T/F
False no legal limit
Most only have 2
What type of business have multiple partners? (3)
Large accounting
law
advertising
_________ are usually a pooling of special talents or the result of a sole proprietor taking on a partner
partnerships
What is the type of partner is A person who assumes full or shared responsibility for operating a business?
general
________ ____________ is a business co-owned by two or more general partners who are liable for everything the business does
general partnership
What is the type of partner is A person who contributes capital to a business but has no management responsibility or liability for losses beyond the amount he or she invested in the partnership?
limited partner
______ _________ is a business co-owned by one or more general partners who manage the business and limited partners who invest money in it
limited partnership
What is an agreement listing and explaining the terms of the partnership; written is preferable to oral?
articles of partnership
What should the articles of partnership state? (5)
Who will make final decisions
What each partner’s duties will
be
How much each partner will invest
How much profit or loss
each partner receives or is responsible for
How the
partnership can be dissolved
6 advantages of partnerships
Ease of start-up
Availability of capital and
credit
Personal interest
Combined business skills and
knowledge
Retention of profits
No special taxes
4 advantages of partnerships
Unlimited liability
Management disagreements
Lack of
continuity
Frozen investment
_________ is An artificial person created by law with most of the legal rights of a real person, including the rights to start and operate a business, to buy or sell property, to borrow money, to sue or be sued, and to enter into binding contracts.
Corporations
Corporations only exists on paper. T/F
True
Approximately how many corporations are in the US?
6 million
What percentage of all business are comprised of corporations?
19%
What percentage do corporations account for sales revenues?
83%
______ is The shares of ownership of a corporation
stock
_____________ is A person who owns a corporation’s stock
stockholder
________ ___________ is A corporation whose stock is owned by relatively few people and is not sold to the general public
closed corporation
___________ _____________ is A corporation whose stock is bought and sold on security exchanges and can be purchased by any individual
open corporation
What is the process of forming a corporation?
incorporation
What do most experts recommend when forming a corporation?
consulting a lawyer
_____________ corporation is A corporation in the state in which it is incorporated
domestic
_______________ corporation is A corporation in any state in which it does business except the one it which it is incorporated
foreign
___________ corporation is a corporation chartered by a foreign government and conducting business in the U.S.
alien
a contract between the corporation and the state in which the state recognizes the formation of the artificial person that is the corporation and includes
articles of incorporation
Stock owned by individuals or firms who may vote on corporate matters but whose claims on profit and assets are subordinate to the claims of others
commmon stock
Stock owned by individuals or firms who usually do not have voting rights but whose claims on dividends are paid before those of common-stock owners
preferred stock
A distribution of earnings to the stockholders of a corporation
dividend
A legal form listing issues to be decided at a stockholders’ meeting and enabling stockholders to transfer their voting rights to some other individual or individuals
proxy
Who is The top governing body of a corporation, the members of which are elected by the stockholders?
Board of directions
Who is Responsible for setting corporate goals, developing strategic plans to meet those goals, and the firm’s overall operation?
Board of directors
Who are experienced managers or entrepreneurs from outside the corporation who have specific talents?
outside directors
Who are top managers from within the corporation?
Inside directors
Who are The chairman of the board, president, executive vice presidents, corporate secretary, treasurer, and any other top executive appointed by the board?
Corporate officers
Who's responsible to Implement the chosen strategy and direct the work of the corporation, periodically reporting results to the board and stockholders?
corporate officers
Hierarchy of corporate structure?
Stockholder (owners) ELECT Board of directors APPOINTS officers HIRE employees
5 advantages of Corporations
Limited liability
Ease of raising capital
Ease of
transfer of ownership
Perpetual life
Specialized management
5 disadvantages of corporations
Difficulty and expense of formation
Government regulation
and increased paperwork
Conflict within the corporation
Double taxation
Lack of secrecy
*Good to know for exam
...
_________________ is A corporation that is taxed as if it were a partnership (income taxed as personal income of stockholders)
S-corporations
2 advantages of S-corporations
Avoids double taxation of a corporation
Retains the
corporation’s legal benefit of limited liability
Which corporation has criteria that:
no more than 100 stockholders, one class of outsanding stock, domestic, no partnerships/corporations/nonresident-alien stockholders.
S-corporation
_____________ is a Form of business ownership combining the benefits of a corporation and partnership but avoids some of restrictions and disadvantages
Limited-liability company (LLC)
3 Advantages of Limited-liability company
Avoids double taxation of a corporation
Retains the
corporation’s legal benefit of limited liability
Provides more
management flexibility
What are the 2 differenes between LLC and S-corp?
LLCs not restricted to 100 stockholders
LLCs have fewer
restrictions on who can be a stockholder
What are Corporations organized to provide social, educational, religious, or other services, rather than to earn a profit?
Not-for-profit corporations
Examples of Not-for-profit corporations
Charities, museums, private schools, colleges, and charitable organizations are organized as not-for-profits primarily to ensure limited liability
2 ways to have growth from within
Introducing new products
Entering new markets
______________ is the purchase of one corporation by another; essentially the same as an acquisition
merger
_______ ___________ is a situation in which the management and board of directors of the firm targeted for acquisition disapprove of the merger
hostile takeover
_______ ____________ is an offer to purchase the stock of a firm targeted for acquisition at a price just high enough to tempt stockholders to sell their shares
tender offer
________ _________ is a technique used to gather enough stockholder votes to control a targeted company
proxy fight
3 types of mergers
Horiztonal
Vertical
Conglomerate
Merger between firms that make and sell similar products
horizontal
Merger between firms that operate at different but related levels of production and marketing a product, where usually one firm is a supplier or customer of the other.
vertical
Merger between firms in completely different industries
Conglomerate