Business: Chapter 4

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1

A business that is owned (and usually operated) by one person is called _________ ________

Sole proprietorships

2

What is the simplest form of business ownership adn the easiest to start?

Sole proprietorships

3

What is the most popular form of business ownership?

Sole proprietorships

4

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

5 disadvantages of sole proprietorshipps

Unlimited liability
Lack of continuity
Lack of money
Limited management skills
Difficulty in hiring employees

6

A voluntary association of two or more persons to act as co-owners of a business for profit is called _____________

partnerships

7

What is a less common form of ownership than sole proprietorship or corporation?

Partnerships

8

There is a limit on the maximum number of partners in partnerships. T/F

False no legal limit

Most only have 2

9

What type of business have multiple partners? (3)

Large accounting

law

advertising

10

_________ are usually a pooling of special talents or the result of a sole proprietor taking on a partner

partnerships

11

What is the type of partner is A person who assumes full or shared responsibility for operating a business?

general

12

________ ____________ is a business co-owned by two or more general partners who are liable for everything the business does

general partnership

13

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

14

______ _________ 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

15

What is an agreement listing and explaining the terms of the partnership; written is preferable to oral?

articles of partnership

16

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

17

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

18

4 advantages of partnerships

Unlimited liability
Management disagreements
Lack of continuity
Frozen investment

19

_________ 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

20

Corporations only exists on paper. T/F

True

21

Approximately how many corporations are in the US?

6 million

22

What percentage of all business are comprised of corporations?

19%

23

What percentage do corporations account for sales revenues?

83%

24

______ is The shares of ownership of a corporation

stock

25

_____________ is A person who owns a corporation’s stock

stockholder

26

________ ___________ is A corporation whose stock is owned by relatively few people and is not sold to the general public

closed corporation

27

___________ _____________ is A corporation whose stock is bought and sold on security exchanges and can be purchased by any individual

open corporation

28

What is the process of forming a corporation?

incorporation

29

What do most experts recommend when forming a corporation?

consulting a lawyer

30

_____________ corporation is A corporation in the state in which it is incorporated

domestic

31

_______________ corporation is A corporation in any state in which it does business except the one it which it is incorporated

foreign

32

___________ corporation is a corporation chartered by a foreign government and conducting business in the U.S.

alien

33

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

34

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

35

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

36

A distribution of earnings to the stockholders of a corporation

dividend

37

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

38

Who is The top governing body of a corporation, the members of which are elected by the stockholders?

Board of directions

39

Who is Responsible for setting corporate goals, developing strategic plans to meet those goals, and the firm’s overall operation?

Board of directors

40

Who are experienced managers or entrepreneurs from outside the corporation who have specific talents?

outside directors

41

Who are top managers from within the corporation?

Inside directors

42

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

43

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

44

Hierarchy of corporate structure?

Stockholder (owners) ELECT Board of directors APPOINTS officers HIRE employees

45

5 advantages of Corporations

Limited liability
Ease of raising capital
Ease of transfer of ownership
Perpetual life
Specialized management

46

5 disadvantages of corporations

Difficulty and expense of formation
Government regulation and increased paperwork
Conflict within the corporation
Double taxation
Lack of secrecy

47
card image

*Good to know for exam

...

48

_________________ is A corporation that is taxed as if it were a partnership (income taxed as personal income of stockholders)

S-corporations

49

2 advantages of S-corporations

Avoids double taxation of a corporation
Retains the corporation’s legal benefit of limited liability

50

Which corporation has criteria that:

no more than 100 stockholders, one class of outsanding stock, domestic, no partnerships/corporations/nonresident-alien stockholders.

S-corporation

51

_____________ 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)

52

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

53

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

54

What are Corporations organized to provide social, educational, religious, or other services, rather than to earn a profit?

Not-for-profit corporations

55

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

56

2 ways to have growth from within

Introducing new products

Entering new markets

57

______________ is the purchase of one corporation by another; essentially the same as an acquisition

merger

58

_______ ___________ is a situation in which the management and board of directors of the firm targeted for acquisition disapprove of the merger

hostile takeover

59

_______ ____________ 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

60

________ _________ is a technique used to gather enough stockholder votes to control a targeted company

proxy fight

61

3 types of mergers

Horiztonal

Vertical

Conglomerate

62

Merger between firms that make and sell similar products

horizontal

63

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

64

Merger between firms in completely different industries

Conglomerate