Benefits of a Company Flashcards
BUSINESS
Name two common forms of business ownership besides a company
Sole proprietorship, partnership
What are the characteristics of a sole proprietorship?
Owned by one person, unlimited liability
What are the advantages of a partnership?
Shared resources, shared workload
What is a key benefit of a company’s legal status?
Separate legal entity, limited liability
What does “limited liability” mean?
Owners are not personally responsible for company debts
How is profit-sharing different in a company compared to a sole proprietorship?
Profits can be distributed as dividends to shareholders
How is ownership and management structured in a company?
Shareholders own, board of directors manage
How can a company raise capital more easily?
By selling shares to investors
What is a benefit of a company’s life span?
Continues even if owners change
How is taxation different for a company?
Companies are taxed separately from owners
What is a challenge of establishing a company compared to a sole proprietorship?
More complex legal requirements, higher costs
What is a key step in forming a company?
Registering with the appropriate government authority
What is a legal requirement of a company name?
Must be unique and not misleading
Define “memorandum of incorporation”
A document that outlines the company’s purpose and structure
Define “notice of incorporation”
A document that confirms the company’s registration
Define “prospectus”
A document that provides information to potential investors
