business organization

Question 1

sole proprietorship and advantages/disadvantages

Answer 1

• individual carrying on business

Advantages: low start up cost, freedom, tax advantages

disadvantages: 100% liable, hard to raise capital

Question 2

corporation and advantages/disadvantages

Answer 2

legal entity that is separate and distinct from its owners

advantages: limited liability, easy to raise capital
disadvantages: regulated, expensive, conflicts

Question 3

debt vs equity

Answer 3

debt = obligation to pay. financing comes from the bank

equity = value of something after deducting mortgage and liability costs - investments come from shareholders or profits

Question 4

5 requirements for Directors an officers fiduciary duty

Answer 4

1. loyalty and act on best interest of company
2. act in best interest of another party
3. only sue officers and not shareholders
4. minority shareholders can sue directors
5. duty to shareholders

Question 5

partnership and advantages and disadvantages

Answer 5

a group of individuals or corporations who pool their resources together to run a business

advantages: easy to form, low start up costs, tax advantages
disadvantages: unlimited liability, divided authority, conflicts

Question 6

fiduciary duty

Answer 6

a relationship of special trust in partnership - cant be altered

Question 7

limited partnership

Answer 7

one general partner and one limited partner. the general partner runs the business and has unlimited liability. the limited partner is only liable for their cash contributions

Question 8

limited liability partnership

Answer 8

limits the liability of a partner to only the liability of that partner and their assets