Chapter 11 Flashcards
What is a sole proprietorship
- It is the most ‘basic form’ of business ownership
- It’s used by a ‘one-person business
- Here the business is not a legally separate entity meaning the owner is personally liable for the business
- Difficult for owners to generate/obtain capital to grow the business
What does Proprietor mean?
It means owner and operator of the business
What is a ‘partnership’?
It’s the same concept as sole proprietorship however here there are ‘2’ or more owners.
What is a ‘limited partnership’?
It has two types of partners in this relationship:
- A general partner –> They actively participate to the business and has personal liability
- The limited partner does not actively participate in managing the business and is only liable to the amount invested
How are ‘hedge funds structured’?
- As a limited partnership
What is a ‘general partnership’?
+ All partners have unlimited liability so they are personally liable for the business and actions of all partners. ‘
What is a ‘corporation”
+ The ownership is separate from the management
+ Ownership is transferred by the buying and selling of shares
+ It’s a separate legal entity
How are corporations governed?
- Government act of incorporation
- The corporation’s carter
- By-laws
What are shareholders rights?
+ When the decisions in a corporation are made by the BOD or management
+ Things such as selecting directors, and selling the corporation require shareholder approval
+ If a decision is made 50.1% approval has to come from shareholders
What is a ‘proxy’?
Allows someone else to vote on behalf of the shareholders
What are board of directors
They are elected by shareholders to ensure the corporation’s decisions are in the best interests of shareholders
Where do we usually see the CEO
on the BOD
What is the COB
They oversee chair board meetings and they usually have the most respected power.
What are boards required to have a minimum of?
Independent directors
What are ‘independent directors’
These are directors not apart of management or align with the biggest shareholder