Chapter 14 - Small Bus Orgs

Question 1

entrepreneur

Answer 1

• one who initiates and assumes the financial risk of a new business enterprise and undertakes to provide or control its management

Question 2

What are the main factors to consider when choosing an organizational form?

Answer 2

1. ease of creation
2. liability of the owners
3. tax considerations
4. need for capital

Question 3

What are the three traditional forms of business organization?

Answer 3

• sole proprietorship
• partnership
• corporation

Question 4

joint and several liability

Answer 4

• a doctrine under which a plaintiff can file a lawsuit against
  
  • all of the partners together (jointly) or
  • one or more of the partners separately (severally, or individually)
• All partners in a partnership can be held liable regardless of whether the partner participated in, knew about, or ratified the conduct that gave rise to the lawsuit

Question 5

dissociation

Answer 5

• the severance of the relationship between a partner and a partnership
• when the partner ceases to be a partner

Question 6

partnership termination process

Answer 6

• Dissolution
  
  • commencement of the winding up process.
• Winding up
  
  • collecting, liquidating, and distributing the partnership assets

Question 7

dissolution

Answer 7

• the formal disbanding of a partnership or a corporation

Question 8

winding up

Answer 8

• discharging liabilities
• collecting, liquidating, and distributing assets
• partnership continues to exist legally until winding up is complete

Question 9

Limited Liability Company (LLC)

Answer 9

• a hybrid form of business enterprise
• limited liability of a corporation
• tax advantages of a partnership
• entity is a citizen of every state in which its members are citizens

Question 10

member

Answer 10

• a person who has an ownership interest in a limited liability company

Question 11

Articles of Organization

Answer 11

• document by which an LLC is formed
• filed with a designated state official

Question 12

advantages of an LLC

Answer 12

• limited liability
• taxation
• management
• foreign investors

Question 13

disadvantages of an LLC

Answer 13

• state LLC statues not uniform
• less than 1/5 of states adopted ULLCA

Question 14

Operating Agreement

Answer 14

• an agreement in which LLC members set forth the details of
• how the business will be managed and operated
• state statutes typically give the members wide latitude in determining governing rules for their organization

Question 15

management of an LLC

Answer 15

• member-managed – all members manage

_OR _

• manager-managed – some, all, or none of the members manage