chapter 2: types of businesses Flashcards
sole propietorship
business owned by one person.
pros: easier and cheaper start up. owner receives all profits
cons: unlimited liability, owner is responsible for all losses
partnership
business owned by two or more individuals.
pros: complementary talents, double the money
cons: compromise
general partnership
unlimited liability, each partner could be held responsible for the other partner’s business losses
limited partnership
limited liability, only responsible for themselves.
co-operative
owned by the workers or members who buy business’ products or use its services. profits are distributed according to how much each member spends
corporations
a legal entity separate from its owners. individuals who own shares of a corporation are shareholders. a board of directors runs a corporation.
pros: limited liability.
cons: expensive and timely. shareholders with only a few shares will not have a lot of control
shareholders
owner of a company’s shares. the more shares that a shareholder owns, the more control they have (1 vote for every share).
franchises
a joint venture between a franchisor and a franchisee. pros: franchise agreement provides franchisee with a ready made, fully operational business and brand recognition that is appealing to consumers.
cons: franchise fee, must abide to franchisor.
franchisor
owns the trademarks and business model
franchisee
owns and operates the business using the business model licensed by the franchisor
debt financing
raising capital by borrowing money from a lender to be repaid at a future date.
equity financing
raising capital through the sale of shares.
board of directors
responsible for managing and supervising the activities of the corporation.
