Chapter 3- Section 1

Question 0

What is a sole proprietorship?

Answer 0

Business owned and run by one person

Question 1

What are the three main forms of businesses organizations in the economy today?

Answer 1

Sole proprietorship, the partnership, and the corporation

Question 2

How easy is a sole proprietorship to form?

Answer 2

Easy because it involves almost no requirements except for occasional business licenses and fees

Question 3

What are the advantages of sole proprietorships?

Answer 3

Ease of starting up, relative ease of management, owner enjoys the profits of successful management without having to share them with other owners, does not have to pay separate business income taxes because the business is not recognized as a separate legal entity, psychological satisfaction, the ease of getting out of business

Question 4

What are the disadvantages of a sole proprietorship?

Answer 4

Unlimited liability, difficulty in raising financial capital, size and efficiency, has limited managerial experience, difficulty of attracting qualified employees, limited life

Question 5

The owner is personally and fully responsible for all losses and debts of the business

Answer 5

Unlimited liability

Question 6

A stock of finished goods and parts in reserve

Answer 6

Inventory

Question 7

Firm legally ceases to exist when the owner dies, quits, or sells the business

Answer 7

Limited life

Question 8

A business jointly owned by two or more persons

Answer 8

Partnership

Question 9

One in which all partners are responsible for the management and financial obligations of the business

Answer 9

General partnership

Question 10

At least one partner is not active in the daily running of the business, although he or she may have contributed funds to finance operation

Answer 10

Limited partnership

Question 11

Because more than one owner is involved what is usually drawn up to specify arrangements between partners?

Answer 11

Eagle papers called articles of partnership

Question 12

What are the advantages of partnerships?

Answer 12

Easy to establish, easy to manage, lack of special taxes on it, usually attract financial capital more easily than proprietorships, slightly larger size which often makes for more efficient operations, easier to attract top talent into their organizations

Question 13

What are the disadvantages of general partnerships?

Answer 13

Each partner is fully responsible for the acts of all other partners

Question 14

What’s is the disadvantage of a limited partnership?

Answer 14

Limited partners have limited liability which means that the investors responsibility for the debts of the business is limited by the size of his or her investment in the firm

Question 15

What are the disadvantages of a partnership?

Answer 15

Limited life, potential conflict between partners, things not always working out as planned

Question 16

A court granted permission to an individual or business to cease or delayed debt payments

Answer 16

Bankruptcy

Question 17

A form of business organization recognized by law as a separate legal entity having all the rights of an individual

Answer 17

Corporation

Question 18

A government document that gives permission to create a Corporation

Answer 18

Charter

Question 19

To form a corporation you must what?

Answer 19

File for permission from the national government or the state where the business will have its headquarters

Question 20

Ownership certificates in the firm

Answer 20

Stock

Question 21

Shares that are sold to investors

Answer 21

Stockholders or shareholders

Question 22

A check representing a portion of the corporate earnings to each stockholder

Answer 22

Dividend

Question 23

Basic ownership of a corporation, Receives one vote for each share of stock

Answer 23

Common stock

Question 24

Nonvoting ownership shares of the corporation, receive dividends before common stockholders receive bears, get their investment back before common stockholders, do not have the right to elect members to the board of directors

Answer 24

Preferred stock

Question 25

A ballot that gives stockholder’s representative the right to vote on corporate matters

Answer 25

Proxy

Question 26

What are the advantages of a corporation?

Answer 26

Ease of raising financial capital, directors of the corporation can hire professional managers to run the firm, provides limited liability for its owners, unlimited life, easy transferring ownership

Question 27

A written promise to repay the amounts borrowed at a later date

Answer 27

Bond

Question 28

Amount borrowed

Answer 28

Principal

Question 29

The price paid for the use of another’s money

Answer 29

Interest

Question 30

What are the disadvantages of a corporation?

Answer 30

The corporate structure and the difficulty and expense of getting a charter, the owners or shareholders have little saying how the business is run after they have voted for the Board of Directors, double taxation of corporate profits, subject to more government regulations and other forms of business

Question 31

Stockholders dividends are taxed twice once as corporate profit and again as personal income

Answer 31

Double taxation