Chapter 35 - Forms of Business Organizations

Question 1

Sole Proprietorship

Answer 1

1) Sole proprietor / owner in sole control of the management and the profits
Advantages
2) very few legal formalities
3) complete control over the management of the organization = freedom to hire employees, determine hours, expand/change the business
4) Keep all profits, taxed as personal income
Disadvantages
1) personal liable for any losses or obligations associated with the business
2) might need to sell personal assets to settle business debts
3) You can be sued personally

Question 2

General Partnership

Answer 2

DEF—Voluntary association between two or more persons who co-own a business and share profit

1) Legal Position: not a separate legal entity in most states
2) Creation: easy. partners generally not required to create an official or written agreement
3) Control: each partner is entitled to equal, total control
4) Liability: each partner has unlimited personal liability for partnership debts (in limited partnership limited partners liable for capital contributions)
5) Lifetime: life of partneres
6) Taxation: profits taxed as income for partners
7) Transferability: non-transferable
8) Interest Dissolution: partnership dissolved when one partner dies or when partners agree to dissolve it

Question 3

Limited Liability Company (LLC)

Answer 3

1) Legal: separate legal entity
2) Creation: file a form with a state agency and name must include LLC
3) Control: member-managed –> members have control decisions made by majority vote / manager-managed –> members designate a group of persons to manage the frim
4) Liability: limited to his or her capital investments
5) Lifetime: can exist beyond the illness or death of its members
6) Taxation: profits taxed as income for partners unless otherwise noted on tax form. If 2 or more partners may choose to be taxed as corp or LLC
7) Transferability: Generally Transferable
8) Dissolution majority vote to dissolve the business, disassociation does not dissolve the entire business`

Question 4

Corporation

Answer 4

1) separate legal entity
2) Creation: mst be created according to state law. Filing Articles of Incorporation and issuing inital stock cert to shareholders
3) Control: separation of ownership and control
4) liability: limited to a loss of capital contribution
5) Lifetime: unlimited
6) taxation: profits taxed as income to corp and as income to partners in divideds (Double Taxation)
7) Transferability: Generally unlimited transfer
8) Interest Dissolution: Corp not dissolved when shareholders die. Involves extensive paperwork and approval by at least 2/3 of all voting shares

Question 5

S Corporation

Answer 5

taxed like a partnership as long as it follows certain regulations

Question 6

Cooperative

Answer 6

members pool their resources together to gain some kind of advantage in the market

Question 7

Joint Stock Company

Answer 7

1) Company members hold transferable shares while all the goods of a company are held in the name of partners
2) mixture of a corporation and a partnership

Question 8

Syndicate

Answer 8

an investment group that comes together for the purpose of financing a specific large project

Question 9

Business Trust

Answer 9

a business organization governed by a group of trustees who operate the trust for the beneficiaries

Question 10

Joint Venture

Answer 10

a relationship between two or more persons or corporations created for a specific business undertaking

Question 11

Franchise

Answer 11

a business that exists bc of an arrangement b/t an owner of a trademark and a person who sells goods or services under that trademark
expands internationally