Chapter 4 Flashcards
Sole Proprietorship
a business that is established, owned, operated, and often financed by 1 person
Partnership
an association of 2 or more individuals who agree to operate a business together for profit
Written Partnership Agreement
spelling out the terms & conditions of the partnership
General Partnership
all partners share in the management & profits, each having unlimited liability for all the business obligations
Limited Partnership - General Partners
have unlimited liability
Limited Partnership - Limited Partners
liability is limited to the amount of their investment
Limited Liability Partnership (LLP)
similar to a general partnership except that partners are not held responsible for the business debt & liability
Limited Liability Limited Partnership (LLLP)
a limited partnership with the addition of limited liability; protects the general partner from debt & liabilities
Liability
the state of being responsible for something, especially by law
Corporation
a legal entity subject to the laws of the state in which it was formed, where the right to operate as a business is issued by state charter; taxable, and owners are not liable
Bylaws
provide legal & managerial guidelines for operating the firm
C-Corporation
conventional or basic form of corporate organizations
S-Corporation
hybrid entity; taxed like a partnership, more restrictions, no personal liability to debt
Limited Liability Corporation (LLC)
hybrid organization; easy start-up, limited restrictions, same liability as corporations; popular after a 1988 tax ruling giving them the option to be taxed as partnership or corporation
Cooperative
legal entity with several corporate features; not subject to taxes, do not retain profits
Buyer Cooperative
combine members’ purchasing power; ex. Ace Hardware
Seller Cooperative
popular in agriculture, individual producers join to compete against large producers
Joint Venture
2 or more companies form an alliance to pursue a specific project
Franchising
a form of business organization that involves a franchisor
Franchisor
the company supplying the product or service concept
Franchisee
the individual or company selling the goods or services in a certain geographic area
Franchise Agreement
a contract that allows the franchisee to use the franchisor’s business name, trademark, & logo
Merger
occurs when 2 or more firms combine to form a new company
Acquisition
a corporation or investor group finds a target company and negotiates with its board of directors to purchase it
Horizontal Merger
companies at the same stage in the same industry merge to reduce costs, expand product offerings, or reduce competition
Vertical Merger
company buys a firm in its same industry, often involved in an earlier or later stage of the production or sales process
Conglomerate Merger
brings together companies in unrelated businesses to reduce risk
Leveraged Buyout (LBO)
specialized, financially motivated, corporate takeovers financed by large amounts of borrowed money - as much as 90% of the purchase price
Merger Motives
to improve the overall performance of the merged firms through cost savings, elimination of overlapping operations, improved purchasing power, increase market share, & reduced competition
