Chapter 4 Flashcards
A business that is owned (and usually operated) by one person
Sole proprietorship
Advantages of sole proprietorship
- Ease of startup and closure
- Pride of ownership
- Retention of all profits
- No special taxes
- Flexibility of being your own boss
Disadvantages of sole proprietorship
- Unlimited liability
- Lack of continuity
- Lack of money
- Limited management skills
- Difficulty of hiring employees
A legal concept that holds a business owner personally responsible for all the debts of a business
Unlimited liability
A voluntary association of two or more persons to act as a co-owners of a business for profit
Partnership
A person who assumes full or shared responsibility for operating a business
General partner
A person who invests money in a business but has no management responsibility or liability for losses beyond the amount they invested in the partnership
Limited partner
Advantages of a partnership
- Ease of start up
- Availability of capital and credit
- Personal interest
- Combined business skills and knowledge
- Retention of profits
- No special taxes
Disadvantages of a partnership
- Unlimited liability
- Management disagreements
- Lack of continuity
- Frozen investment
An artificial person, created by the law, with most of the legal rights of a real person
Corporation
The shares of an ownership or corportation
Stocks
A person who owns a corporations stocks
Stockholder
A corporation whose stock is not sold to the general public
Closed corporation
A corporation whose stock can be bought and sold by any individual
Open stock
A corporation in the state in which it is incorporated
Domestic corporation
A corporation in any state in which it does business except the one which it incorporated
Foreign corporation
A corporation chartered by a foreign government and conducting business in the united states
Alien corporation
The most basic form of corporate ownership and whose owners may vote on corporate policies
Common stock
Stock owned by individuals or firms who usually do not have voting rights but whose claims on dividends are paid before those of common stock owners
Preferred stock
A distribution of earnings to the stockholders of a corporation
Dividend
A legal form listing issues to be decided at a stockholders’ meeting and enabling stockholders to transfer their voting rights to some other individual or indiviuals
Proxy
The top governing body of a corporation, the members of which are elected by the stockholders
Board of directors
The chairperson of the board, presidents, executive vice president, corporate secretary, treasurer, and any other top executive appointed by the board of directors
Corporate officers
A feature of corporate ownership that limits each owner’s financial liability to the amount of money that they have paid for the corporation’s stock
Limited liability
Advantages of a corporation
- Limited liability
- Ease of raising capital
- Ease of transfer of ownership
- Perpetual life
- Specialized management
Disadvantages of a corporation
- Difficulty and expense of formation
- Government regulation and increased paperwork
- Conflict within the corporation
- Double taxation
- Lack of secrecy
A corporation that is taxed as though it were a partnership
S Corporation
A form of business ownership that combines the benefits of a corporation and a partnership while avoiding some of the restrictions and disadvantages of those forms of ownership
Limited liability company (LLC)
A corporation organized to provide a social, educational, religious, or other service rather than to earn a profit
Not-for-profit organization
A agreement between two or more groups to form a business entity in order to achieve a specific goal or to operate for a specific period of time
Joint venture
A temporary association of individuals or firms organized to perform a specific task that requires a large amount of money
Syndicate
The combining of two corporations or other business entities to form one business
Merger
A situation in which the management and board of directors of a firm targeted for acquisition disapprove of the merger
Hostile takeover
