Chapter 4 Flashcards
Sole proprietorships are most common in ….
Retail, service and agriculture
A business that is owned (and usually operated) by one person
Sole proprietorship
Two main advantages of sole proprietorship
Simplicity and individual control
Holds a business owner personally responsible for all the debt of the business
Unlimited liability
A voluntary association of two or more persons to act as co-owners of a business for profit
Partnership
A person who assumes full or shared responsibility for operating a business
General partner
— is a person who invests money I’m a business but has no management responsibility or liability for losses beyond what he or she has in vested in the partnership
Limited partner
Refer to an agreement listing and explaining the terms of the partnership
articles of partnership
Partnership agreement should state
Who makes financial decisions Partners duties Investment of each partner Profit or loss each receive or lose What happens is partner wants to dissolve or partner dies
Least popular form of business ownership
Partnership
An artificial person created by law with most of the legal rights of a real person including the right to start and operate a business, to buy or sell property, to barrow money, to sue or be sued, and to enter into binding contracts
Corporation
The shares of ownership of a cooperation.
Stock
Corporation who’s stock is owned by a relatively few people and is not sold to the general public
Closed corporation
A corp. who stock can be bought and sold to any individual
Open corporation
A corporation in the state in which it is incorporated
Domestic corporation
A corp. in any state which it does business exept the one in which it is incorporated
Foreign corporation
A corporation chartered by a foreign government and conducting business within the us
Alien corp.
Stock owned by individuals or firm who may vote on corporate matters but whose claims on profits and assets are subordinate to the claims of others
Common stock
Stock owned by individuals or firms who usually do not have voting rights but who’s 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 individuals
Proxy
The top governing body of a corporation the members which are elected by the stockholders
Board of directors
Where to incorporate. Two main factors that help determaim where to incorporate are…
The cost of incorporating in one state compared to another
The advantages and disadvantages of each states corporate law and tax structure
Articles of incorporation usually include
Firms name + address Incorporaters name +address Purpose of corporation Max amount and types of stock to be issued Rights/privledges of stockholders Length of time the corp. is to exist
The two basic types of stock are
Common + preferred
Top governing body of a corporation and is elected by the stockholders
Board of directors
The chairman of the board, president, 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 owners financial liability to the amount of money that he or she has paid for the corporations stock
Limited liability
Both … Corp. and .. Corp. are taxed like a partnership.
LLC and S-corporation
S-corporAtion
A corp. that is taxed as though it were a partnership
To qualify for s-corp. a firm must meet the fallowing requirements
No more than 100 stockholders Stock holders must be individuals estates or certain trusts 3) only one class of outstanding stock 4) domestic corp. 5)no alien stockholder 6) all stockholders must agree to from an S-corp.
A form of business ownership that combines the benefits of a corporation and a partnership whil avoiding some of the disadvantages of both
LLC
An 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 invididuals or firms organized to preform a specific task that requires a large amount of Capitol
Syndicate
The Purchase of one corporation by another
Merger
A situation in which the management and board of directors of a firm targeted for acquisition disapprove of the merger
Hostile takeover
An offer to purchase the stock of a firm targeted for acquisition at a price just high enough to temp stockholders to sell their shares
Tender offer
A technique used to gather enough stockholder votes to control a targeted company
Proxy fight
Three types of growth by merger are
Horizontal merger
Vertical merger
Conglomerate merger
…is a merger between two firms that make or sell similar products in similar markets
Horizontal merger
Is a merger between two firms that operate at different levels in the production and marketing of a product
Generally one of the merging firms is either a supplier or a customer of the other
Vertical merger
Merger that takes place between firms in completely different industries
Conglomerate merger
Is essentially the same thing as a merger, but the term usually is use to describe a large corporations purchase of other corporations
Acquisition
72% of all American business firms are
Sole proprietorships
4 percent of total revenues come from this type of business ownership
Sole proprietorship
It is allways a good idea to have s written agreement or…… When setting forth the terms of s partnership
Articles of partnership
Is a carefully constructed guide for the person starting a business
Business-plan
12 parts to a business plan
1) introduction 2)executive summary
3) benefits to the community 4) company and industry 5) management team 6) manufacturing/operations plan
7) labor force 8) marketing plan 9) financial plan 10) exit strategy 11)critical risks/assumptions 12) appendix
A corporation organized to provide a social, educational, religious, or other service rather than to earn a profit
Not-for-profit corporation
Various charities, museums, private schools, colleges, and charitable organizations are organized as not-for-profit corporations
Primarily to ensure….
Limited liability
Once non-profit corps meet specific Internal Revenue Service guidelines they can obtain…
Tax-exempt status
A form of business that combines the benefits of a corporation and a partnership while avoiding some of the restrictions and disadvantages of those forms of ownership
LLC limited liability company
In theory stockholders are able to control the activities of the corporation because they…
Elect the board of directors who appoint the corporate officers
Small business
3 major categories
Production
Distribution
Service
Production 19%
Distribution 33%
Service 48%
Small business VS not small
Sometimes it’s measured by employee count and sometimes by revenue
In manufacturing and mining anything less than 500 employees is small business
70% of entrepreneurs are between the ages of what and what
24-44
30-34 is the highest with 21%
3 major reasons why some entrepreneurs fail
Lack of Capitol
Lack of management
Over expansion
