Chapter 4

Question 1

Sole proprietorships

Answer 1

Businesses owned and operated by one individual; the most common form of business organization in the United States.

Question 2

Partnership

Answer 2

A form of business organization defined by the Uniform Partnership Act as “an association of two or more persons who carry on as co-owners of a business for profit.”

Question 3

General Partnership

Answer 3

A partnership that involves a complete sharing in both the management and the liability of the business.

Question 4

Limited partnership

Answer 4

A business organization that has at least one general partner, who assumes unlimited liability, and at least one limited partner, whose liability is limited to his or her investment in the business.

Question 5

Articles of partnership

Answer 5

Legal documents that set forth the basic agreement between partners.

Question 6

Corporation

Answer 6

A legal entity, created by the state, whose assets and liabilities are separate from its owners.

Question 7

Stock

Answer 7

Shares of a corporation that may be bought or sold.

Question 8

Dividends

Answer 8

Profits of a corporation that are distributed in the form of cash payments to stockholders.

Question 9

Corporate charter

Answer 9

A legal document that the state issues to a company based on information the company provides in the articles of incorporation.

Question 10

Private corporation

Answer 10

A corporation owned by just one or a few people who are closely involved in managing the business

Question 11

Public corporation

Answer 11

A corporation whose stock anyone may buy, sell, or trade.

Question 12

Initial public offering (IPO)

Answer 12

Selling a corporation’s stock on public markets for the first time.

Question 13

Quasi-public corporations

Answer 13

Corporations owned and operated by the federal, state, or local government

Question 14

Nonprofit corporations

Answer 14

corporations that focus on providing a service rather than earning a profit but are not owned by a government entity.

Question 15

Board of directors

Answer 15

A group of individuals, elected by the stockholders, to oversee the general operation of the corporation, who set the corporation’s long-range objectives.

Question 16

Preferred Stock

Answer 16

A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.

Question 17

Common stock

Answer 17

Stock whose owners have voting rights in the corporation, yet do not receive preferential treatment regarding dividends.

Question 18

Joint Venture

Answer 18

A partnership established for a specific project or for a limited time.

Question 19

S corporation

Answer 19

Corporation taxed as though it were a partnership with restrictions on shareholders.

Question 20

Limited liability company (LLC)

Answer 20

Form of ownership that provides limited liability and taxation like a partnership but places fewer restrictions on members.

Question 21

Cooperative (co-op)

Answer 21

An organization composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization.

Question 22

Merger

Answer 22

The combination of two companies to form a new company.

Question 23

Acquisition

Answer 23

The purchase of one company by another, usually by buying its stock.

Question 24

Leveraged buyout (LBO)

Answer 24

A purchase in which a group of investors borrows money from banks and other institutions to acquire a company, using the assets of a purchased company to guarantee repayment of the loan.