Chapter 5: Business Ownership Flashcards
Partnership
A legal form of business with two or more owners
Sole proprietorship
A business that is owned, and usually managed, by one person
Corporation
A legal entity with authority to act and have liability separate from its owners
Unlimited liability
The responsibility of business owners for all the debts of the business
General partnership
All owners share in operating the business and assuming liability for the business debts
Limited partnership
One or more general partners and one or more limited partners
General partner
Owner who has unlimited liability and is active in managing the firm
Limited partner
Owner who invests money in the business but doesn’t have any management responsibility or liability for losses beyond the investment
Limited liability
The responsibility of a business’s owners for losses only up to the amount they invest
Master limited partnership
A partnership that looks much like a corporation but is taxed like a partnership and avoids the corporate income tax
Limited liability partnership
A partnership that limits partners’s risk of losing their personal assets to only their own acts and omissions of people under their supervision
Conventional corporation
A state chartered legal entity with authority to act and have liability separate from its owners
S Corporation
A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships
Limited liability company
A company similar to an S Corporation but without the special eligibility requirements
Merger
The result of two firms forming one company
Acquisition
One company’s purchase of the property and obligations of another company
Vertical Merger
The joining of two companies involved in different stages of related businesses.
Horizontal merger
The joining of two firms in the same industry
Conglomerate merger
The joining of firms in completely unrelated industries
Leveraged buyout
An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing
Franchise agreement
An arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory
Franchisor
A company that develops a product concept and sells others the rights to make and sell the product
Franchise
The rights to use a specific business’s name and sell its products or services in a given territory
Franchisee
A person who buys a franchise
