Chapter 5 Forming a Business Flashcards
How to form a business
Conventional (C) Corporation
A state-chartered legal entity with authority to act and have liability seperate from it’s owners.
Aquisition
One company’s purchase of the propety and obligations to another company.
Conglomerate Merger
The joining of firms in completely unrelated industries.
Cooperative
A business owned and controlled by the people who use it- producers, consumers, or workers with similar needs who pool their resources for mutual gain.
Corporation
A legal entity with authority to act and have liability apart from it’s owners.
Franchise
The right to use a specific business’s name and sell it’s products or services in a given territory.
Franchise Agreement
An arrangment whereby someone with a good idea for a business sells 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 products.
General Partnership
A partnership in which all owners share in operating the business and in assuming liability for the business’s debts.
General Partner
An owner (partner) who has unlimited liability and is active in managing the firm.
Horizontal Merger
The joining of two firms in the same industry.
Leveraged Buyout (LBO)
An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing.
Limited Liability
The responsibility of a business’s owners for losses only up to the amount they invest; limited partners and shareholders have limited liability.
Limited Liability Partnership (LLP)
A partnership that limits partners’ risk of losing their personal assests to only their own acts and omissions of people under their supervision.
Limited Partner
An owner who invests money in the business but does not have any managment responsibility or liability for losses beyond the investment.
Limited Partnership
A partnership with one or more general partners and one or more limited partners.
Master Limited Partnership (MLP)
A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.
Merger
The result of two firms forming one company.
Limited Liability Company (LLC)
A company similar to an S corporation but without the special eligibility requirements.
Partnership
A legal form of business with two or more owners.
S Corporation
A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships.
Sole Proprietorship
A business that is owned and usually managed, by one person.
Unlimited Liability
The responsibility of business owners for all of the debts of the business.
Vertical Merger
The joining of two companies involved in different stages of related business.
