Chapter 5- How To Form A Business Flashcards
Sole proprietorship
A business owned and managed by one person.
Partnership
A legal business with more than 2 owners.
Corporation
A legal entity with authority to take action and be liable separate from the owners.
Unlimited liability
Taking full responsibility for the business and its losses as the owner.
General partnership
All owners share equal responsibility
Limited partnership
Some general partners and some limited partners.
General partner
One person who’s liability is unlimited and is involved in managing.
Limited partner
Investor but doesn’t hold any debt liability besides investment and no manager responsibilities.
Limited liability
The business owners losses are only up to the amount they invest limited partners and stockholders limited liability.
Master limited partnership MLP
Acts like a corporation but taxed like a partnership which avoids the corporate income tax. Traded in stock exchange.
Limited liability partnership LLP
Limits partners risk of losing personal assets to just acts and omissions of themselves and ones under their supervision.
Conventional C corporation
State chartered entity w/ authority to act and have liability separate from its owners.
Limited liability company LLC
A company similar an S corporation w/o the special eligibility requirements.
Merger
Two firms joining one company
Acquisition
A company’s purchase of the property and obligations of another company.
Vertical merger
Two company’s joining but involved in different stages of related business.
Ex. Soft drink and artificial sweetener
Horizontal merger
Joining if two firms in the same industry.
Conglomerate merger
Joining firms in completely unrelated industries.
Ex. Soft drink and snack food company
Levered buyout LBO
Employees, managers, or private investors attempting to buyout the stockholders by borrowing.
Franchise agreement
An agreement where someone w a good idea for the business buys the rights to use the business name and sell a product or service to others in a area.
Ex. McDonalds and 7-11
Franchisor
A company that develops a product concept and sells others the rights to make and sell the products.
Franchise
The right to use a specific business name and sell its product in a given territory.
Franchisee
A person who buys a franchise
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.
