Chapter 6 Flashcards
What are the three major forms of business management?
Sole proprietorships, partnerships, and corporations.
What is a sole proprietorship?
A business that is owned and usually managed by only one person.
What is a partnership?
When two or more parties legally agree to become co-owners of a business.
What is a corporation?
A legal entity with authority to act and have liability separate from its owners.
What are the six advantages of a sole proprietorship?
Ease of starting and ending the business, being your own boss, pride of ownership, retention of company profit, no special taxes, and less regulation.
What are the six advantages of a sole proprietorship?
Ease of starting and ending the business, being your own boss, pride of ownership, retention of company profit, no special taxes, and less regulation.
What are the eight disadvantages of sole proprietorships?
Unlimited liability (the risk of personal losses), limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited lifespan, and possibly pay higher taxes.
What is the difference between general partnerships and limited partnerships?
In a general partnership, all owners share in operating the business and in assuming liability for the businesses’ debts. A limited partnership has one or more general partners and one or more limited partners.
What is the difference between a general partner and a limited partner?
A general partner is an owner who has unlimited liability and is active in managing the firm. A limited partner is an owner who invests money into the business but does not have any management responsibility or liability for losses beyond their investment.
What are the six advantages of partnerships?
More financial resources, shared management and pooled/complementary and knowledge, longer survival, shared risk, no special taxes, and less regulation.
What are the five disadvantages of partnerships?
Unlimited liability, division of profits, disagreement among partners, difficulty of termination, and possibly pay higher taxes.
What are four examples of provisions usually states in a partnership agreement?
The name of the business, the names and addresses of all partners, the duties of each partner, and the contributions made by each partner.
What are the two classes of corporations in Canada?
Public corporation: has the right to issue stock shares to the public, which means its shares may be listed on a stock exchange.
Private corporation: usually controlled by a small number of shareholders and its shares are not listed on a stock exchange.
What are the seven advantages of corporations?
Limited liability, ability to raise more money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management.
What are the seven disadvantages of corporations?
Initial cost, extensive paperwork, double taxation, two tax returns, size, difficulty of termination, and possible conflict with shareholders and their board of directors.
