Chapter 6 Flashcards
Sole proprietorship
A for of business in which a single owner does business himself or herself and requires only a license to open
Unlimited personal liability
The sole proprietor is personally liable for all business debts. (Disadvantage)
Access to Capital
In short, proprietors, unless they have great personal wealth , find it difficult to raise additional money while maintaining sole ownership. They usually put all of what they have into the business and often use their personal resources as collateral on existing loans
Continunity
If the proprietor dies or becomes incapacitated, the business automatically terminates
C-Corporation
The most common form of business ownership. A corporation is a separate legal entity apart from its owners and may engage in business, issue contracts, sue and be sued, and pay taxes.
Stockholders
Owners of the business.
Board of directors
The board establishes the general policies of the company and, to a greater or lessor extent depending on the particular corporation, can become involved in various details of the operating activities.
Corporate Officers
The functions of each officer are defined by the board of directors. the corporate officers include the President, Secretary (clerk), and Treasurer
President
In charge of day to day operations under the directives of the board of directors
Secretary
Is in charge with handling the paperwork of the corporation, such as preparing minutes of stockholder and director meetings, sending out notices, and preparing stock certificates
Treasurer
Is charged with guardianship of the corporate finances.
State incorporation/registration
If your business incorporates in a particular state, the corporation can be sued in that state even you do not conduct any activities there.
Corporate Stock
The ownership of a corporation lies in the stockholders and is evidenced by stock certificates issued to the shareholders
Issued shraes
the stock that a company sells to investors to generate capital
Transferability of ownership
If stockholders in a corporation are displeased with the progress of the business, they can sell their shares to another individual, subject only to restriction on transfer of shares
Double taxation
Corporations are taxed on their profits up to 35%. When shareholders are distributed profits in the form of dividends they can also be taxed up to 35%.
S-Corporation
A corporation that elects under federal and state tax laws to be taxed like a partnership.
General Partnership
An association with two or more people carrying on as co-owners of a business for profit
Limited Partnership
Limits the liability of the partners to the extent of their capital contributions
Unlimited Liability
At least one member of every partnership must be a general partner. That partner has unlimited personal liability.
Limited liability company
A blend of some of the best characteristics pf corporations, partnerships, and sole proprietorships. It is a separate entity like a corporation, but is entitled to be treated as a sole proprietorship or a partnership for tax purposes.
