Chapter 7- Business Types and Planning Flashcards
define sole proprietorship
a type of business characterized by one owner
What are the advantages of sole proprietorship?
- simple to organize and manage
- one level of taxation
- owner doesn’t answer to other people
what are some disadvantages of sole proprietorship?
- fully liable for the debts, contracts, and wrongful acts and negligent acts resulting from the business.
- one allowed if only one owner
define a general partnership
exists when two or more people own a business.
what does a partnership outline?
- the scope of the partnership’s business
- the percentage of the business each partner owns
- how profits and losses will be allocated
- how the partnership will be managed
- whether new partners can join
- selling or transfer of partnership ownership interest
- termination of the partnership
What are some advantage of a general partnership?
- great deal of flexibility in partnership design.
- generally not subject to federal income taxation.
- who will report the income on their personal tax returns.
what are some disadvantages of a general partnership?
- personal liability
Define a limited partnership
When two or more people come together to form a business. however, there is a general partner and limited partners.
Define a general partner
manages the partnership and is personally liable for the partnership’s debts and other legal obligations
define a limited partner
does not have the right to manage the limited partnership, but she is not personally liable for the partnership’s legal obligations.
Define a limited liability partnership
provides all partners a degree of limited liability.
What is a limited liability limited partnership?
Where you have general partners and limited partners.
Define a corporation
a business entity legally distinct form its owners
What role does the board of directors have in a corporation?
They govern the corporation.
What role do the officers have in a corporation?
They manage the day-to-day operations of the corporation