chapter 8 Flashcards
the ownership structure of a company or firm
business organization
authorization to operate a business issued by a local government
business license
laws in a ciity or town that designate certain areas, or zones, for residential and business use
zoning laws
the legal obligation to pay debts
liability
a business organization owned by two or more persons who agree on a specific division of responsibilities and profits
partnership
general partnership
a type of partnership in which all partners share equally in both responsibility and liability
limited partnership
a type of partnership in which only one partner id required to be a general partner
limited liability partnership
a type of partnership in which all partners are limited partners
a partnership agreement that spells out each partners rights and responsibilities
articles of partnership
the money and other valuables belonging to an individual or business
assets
a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a giving area
business franchise
the share of earnings given by a franchise as payment to the franchiser
royalties
corporation
a legal entity, or being, owned by individual stockholders, each of whom has limited liability for the firms debts
stock
a certificate of ownership in the corperation
a type of corporation that issues stock to only a few people, who are often family members
closely held corporation
a type of corporation that sells stock on the open market
publicly held corporation
a formal contract issued by a corporation or other entity that includes a promise to repay borrowed money with interest at fixed intervals
bond
a license to form a corporation issued by a state government
certificate of incorporation
the portion of corporate profits and out to stockholders
dividend
a type of business with limited liability for the owners, with the advantage of not paying corporate income tax
limited liability corporation
horizontal merger
the combination of two or more firms competing in the same market with the same good or service
vertical merger
two or more firms involved in different stages of producing the same good or service
conglomerate
a business combination merging more than three businesses that produce unrelated products or services
a large corporation that produces and sells its goods and services in more than one country
multinational corporation
What are four elements common to all businesses?
expenses
advertising
receipts and record keeping
risk
what two steps must entrepreneurs take before starting a business?
they must gather the factors of production
decide on the form of business organization that best suits their purpose
List and briefly explain the four advantages of sole proprietorships
- easy to start - with just a small amount of paper work and legal exspense, just about anyone can start such a business
- relatively few regulations - least regulated form of business organization
- sole receiver profit - owner keeps profits
- full control - all the shots called by one owner
list and briefly explain the three disadvantages of sole proprietorships?
unlimited personal liability - personally responsible for all business debts
limited access to resources - pay for things out of pocket
lack of permanence - when an owner of a business dies and no one buys or takes over and keeping employees
list and briefly explain the advantages of partnerships
ease to start up - no written partnership law
financial impact - one or more person contributes
shared decision making - joining strengths and weaknesses
list and briefly explain the three disadvantages of partnerships
unlimited liability - could louse everything
potential for conflict - disagreements between partners
lack of permanence - if one partner dies then the other could receive sole ownership
list the two advantages of corporations to stockholders
- gain benefit of limited liability
- provide flexibility
list the three advantages of corporations to the corporation
- more potential growth
- raise large amounts of capital
- long life
list the four disadvantages of corporations
- more regulation
- difficulty and expense of start up
- double taxation
- loss of control
a business owned and managed by a single individual
sole proprietorship
