Chapter 8 exam 2 Flashcards

1
Q

Define sole proprietorship

A

A business that is established, owned, operated, and often financed by one person

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2
Q

What is LLP and define it

A

Limited liability partnership - A partnership is which each partner is protected from responsibility for the acts of other partners, and each party’s liability is limited to harm resulting from that party’s own actions

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3
Q

What does LBO stand for and define it

A

Leveraged buyout- A corporate takeover financed by large amounts of borrowed money; can be done by outside investors or by a company’s own management

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4
Q

What does LBO stand for and define it

A

Leveraged buyout- A corporate takeover financed by large amounts of borrowed money; can be done by outside investors or by a company’s own management

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5
Q

What are advantages of sole proprietorship

A
Easy and inexpensive to form
Profits all go to the owner
Direct control over business
Relative freedom from government regulations
No special taxation
Easy to dissolve
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6
Q

What are the disadvantages of Sole Proprietorship

A
Unlimited liability
Difficulty in raising capital
Limited managerial expertise
Trouble finding qualified employees
Persona time commitment
Unstable business life
Losses are the owners responsibility
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7
Q

Advantages of a partnership

A
Easy to form
Availability of capital
Diversity of skills and expertise
Flexibility
No special taxes
relative freedom from government control
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8
Q

Disadvantages of partnerships

A

Unlimited liability
potential for conflicts between partners
Complexity of profit sharing
Difficulty exiting or dissolving

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9
Q

What are the three main types of partnerships

A

general, limited and limited liability

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10
Q

What is the main reason for a corporation to go public

A

to raise capital, expand or maintain growth other are exit strategy for the original owners

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11
Q

What is a leveraged buyout

A

when a group of investors or management of the company offer to buy shares of the others In the market and is successful in obtaining th required number of shares

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12
Q

What are the 5 main steps in incorporating a company

A
  1. selecting a company name
  2. Writing the articles of incorporation and filing them with the appropriate government office
  3. Paying the required fees and axes
  4. Holding an organizational meeting
  5. Adopting bylaws, electing directors, and passing the first operating resolutions
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13
Q

Advantages of Large Corporations

A
limited liability- Are a separate identity 
Ease of transferring ownership
Unlimited life
Ability to attract financing
Ability to attract potential employees
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14
Q

disadvantages of Corporations

A

Double taxation of profits
Cost and complexity of formation
More government restrictions
Losses not written off

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15
Q

What are the ways in which Cooperatives differ from other businesses and explain them

A
  1. Purpose- focus is to meet the common needs of their members
  2. Control Structure- use the the one member-one vote system to ensure that people, not capital control the organization
  3. Allocation of Profit- This is based on the extent to which members use the cooperative, not the number of shares held
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16
Q

What are the Internationally Recognized Principles cooeratives follow

A
voluntary and open membership
democratic member control 
member economic participation
Autonomy and independence
education, training, and information
cooperation among others
concern of community
17
Q

What are the benefits of a joint venture

A

infrastructure costs decreased
production costs decreased
risk decreased

18
Q

What are the reasons for joint ventures to form

A

project might be to big
gain access to new markets
access to new products and technology

19
Q

Advantages of a franchise

A

Increased ability for the franchisor to expand
Recognized name, product and operating concept
Management training and assistance
Financial assistance

20
Q

Disadvantages of Franchises

A

Loss of control
Cost of franchising
Restricted operating freedom

21
Q

Motives to merge

A

eliminating of overlapping operations
improved purchasing power
improved market share
reduced competition