forms of business Flashcards
what are the equity options
-sole proprietorship
-partnership
-corporation
-limited liability company
what is a sole proprietorship
a business owned and managed by a single individual
-easy, quick, simple, affordable
- full control with minimal administration
- risk, credibility is only as good and yours
- challenge raising additional capital
what is a partnership
a business owned by two or more people
- limited and general
- voluntary association, unlimited liability, limited life, limited access to money, partners keep control, relatively unregulated
- single taxation
limited vs. general partnerships
limited: no mutual agency, provision for limited liability for some, do not share risk/wealth
general: mutual agency, unlimited liability, share risk/wealth
what is a corporation
A business that is owned by many investors and is a separate legal entity
- limited liability, limited stockholder power, unlimited life, government regulation, double taxation
- domestic, foreign, alien
what is the order of the corporate ladder
owners/stockholders -> board of directors -> officers -> managers -> employees
domestic vs. foreign vs. alien corporation
domestic: operate in state in which it is incorporated
foreign: operate in states other than state of incorporation
alien: organized in one country and operate in another
what are the types of stock
common: voting rights(proxy) and residual claims to assets
preferred: not vote, first claim on income(preferred dividend) and first claim on assets after debt is paid
what is fiduciary responsibility
a corporation is designed and required by US law to create wealth for stockholders
what is a B (benefit) corporation
certified b labs meet rigorous standards of social and environmental performance, accountability, and transparency
- more than 4,000 certified B corps
-3 P approach: people, plant, profit
-gaining credibility and recognition
what is a limited liability company (llc)
a form of business ownership that offers both limited liability to its owners and flexible tax treatment
-combines advantages of partnership and corporation
-pros: limited liability, pass through taxation, and flexible
-cons: double taxation, burden of corporate structure
what is a merger
merges two firms into one
what is acquisition
one firm buys another
-horizontal: same industry
-vertical: distribution channel
-conglomerate: unrelated business
