Legal Forms Of Business Flashcards
What is unlimited liability?
Owners are responsible to pay for all debts of the business
What is limited liability?
Owners are responsible for losses only up to what they invest
What are the three general forms of business ownership?
- Sole proprietorship
- Partnership
- Corporation
What are the advantages of sole proprietorship?
- Easy to start
- Independence of ownership
- Simple tax rules
What are the disadvantages of sole proprietorship?
- Unlimited liability
- Limited financial and human resources
- Large time commitment
- Limited growth potential
What are the advantages of partnerships?
- More resources available
- Can share the load
- Longer survival
- Independent legal structure from owners
- Limited liability for silent partners
- No double taxation
What are the disadvantages of partnerships?
- Unlimited liability for general partners
- Division of profit
- Potential for disagreements
- Exit conditions must be spelled out in partnership agreement
What are the advantages of corporations?
- Limited liability
- Greater access to money (selling shares)
- Separation of ownership from management
- Ease of ownership transfer
What are the disadvantages of corporations?
- More costly to form
- Must keep accurate records
- Potential for conflict with board of directors
- Double taxation
- Separation of ownership from management
What state is the best to incorporate in?
Delaware
What are the three basic types of corporations?
- Private
- Public
- Non-profit
What is the best business type for most businesses?
LLC (limited liability company)
What are the four factors to consider in a SWOT analyses?
- Strengths (location, price, values, resources)
- Weaknesses (cash flow, reliability of data, morale, financials)
- Opportunities (global influences, innovation, influences)
- Threats (political effects, market demand, loss of key staff)
What is a SWOT analyses for?
In this context, analyzing a new business venture or proposition
