Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Foundations of Business Administration > Part 2 - Constitutional Business Decisions > Flashcards

Part 2 - Constitutional Business Decisions Flashcards

1
Q

What are some of the decisions to take when founding a company?

A
  • What is the purpose of the company?
  • What are the capital requirements?
  • Which legal form to choose from?
  • Which location?
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

On what foundation activities depend on?

A

Foundation activities depend to a large extent to the legal form.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are some of the characteristics of small businesses?

A
  • Small businesses seek a secure and stable income. They avoid risks;
  • Small businesses lack strategy and planning for dramatic growth;
  • Small businesses do not dominate their market.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How is the financing aspect of small businesses?

A
  • They can be financed from personal resources including capital borrowed from friends or relatives;
  • They can receive government-regulated small business promotion agencies/firms;
  • They can be financed on a minor scale from bank loans.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the characteristics of Entrepreneurship?

A
  • Motivated to create new ventures as well as to grow and expand existing businesses;
  • Vision, aspiration and strategy;
  • Accept both risks and opportunities.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How is the financing aspect of Entrepreneurship?

A
  • Professional investments firms (angle investor, venture capital, private equity…) and bank loans;
  • Personal resources;
  • Government-promotion programs.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Why is the choice of a legal form a fundamental business decision and what does it affect?

A

The choice of a legal form is a fundamental business decision which affects managerial and financial issues.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the terms in German for the following legal forms of companies?

  • Sole proprietorships;
  • Partnerships;
  • Corporations;
  • Cooperatives;
  • Private Foundation.
A
  • Einzelunternehmen;
  • Personengesellschaften;
  • Kapitalgesellschaften;
  • Genossenschaften;
  • Stiftung des privaten Rechts.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the major forms of legal forms of companies?

A

The major forms of legal forms of companies are:

  • Sole Proprietorships;
  • Partnerships and;
  • Corporations.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the special forms (mix between partnerships and corporations) of companies?

A

The special forms of companies include:

  • Cooperatives and
  • Private Foundations.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the definition of sole proprietorship?

A

A sole prorpietorship is a business owned and usually operated by one person (Kaufmann) who is responsible for all its debts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are some of the features from the sole proprietorship?

A
  • “privacy of the business”;
  • The company is no separate legal person;
  • Regular financial accounting should be conducted, but no requirement for auditing and publication;
  • Name of the company is mostly free, with few restrictions;
  • Taxation included in the personal income tax declaration, additional business tax (Gewerbesteuer);
  • Financing and other capabilities depend strictly on the abilities of the owner.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are the advantages of a sole proprietorship?

A
  • Freedom;
  • Simple to form and to cancel;
  • Low tax burden
    (Tax laws permit owners to treat sales revenues and operating expenses as part of their personal income, additional business tax in limited range)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are the disadvantages of a sole proprietorship?

A
  • Unlimited liability;
  • Lack of continuity;
  • It depends on the personal resources from the owner and;
  • It is difficult to get institutional financial support to start up or to expand.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the definition of partnerships?

A

Partnerships are businesses with 2 or more owners who share both the operations of the firm and its financial responsibilities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the typical types of partnerships and their correspondent names in German? (4)

A
  • Company constituted under the German civil law:
  • > Gesellschaft des bürgerlichen Rechts (GbR/BGB);
  • General commercial partnership:
  • > Offene Handelsgesellschaft (OHG);
  • Limited commercial partnership:
  • > Kommanditgesellschaft (KG);
  • (Dormant/Silent/undisclosed partnership):
  • > Stille Gesellschaft.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the main characteristics of a company constituted under the German civil law (Gesellschaft des bürgerlichen Rechts)?

Template:

  • Number of partners
  • Objective
  • Legal person
  • Liability type
  • Financial accounting
A
  • Number of partners: 2 or more legal persons, based on a contract of association, which is form free;
  • Objective: Achievement of a common goal;
  • Legal person: No own legal person;
  • Liability type: Unlimited liability of all partners;
  • Financial accounting: Should be conducted, but no requirement for auditing nor publication.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What are the main characteristics of a general commercial partnership (Offene Handelsgesellschaft)?

Template:
-Number of partners:

  • Liability type:
  • Management:
  • Restriction in withdrawal of capital and in profit / loss distribution:
  • > Capital:
  • > Profit/Loss:
A
  • Number of partners: 2 or more partners (natural or legal persons);
  • Liability type: All partners have unlimited liabilities;
  • Management: All partners are authorized and obliged to manage the company
  • Restriction in withdrawal of capital and in profit / loss distribution:
  • > Capital: Only 4% of the capital investment can be taken out from the company per year by the partners
  • > Profit/Loss: First 4% return on capital employed, then distribution per head (can be changed by contract).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the main characteristics of a limited commercial partnership (Kommanditgesellschaft)?

Template:
- Types of partners:

  • Who manages the company:
  • Rights from the limited partners:
  • Restriction in withdrawals of capital and in profit/loss distribution:
  • Financing advantage:
  • Market for partners:
A
  • Types of partners:
  • > General partner (Komplementär) with unlimited liability
  • > Limited partner (Kommanditist) liable to the extent of his investment.
  • Who manages the company: Only general partners are authorized to run the company
  • Rights from the limited partners: Limited partners only have the control right, but no management rights.
  • Restriction in withdrawals of capital and in profit/loss distribution: Analogue regulations as for OHG concerning withdrawals of capital and profit/loss distributions
  • Financing advantage: Improved financing through additional (limited) partners without restrictions of the decision making competencies
  • Market for partners: No organized market for partners (like the stock exchange)
20
Q

What are the main characteristics of a silent partnership (Stille Gesellschaft)?

Template:

  • Silent Partner:
  • Liability type:
  • Participation in the profits/ losses:
  • Management:
  • Motivations for the different partners:
  • > For the Business owner:
  • > For the silent partner:
A
  • Silent Partner: He contributes in the manner that his capital contribution goes into the assets of the business owner. The name of the investor remains undisclosed.
  • Liability type: Liability to a third party only by the official business owner, not silent partners.
  • Participation in the profits/ losses: Silent partners participate in the profits and the loss participation can be excluded by contract.
  • Management: Silent partners have no involvement in the company´s management and have a limited control right.
  • Motivations for the different partners:
  • > For the Business owner: Getting additional capital contribution under his own name (demonstrating financial strength)
  • > For the silent partner: Participate in the profits of the business without liability obligation to a third party and without the disclosure of his name.
21
Q

How does the U.S. Law differentiates the different types of partners in a silent partnership?

A
  1. Silent: No voice in the affairs of the business;
  2. Secret: Undisclosed
  3. Dormant: Both silent and secret
22
Q

What are the main advantages of partnerships?

  • Taxation:
  • Laws:
  • Ability to grow:
A
  • Single taxation;
  • No laws that require partners to file for agreements with any government agency;
  • Ability to grow by adding new talent and money.
23
Q

What are the main disadvantages of partnerships?

  • Liabilities
  • Continuity
  • Ownership transfer
A
  • Unlimited liabilities;
  • Lack of continuity;
  • Difficulty in transferring ownership.
24
Q

What are the main characteristics from corporations?

  • Legal entity
  • Liability
A
  • Legally considered as an entity (legal person) separated from its owners;
  • Only the corporation has unlimited liabilities
  • Liability of individual owners limited to their invested capital
25
Q

What are the 3 major types of corporations and what are their names in German?

A
  • Stock Corporation / Aktiengesellschaft (AG);
  • Limited Liability Company / Gesellschaft mit beschränkter Haftung (GmbH);
  • Societas European (SE).
26
Q

What are the main advantages from corporations?

  • Liabilities
  • Capital raise
  • Continuity
A
  • Limited liability to investors;
  • Raising huge amounts of capital;
  • Continuity of business (“legal life” independent from its founders and owners).
27
Q

What are the main disadvantages from corporations?

  • Taxation
  • reporting requirements
  • costs of foundations
A
  • Double taxation (at corporate and shareholder-value);
  • Extended reporting requirements for large corporations;
  • High costs for the foundation.
28
Q

What is a stock corporation?

A

A stock corporation is a corporation, in which equity investors participate through the purchase of socks (shares).

29
Q

What are the requirements for founding a stock corporation?

A
  • More than 5 shareholders

- At least 50000 Euros required to found a stock corporation

30
Q

Public corporation:

  • shares and public
  • where can you buy shares?
A
  • Widely distributed shares, available for sale to the general public
  • Listed in stock exchanges
31
Q

Private/(closely held) corp. :

  • number of shareholders
  • sale of participation in the company:
A
  • Held by only a few shareholders

- Not available for sale to the general public

32
Q

What are the types of shares in a stock corporation and what are it main characteristics?

A
  • Common stock / Stammaktie : Every share incorporates a voting right & the right for dividend payments
  • Preferred stock / Vorzugsaktie: Every share is guaranteed a fixed dividend, but there are no voting rights included.
33
Q

What are the 3 types of shares with regard to their transferability and what are their main characteristics?

A
  • Bearer share (Inhaberaktie): Standard case, voting right, unproblematic transfer, particularly suitable for the stock exchange.
  • Registered share (Namensaktie): Dedicated to a person, filed in an “Aktienbuch”. Transfer via “indorsement” / “Übergabe”, i.e. written notice and signature on the back of the stock.
  • Registered share not freely transferable (Vinkulierte Namensaktie): Transfer inter vivos contingent upon the consent of the corporation
34
Q

What are the major financial rules in a stock corporation when it comes to:

  • Accounting principles
  • Publication of an annual report
  • Profit and loss distribution
  • Financing possibilities
  • External financing possibilities
A
  • Accounting principles strictly regulated by the AktG and HGB
  • All big corporations have the obligation to publish the annual report in a clearly defined form according to the law (Publizitätsgesetz)
  • Profit and loss distribution relative to the amount of nominal shares. Basis for profit distribution (dividend payout) is the net income shown in the balance sheet after allocation to reserves (gesetzliche Rücklagen)
  • Very good financing possibilities via issuing new shares
  • Furthermore external financing possibilities through right to issue corporate bonds, which is legally strictly regulated
35
Q

What are the main characteristics of a limited liability company (GmbH) when it comes to :

  • Number of persons
  • Capital stock (Stammkapital)
  • Transfer of shares
  • Main difference from stock corporations
A
  • Corporation held by one or more persons
  • Capital stock >= 25000 euros, divided into shares >= 250 euros each
  • Shares can be sold or transmitted, however, the transfer has to be recorded in notarial form, often only with the approval of the other owners
  • Difference from an AG: More flexible regulations, individual adjustments possible
36
Q

What is the simplest form of corporation thought for small to medium businesses? This form is also used by large corporations in order to open subsidiaries.

A

Limited Liability company (GmbH)

37
Q

What are the organs from a limited liability company?

A
  • Shareholder Meeting (Gesellschafter-Versammlung)
  • Managing directors (Geschäftsführer)
  • Supervisory board, compulsory if employees > 500
38
Q

How can an increase of equity capital occur in a limited liability company?

A
  • Admission of new shareholders or

- Additional payments of existing shareholders

39
Q

Profit & Loss distribution of a limited liability company:

A

Related to share capital

40
Q

How do the accounting, auditing and publicity work in a limited liability company?

A

Analogue to an AG

41
Q

What is the main motivation to use the legal form SE?

A

-Each EU country has its own national laws for corporations and in order to facilitate cross-boundary capital merger & acquisition activities, between countries in the EU, the legal form Societas European has been introduced in 2004.

42
Q

What are the 2 main requirements to be able to create an SE?

  • Subsidiaries
  • Minimal stock capital
A
  • The company must have subsidiaries in at least 2 EU countries or merger of 2 companies from 2 EU countries
  • Minimum stock capital of 120000 euros required
43
Q

Mixture Form - GmbH & Co. KG:

  • General Partner
  • Other limited partners
  • Liability
  • Managerial control
  • Exchange of shareholders
  • Accounting, auditing and publicity
A
  • The general partner (“Komplementär”) in this case is not a natural person, but a GmbH
  • Other limited partners (Kommanditen) as in a normal KG
  • Formally the general partner has unlimited liability, but as the GmbH is the general partner, unlimited personal liability is avoided
  • Managerial control through GmbH, who appoints a Managing Director
  • Easy exchange of shareholders, because of Gmrs and limited partners can change without problems
  • Accounting, auditing and publicity treated as a corporation
44
Q

Mixture Form - Kommanditgesellschaft auf Aktien (KGaA):

  • What is it?
  • Types of owners
  • Legal regulations
  • What is the advantage of being the general partner here?
A
  • Mixture of partnership and corporation (AG)
  • At least 1 owner is treated as the general partner with unlimited liability. The other shareholders with limited liability have the same rights and obligations as in an AG
  • Same legal regulations regarding codetermination, auditing and publishing like an AG
  • The general partner holds a very strong position in the voting and in the company´s management
45
Q

Cooperatives:

  • Definition
  • Objective
  • Basic philosophy
  • Minimum number of members
  • Minimum capital
  • What happens if a member exits?
A
  • Voluntary economic association with its own legal personality and limited liability
  • Self-help, promotion of member´s business through common management of operation, not profit maximization
  • Democratic self-administration, e.g. voting right does not depend on capital share
  • At least 3 members
  • No minimum capital required
  • When a member exits the company, he gets his capital paid off
46
Q

Foundation of civil law:

  • Definition
  • Publicity obligations
  • Possible problems
A

A foundation is an institution that pursues a purpose determined by the founder often on a charitable/non-profit basis. The founder holds full autonomy in determining the purpose and the charter of the foundation. However, later change is not possible.

  • No publicity obligations
  • Capital raising, flexibility and transparency
47
Q

What is one of the main advantages of a small company owned by a family?

A

-Unity of ownership and control

Foundations of Business Administration (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions