Primary Forms Of Business Ownership

Question 0

Advantages of sole proprietorship

Answer 0

Simplicity 
Single layer of taxation 
Privacy 
Flexibility and control 
Fewer limitations on personal income 
Personal satisfaction

Question 1

Sole Proprietorship

Answer 1

Business owned by a single person

Question 2

Disadvantages of Sole Proprietorship

Answer 2

Financial Liability 
Demands on the owner 
Limited managerial perspective 
Resource limitations 
No employee benefits for the owner 
Finite life span

Question 3

Unlimited liability

Answer 3

Legal condition under which any damages or debts incurred by a business are the owner’s personal responsibility

Question 4

Partnership

Answer 4

Unincorporated company owned by two or more people

Question 5

General partnership

Answer 5

Partnership in which all partners have joint authority to make decisions for the firm and joint liability for the firm’s financial obligations

Question 6

Limited Partnership

Answer 6

Partnership in which one or more persons act as general partners who run the business and have the same unlimited liability as sole proprietors

Question 7

Limited Liability

Answer 7

Legal condition in which the maximum amount each owner is liable for is equal to whatever amount each invested in the business

Question 8

Master Limited Partnership (MLP)

Answer 8

Partnership that is allowed to raise money by selling units of ownership to the general public

Question 9

Limited Liability Partnership (LLP)

Answer 9

Partnership in which each partner has unlimited liability only for his or her own actions and at least some degree of limited liability for the partnership as a whole

Question 10

Advantages of Partnerships

Answer 10

Simplicity 
Single layer of taxation 
More resources 
Cost sharing 
Broader skill and experience base 
Longevity

Question 11

Disadvantages of partnerships

Answer 11

Unlimited liability
Potential for conflict
Expansion, succession, & termination issues

Question 12

Corporation

Answer 12

Legal entity, distinct from any individual persons, that has the power to own property and conduct business

Question 13

Shareholders

Answer 13

Investors who purchase shares of stock in a corporation

Question 14

Public corporation

Answer 14

Corporation in which stock is sold to anyone who has the means to buy it

Question 15

Private corporation

Closely held corporation

Answer 15

Corporation in which all the stock is owned by only a few individuals or companies and is not made available for purchase by the public

Question 16

Advantages of corporations

Answer 16

Ability to raise capital
Liquidity
Longevity
Limited liability

Question 17

Disadvantages of corporations

Answer 17

Cost & complexity 
Reporting requirements 
Managerial demands 
Possible loss of control 
Double taxation 
Short term orientation of the stock market

Question 18

S corporation

Answer 18

Type of corporation that combines the capital raising options and limited liability of a corporation with the federal taxation advantages of a partnership

Question 19

Limited Liability Company (LLC)

Answer 19

A structure that combines limited liability with the pass-through taxation benefits of a partnership; the number of shareholders is not restricted, nor is members’ participation in management

Question 20

Benefit Corporation

Answer 20

A profit seeking corporation whose charter specifies a social or environmental goal that the company must pursue in addition to profit

Question 21

Subsidiary

Answer 21

Corporation primarily or wholly owned by another company

Question 22

Parent company

Answer 22

Corporation that owns one or more subsidiaries

Question 23

Holding company

Answer 23

Special type of parent company that owns other companies for investment reasons and usually exercises little operating control over those subsidiaries

Question 24

Alien Corporation

Answer 24

Corporation that operates in the United States but is incorporated in another country

Question 25

Foreign Corporation

Out of state corporation

Answer 25

Company that is incorporated in one state but that does business in several other states where it is registered

Question 26

Domestic Corporation

Answer 26

Corporation that does business only in the state where it is chartered

Question 27

Charted

Answer 27

Incorporated