Quiz 2 chapter 5 Flashcards
sole proprietorship
businesses owned and usually managed by a single individual
SPC
Partnership
voluntary agreements where two or more people act as co-owners; there are several types
SPC
corporations
legal entities, separate from their owners
SPC
4 sole proprietorships: advantages
- retention of control
- pride of ownership
- retention of profits
- possible tax advantage
5 sole proprietorships: disadvantages
- limited financial resources
- unlimited liability
- limited ability to attract and retain talented employees
- heavy workload and responsibilities
- lack of permanence
General partnerships: advantages
- pooled financial resources
- shared responsibilities
- ease of formation
- tax advantages
general partnerships: disadvantages
- unlimited liability
- disagreements
- difficulty in withdrawing from partnership
- lack of continuity
general partnership
all partners have the right to participate in the management of the firm, and all share unlimited liability
Limited partnership
includes at least one general partner and at least one limited partner (who has limited liability)
limited liability partnership
all partners are actively involved but they have some form of liability, which varies by jurisdiction
acquisitions
when one firm buys another
mergers
two companies agree to become one
corporations look for
growth opportunities, operational efficiencies, and competitive advantages
divestitures
allow a firm to streamline operations and focus
spin off
setting up the division or part of the business as a separate entity (sell shares to existing shareholders)