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Question 1

a business owned and controlled by one person. Oldest, simplest, and most common type of business organization

Answer 1

sole proprietorship

Question 2

specify the areas of a city or country where various types of business activities can be pursued.

Answer 2

zoning laws

Question 3

anything of value that a borrower agrees to give up if he or she is not able to repay a loan

Answer 3

collateral

Question 4

a business that is owned and controlled by two or more people

Answer 4

partnership

Question 5

partners enjoy equal decision making authority. Each also has unlimited liability.

Answer 5

general partnership

Question 6

partners join as investors who rarely take an active role in business decisions

Answer 6

limited partnership

Question 7

responsibility for a debt

Answer 7

liability

Question 8

the length of a firm’s life

Answer 8

longevity

Question 9

advantages of a sole proprietorship:

Answer 9

1. easy start up
2. full control
3. exclusive rights to profits

Question 10

disadvantages of a sole proprietorship:

Answer 10

1. unlimited liability
2. sole responsibility
3. limited growth potential
4. lack of longevity

Question 11

advantages to a partnership:

Answer 11

1. easy start up
2. specialization
3. shared decision making
4. shared business losses

Question 12

disadvantages of a partnership:

Answer 12

1. unlimited liability
2. potential for conflict
3. lack of longevity

Question 13

four advantages of a corporation:

Answer 13

1. limited liability also benefits a corporation’s founders
2. separation of ownership from management
3. capital can be raised with relative ease
4. Longevity

Question 14

for stockholders, the major advantage is limited liability, what does this mean?

Answer 14

if a corporation fails, the loss to its stockholders is limited to the amount they invested

Question 15

three disadvantages of a corporation:

Answer 15

1. expensive and difficult to obtain
2. governments regulate corporations much more closely
3. slow process of decision making

Question 16

two disadvantages for stockholders:

Answer 16

1. they can earn a profit without actually working for the company
2. lack of control

Question 17

three advantages of a combination:

Answer 17

1. efficiency
2. potential for lower costs
3. easy to acquire financial capital

Question 18

two disadvantages of a combination:

Answer 18

1. practices lead to higher rates on unemployment

2. can lead to higher prices for customers

Question 19

for small business owners, a major disadvantage is unlimited liability. what does this mean?

Answer 19

if you borrow money and your company fails and cannot repay the loan, you are still responsible to make payments- which might mean selling personal items.