Topic 4: Chapter 5

Question 1

Sole proprietorship

Answer 1

A business that is owned, and usually managed by one person

Question 2

Partnership

Answer 2

A legal form of business with two or more owners

Question 3

Corporation

Answer 3

A legal entity with authority to act, and have liability separate from its owners

Question 4

Unlimited liability

Answer 4

Listed as one disadvantage of a sole proprietorship: The responsibility of business owners for all of the debts of the business.

Question 5

General partnership

Answer 5

A partnership in which all owners share in operating the business, and in assuming liability for the businesses debts

Question 6

Limited partnership

Answer 6

A partnership with one or more general partners, and one or more limited partners

Question 7

General partner

Answer 7

An owner who has unlimited liability, and his active and managing the firm

Question 8

Limited partner

Answer 8

An owner who invests money in the business, but does not have any management responsibility or liability for losses beyond investment

Question 9

Limited liability

Answer 9

The responsibility of a business as owners for losses only up to the amount they invest limited partners and shareholders, have limited liability

Question 10

Master limited partnership

Answer 10

A partnership that looks much like a corporation but is taxed like a partnership and thus avoids the corporate income tax

Question 11

Limited liability partnership

Answer 11

A partnership that limits partners risk of losing their personal assets to only their own acts and omissions, and to the acts and omissions of people under their supervision

Question 12

Conventional corporation

Answer 12

A state chartered legal entity with authority to act, and have liability separate from its owners

Question 13

S corporation

Answer 13

A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships

Question 14

LLC

Answer 14

Company somewhere to an S corporation but without the special eligibility requirements

Question 15

Merger

Answer 15

There is only two firms forming one company

Question 16

Acquisition

Answer 16

One companies purchase of the property and obligations of another company

Question 17

Vertical merger

Answer 17

The joining of two companies involved in different stages of related businesses

Question 18

Horizontal merger

Answer 18

The joining of two firms in the same industry

Question 19

Conglomerate merger

Answer 19

The joining of firms in a completely unrelated industries

Question 20

Leveraged buyout (LBO)

Answer 20

An attempt by employees management or a group of investors to purchase an organization primarily through borrowing

Question 21

Franchise agreement

Answer 21

An arrangement whereby someone with a good idea for a business, sells the rights to use the business name and sell a product or service to others in a given territory

Question 22

Franchisor

Answer 22

A company that develops a product concept and sells, others the rights to make and sell the products

Question 23

franchise

Answer 23

The right to use a specific business, his name, and sells products or services in a given territory

Question 24

Franchise

Answer 24

A person who buys a franchise

Question 25

Cooperative (co-op)

Answer 25

A business owned and controlled by the people who use it producers consumers, or workers with similar needs to pull their resources for mutual gain