Types Of Business Ownership Flashcards
Soleproprietorship
Owned by one person who assumes all the profits and risks from the business. They experience unlimited liability.
Unlimited liability
The business owes can be collected from the owners personal assets or belongings.
If the owner cannot pay business-related debt, bill collectors can take their house, car, boat, anything as payment.
Assets
Personal belongings worth money
Partnership
A business that is owned by two or more people. Often formed to combine money, experience, or abilities.
Capital
Money
What are the two basic types of partnerships
General partnership and a limited partnership
General partnership
Each partner has unlimited liability. Business debts can be paid by taking each partners assets.
Limited partnership
Permits a partner to invest money into a business but have limited liability.
Limited liability
An owner’s financial responsibility is restricted to the amount invested in a business.
Corporation
Artificial being, invisible, intangible. Separate from its owners. Owners are only liable for the amount of money they invest.
How do you become an owner of a corporation
Purchase shares of stocks and become a stockholder
What are corporations governed by
A board of directors
An “S” corporation
Same liability protection of a corporation, but is taxed as a partnership. Company has 100 or fewer shareholders.
Nonprofit corporation
Cannot make a profit and isn’t taxed
Private or close corporation
Doesn’t offer shares/stocks for the public. Taxed on the profits made by the company itself. Shareholders are taxed on the dividends they earn on their investments. This is called dual/double taxation.
“C” corporation
Infinite amount of stockholders, public. Most government regulated and taxed. Provides annual reports and are subject to dual taxation.
Merger
When two companies combine to form one company
Acquisition
When a larger company purchases a smaller company
Consolidation
Act of acquiring many smaller companies
Expansion
Company obtains more money by selling more shares of stock, reinvesting profits back into itself, or getting a bank loan
Hybrid structure
Allows owners to enjoy advantages of corporations and either sole proprietorships or partnerships. Depending on the number of owners its either a limited liability company or partnership (LLP or LLC)
Franchising
Method of distributing recognized goods and services through a legal agreement between two parties
Franchiser
Seller or parent company who owns the company name or trademark rights
Piggyback franchising
A retail franchise operates within the facility of other stores. (Ex. Starbucks inside target)
