Understanding Business 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

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 business’s debts.

Question 6

Limited Partnership

Answer 6

A partnership with on or more general partners and one or more limited partners.

Question 7

General Partner

Answer 7

An owner/partner who has unlimited liability and is active in managing the firm.

Question 8

Limited Partner

Answer 8

An owner who invests money in the business but doesn’t have any management responsibility or liability for losses beyond investment.

Question 9

Limited Liability Partnership (LLP)

Answer 9

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 10

Convential (C) Corporation

Answer 10

State-chartered legal entity with authority to act and have liability separate from its owners.

Question 11

S Corporation

Answer 11

Unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships.

Question 12

Merger

Answer 12

Result of 2 firms forming 1 company.

Question 13

Acquisition

Answer 13

1 company’s purchase of property and obligations of another company.

Question 14

Vertical Merger

Answer 14

Joining of 2 companies involved in different stages of related businesses.

Question 15

Horizontal Merger

Answer 15

Joining of 2 firms in same industry.

Question 16

Conglomerate Merger

Answer 16

Joining of firms in completely unrelated industries.

Question 17

Leveraged Buyout (LBO)

Answer 17

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

Question 18

Franchise Agreement

Answer 18

Agreement 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 19

Franchisor

Answer 19

Company that develops a product concept and sells others the rights to make and sell the products.

Question 20

Franchise

Answer 20

Right to use a specific business’s name and sell its products or services in a given territory.

Question 21

Franchisee

Answer 21

Person who buys a franchise.

Question 22

Cooperative

Answer 22

Business owned and controlled by the people who use it–producers. consumers. or workers with similiar needs who pool their resources for mutal gain.

Question 23

Limited Liability Company

Answer 23

A company similar to an S corporation but without the special eligibility requirements.

Question 24

Master Limited Partnership (MLP)

Answer 24

A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.