Term
| What are the advantages and disadvantages of sole proprietorships? |
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Definition
Advantages:
ease of starting and ending
ability to be your own boss
pride of ownership
retention of profit
no special taxes.
Disadvantages:
unlimited liability
limited financial resources
difficulty in management
overwhelming time commitment
few fringe benefits
limited growth
limited life span |
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Term
| What are the three key elements of a general partnership? |
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Definition
1. Common ownership
2. Shared profits and losses
3. The right to participate in managing the operations of the business. |
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Term
| What are the main differences between general and limited partners? |
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Definition
General partners are owners (partners) who have unlimited liability and are active in managing the company.
Limited partners are owners (partners) who have limited liability and are not active in the company. |
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Term
| What does unlimited liability mean? |
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Definition
| Unlimited liability means that sole proprietors and general partners must pay all debts and damages caused by their business. They may have to sell their houses, cars, or other personal possessions to pay businesses debts. |
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Term
| What does limited liability mean? |
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Definition
| Limited liability means that corporate owners (stockholders) and limited partners are responsible for losses only up to the amount they invest. Their other personal property is not at risk. |
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Term
| What is a master limited partnership? |
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Definition
| A master limited partnership is a partnership that acts like a corporation but is taxed like a partnership. |
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Term
| What are the advantages and disadvantages of partnerships? |
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Definition
Advantages:
more financial resources
shared management and pooled knowledge
longer survival
Disadvantages:
unlimited liability
division of profits
disagreements among partners
difficulty of termination |
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Term
| What is the definition of a corporation? |
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Definition
| A corporation is a state-chartered legal entity with authority to act and have liability separate from its owners. |
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Term
| What are the advantages and disadvantages of corporations? |
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Definition
Advantages:
more money for investment
limited liability
size
perpetual life
ease of ownership change
ease of drawing talented employees
separation of ownership from management.
Disadvantages:
initial cost
paperwork size
difficulty in termination
double taxation
possible conflict with a board of directors |
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Term
| Why do people incorporate? |
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Definition
1. Special tax advantages
2. Limited liability. |
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Term
| What are the advantages of S corporations? |
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Definition
Advantages:
limited liability (like a corporation)
simpler taxes (like a partnership)
Fewer than 100 stockholders (members of a family count as one shareholder)
its stockholders must be individuals or estates and U.S. citizens or permanent residents
The company cannot derive more than 25 percent of its income form passive sources. |
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Term
| What are the advantages of limited liability companies? |
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Definition
| Limited liability companies have the advantage of limited liability without the hassels of forming a corporation or the limitations imposed by S corporations. |
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Term
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Definition
| A merger is the result of two firms forming one company. The three major types are vertical mergers, horizontal mergers, and conglomerate mergers. |
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Term
| What are leveraged buyouts, and what does it mean to take a company private? |
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Definition
Leveraged buyouts are attempts by managers and employees to borrow money and purchase the company.
Individuals who, together or alone, buy all the stock for themselves are said to take the company private. |
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Term
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Definition
| An arrangement to buy the rights to use the business name and sell its products or services in a given country. |
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Term
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Definition
| A franchisee is a person who buys a franchise. |
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Term
| What are the benefits and drawbacks of being a franchisee? |
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Definition
The benefits include getting a nationally recognized name and reputation, a proven management system, promotional assistance, and pride of ownership.
Drawbacks include high franchise fees, managerial regulation, shared profits and transfer of adverse effects of other franchisees fail. |
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Term
| What is the major challenge of global franchises? |
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Definition
| It is often difficult to transfer an idea or product that worked well in the United States to another culture. It is essential to adapt to the region. |
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Term
| What is the role of a cooperative? |
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Definition
| Cooperatives are organizations owned by members/customers. Some people form cooperatives to acquire more economic power than they would have as individuals. Small businesses often form cooperatives to gain more purchasing, marketing, or product development strength. |
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