| Question | Answer |
| Owned and managed by one person | Sole proprietorship |
| Two or more people legally agree to co-own a business | partnership |
| A legal entity with authority to act and have liability apart from its owners | corporation |
| Ease to start and end a business
ability to become your own boss
pride of ownership
tax advantages
retention of company profit | advantages of sole proprietorships |
| the responsibility of owners for all of the debts of the business- the risk | unlimited liability |
| unlimited liability
limited financial resources
overwhelming time commitment
limited growth
limited life span | disadvantages of sole proprietorships |
| A partnership in which all owners share in operating the business and in assuming liability for business's debts | general partnership |
| a partnership with one or more general partners and one or more limited partners | limited partnership |
| an owner who has unlimited liability and is active in managing the firm | general partner |
| an owner who invests money in the business but does not have any management responsibility or liability for losses beyond their investment | limited partner |
| the responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders | limited liability |
| a partnership that looks like a corporation but is taxed like a partnership | master limited partnership MLP |
| 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 | Limited liability partnership LLP |
| more financial resources
shared management
more skills and knowledge
longer survival
tax advantages | advantages of a partnership |
| unlimited liability
division of profits
disagreements among partners
difficulty of termination | disadvantages of a partnership |
| a star charged legal entity with authority to act and have liability separate from its owners | Conventional (C) corporation |
| A unique government creation that looks like a corporation but is taxed like a sole proprietorship or partnership, must meet qualifications | S corporation |
| must have under 100 shareholders
must be citizens or residents of the US
must have one class of stock
no more than 25% of income from passive sources | qualifications of S corporations |
| similar to S corporations but without requirements | limited liability companies (LLC) |
| Limited Liability
ability to raise money
perpetual life
ease of ownership change
separation of ownership from management | advantages of corporations |
| initial cost
double taxations
two tax returns
size may become to large to manage
difficulty terminating | disadvantages of corporations |
| The result of two firms joining to form one company | merger |
| the joining of two companies involved in different stages of related businesses | vertical merger |
| the joining of two firms in the same industry | horizontal merger |
| the joining of firms in completely unrelated industries | conglomerate merger |
| one company purchases the property and obligations of another company | acquisitions |
| an attempt by employees, management, or a group of investors to buy out the stockholders in a company by borrowing the necessary funds | leveraged buyout (LBO) |
| an arrangement whereby someone with a good idea for a business sells the rights to use the business's name and sell a product or service to others in a given industry | franchise agreement |
| One who sells their idea/product/service | franchisor |
| selling the name or product or service | franchise |
| One who buys an idea /product/service | franchisee |
| management and marketing assistance
personal ownership
nationally recognized name
financial advice and assistance
lower failure rates | advantages of a franchise |
| large start up costs
shared profit
management regulation
coattail effects
restrictions on selling
fraudulent franchisors | disadvantages of franchises |
| a business owned and controlled by the people who use it- producers, consumers, or workers with similar needs who pool their resources for mutual gain | cooperatives |
