2.01 Flashcards
Which type of ownership is the most common in the US?
Sole Proprietorship
Which type of ownership counts for the most revenue?
Corporation
Which corporation is the easiest to form?
Sole Proprietorship
Advantages of a Sole Proprietorship? (4)
Easy to form, complete control of business, Recipient of 100% of profit, one time taxation,
Disadvantages of a Sole Proprietorship (3)
Limited Capital, Unlimited Liability, Limited Lifetime
If the business fails you’re held responsible and they can come after your personal fortune
Unlimited Liability
Sources of funding for sole proprietorship
Bank Loans, Gifts, Personal Investments , others may vary
Who Manages a Partnership?
Determined by partnership agreement. It may be one or more partners, or someone that has been hired to manage the day-to-day operations.
How is a Partnership Formed?
With a partnership agreement. Some states only require a verbal agreement but it is better to have a written agreement. Most states also require a business name and the name of each partner be registered. In North Carolina, partners must choose a name for their business, register the business name with the appropriate government entity, sign a partnership agreement, and then get a business license and/or permits.
Advantages of Partnership (4)
Easy to form, More Capital and credit Available, Workload, more evenly shared, Losses are also shared.
Disadvantages of Partnership (5)
Unlimited Liability, Limited Lifetime, profits are shared, decisions are made jointly, hard to add other partners.
Sources of funding for partnership
Personal , borrowed, and others may vary
How is a Partnership Terminated?
Partnerships are terminated by actions of the partners, bankruptcy, death, and/or court order.
If an investor does not want to lose more than the amount of their investment and does not care to be involved in every day operations.
Limited Liability Partnership
When the businesses only want to be partners for a limited time and for a specific reason/project.
Joint Venture
This is used for partnerships or joint ventures that don’t have a formal agreement and just conduct business together. In this case, partners may or may not be aware of their formed partnership.
By Proof of Existence
Active, Known to the public, Unlimited Liability
General
Not active, unknown, unlimited liability
Dormant
Not active, known, limited liability
Limited
Active, Unknown, Unlimited Liability
Secret
Not active, known, unlimited
Silent
Who owns a corporation?
The stockholder (shareholders), An entity with the legal authority to act as a single person.
How is ownership determined
Determined by purchase of stock
How are corporations formed?
Filing of an article of incorporation with state government. The business must create corporate bylaws, name a board of directors, and issue shares of stock. In North Carolina, the business must choose a name, choose board of directors, file articles of incorporation, create bylaws, hold a meeting, issue stock, obtain licenses, determine tax obligations, and open a bank account for the business.
