Chapter 14 Vocab

Question 1

one who initiates and assumes the financial risks of a new business enterprise and undertakes to proved or control its management

Answer 1

entrepreneur

Question 2

the simplest form of business, in which the owner is the business; the owner reports business income on his or her personal income tax return and is legally responsible for all debts and obligations incurred by the business

Answer 2

sole proprietorship

Question 3

an agreement by two or more persons to carry on, as co-owners, a business for profit

Answer 3

partnership

Question 4

a business entity that has no tax liability; the entity’s income is passed through to the owners, and the owners pay the taxes on the income

Answer 4

pass-through entity

Question 5

a tax return submitted by a partnership that only reports the income and losses earned by the business; the partnership as an entity does not have to pay taxes on the income received by the partnership

Answer 5

information return

Question 6

a written agreement that sets forth each partner’s rights and obligations with respect to the partnership

Answer 6

articles of partnership

Question 7

a partnership that is specifically limited in duration

Answer 7

partnership for a term

Question 8

a partnership that has no fixed duration specified

Answer 8

partnership at will

Question 9

when persons who are not partners may nevertheless hold themselves out as partners and make representations that third parties rely on in dealing with them; law does not confer any partnership rights on them but it may impose liability

Answer 9

partnership by estoppel

Question 10

in partnership law, partners share liability for partnership obligations and debts; a partner has right to be sued with the other partner

Answer 10

joint liability

Question 11

a doctrine under which a plaintiff can file a lawsuit against all of the partners together (jointly) or one or more of the partners separately (severally)

Answer 11

joint and several liability

Question 12

the severance of the relationship between a partner and a partnership when the partner ceases to be associated with the carrying on of the partnership business

Answer 12

dissociation

Question 13

the amount payable to a partner on his or her dissociation from a partnership, based on the amount distributable to that partner if the firm were wound up on that date, and offset by any damages for wrongful dissociation

Answer 13

buyout price

Question 14

the formal disbanding of a partnership or a corporation

Answer 14

dissolution

Question 15

the second of two stages in the termination of a partnership or corporation, in which the firm’s assets are collected, liquidated, and distributed, and liabilities are discharged

Answer 15

winding up

Question 16

a hybrid form of business organization that is used mainly by professions who normally do business in a partnership; is a pass through entity for tax purposes and limited liability of the partners

Answer 16

limited liability partnership (LLP)

Question 17

a partnership consisting of one or more general partners (who manage the business and are liable to the full extent of their personal assets for debts of the partnership) and one or more limited partners (who contribute only assets and are liable only up to the extent of their contributions)

Answer 17

limited partnership (LP)

Question 18

in a limited partnership, a partner who assumes responsibility for the management of the partnership and liability for all partnership debts

Answer 18

general partner

Question 19

in a limited partnership, a partner who contributes capital to the partnership but has no right to participate in the management and operation of the business; assumes no liability for partnership debts beyond capital contributed

Answer 19

limited partner

Question 20

the basic document filed with a designated state official by which a limited partnership is formed

Answer 20

certificate of limited partnership

Question 21

a hybrid from of business enterprise that offers the limited liability of the corporation but the tax advantages of the partnership

Answer 21

limited liability company (LLC)

Question 22

a person who has an ownership interest in a limited liability company

Answer 22

member

Question 23

the document filed with a designated state official by which a limited liability company is formed

Answer 23

articles of organization

Question 24

in a limited liability company, an agreement in which the members set forth the details of how the business will be managed and operated

Answer 24

operating agreement

Question 25

any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name or copyright in the selling of goods or services

Answer 25

franchise

Question 26

one receiving a license to use another’s (the franchisor’s) trademark, trade name, or copyright in the sale of goods or services

Answer 26

franchisee

Question 27

one licensing another (the franchisee) to sue the owner’s trademark, trade name, or copyright in the selling of goods or services

Answer 27

franchisor

Question 28

three types of franchises

Answer 28

distributorships, chain-style businesses, and manufacturing or processing-plant arragements