Chapter 8 exam 2 Flashcards
Define sole proprietorship
A business that is established, owned, operated, and often financed by one person
What is LLP and define it
Limited liability partnership - A partnership is which each partner is protected from responsibility for the acts of other partners, and each party’s liability is limited to harm resulting from that party’s own actions
What does LBO stand for and define it
Leveraged buyout- A corporate takeover financed by large amounts of borrowed money; can be done by outside investors or by a company’s own management
What does LBO stand for and define it
Leveraged buyout- A corporate takeover financed by large amounts of borrowed money; can be done by outside investors or by a company’s own management
What are advantages of sole proprietorship
Easy and inexpensive to form Profits all go to the owner Direct control over business Relative freedom from government regulations No special taxation Easy to dissolve
What are the disadvantages of Sole Proprietorship
Unlimited liability Difficulty in raising capital Limited managerial expertise Trouble finding qualified employees Persona time commitment Unstable business life Losses are the owners responsibility
Advantages of a partnership
Easy to form Availability of capital Diversity of skills and expertise Flexibility No special taxes relative freedom from government control
Disadvantages of partnerships
Unlimited liability
potential for conflicts between partners
Complexity of profit sharing
Difficulty exiting or dissolving
What are the three main types of partnerships
general, limited and limited liability
What is the main reason for a corporation to go public
to raise capital, expand or maintain growth other are exit strategy for the original owners
What is a leveraged buyout
when a group of investors or management of the company offer to buy shares of the others In the market and is successful in obtaining th required number of shares
What are the 5 main steps in incorporating a company
- selecting a company name
- Writing the articles of incorporation and filing them with the appropriate government office
- Paying the required fees and axes
- Holding an organizational meeting
- Adopting bylaws, electing directors, and passing the first operating resolutions
Advantages of Large Corporations
limited liability- Are a separate identity Ease of transferring ownership Unlimited life Ability to attract financing Ability to attract potential employees
disadvantages of Corporations
Double taxation of profits
Cost and complexity of formation
More government restrictions
Losses not written off
What are the ways in which Cooperatives differ from other businesses and explain them
- Purpose- focus is to meet the common needs of their members
- Control Structure- use the the one member-one vote system to ensure that people, not capital control the organization
- Allocation of Profit- This is based on the extent to which members use the cooperative, not the number of shares held
