Chapter 14

Question 1

Farm Business Cycles

Answer 1

Entry

• Entering farming as a career
• Acquire resources

Growth

• Expand
• Intensify Production

Consolidation

• Debt Reduction
• Increase efficiency

Exit

• Operator retirement
• Size declines

Question 2

Sole Proprietorship

Answer 2

The owner owns and manages the business, assumes all

risks, receives all profit.

Question 3

Joint Venture

Answer 3

Two or more operators combine abilities and assets to

achieve higher levels of efficiency

Question 4

Operating agreements (JV)

Answer 4

Two or more sole proprietors carry on some activities

jointly while maintaining individual ownership of resources.

Question 5

Partnership (JV)

Answer 5

An association of two or more persons who share
ownership of a business to be conducted for profit.

does not pay taxes

Question 6

General partner

Answer 6

manages the business and has unlimited liability

Question 7

Limited partners

Answer 7

do not participate in the management and are

liable only for what they have contributed to the business

Question 8

Corporations (JV)

Answer 8

Separate legal entity

It is formed and operated in accordance with laws of the state in
which it is organized

Double taxation: Shareholders pay taxes on the dividends and their individual rates.

Question 9

S corp

Answer 9

• No more than 100 shareholders (or no more than 75 in
some states)
• Shareholders must be U.S. citizens, estates, or certain types
of trusts
• One class of stock
• All shareholders must agree to form the S corporation

Question 10

LLC

Answer 10

Liability is limited to the assets of the LLC, not the individually
owned assets of members.

Ownership is based on the fair market value of the assets contributed by each shareholder

Question 11

Cooperatives

Answer 11

Special type of corporation

Members who contribute capital enjoy limited liability.

Net income is passed to members and taxed at their individual
rates

Return to members cannot exceed 8%