Chapter 7

Question 0

Advantages of sole proprietorship

Answer 0

1. Freedom to enter & exit market easily
2. Freedom from outside control
3. Freedom to retain information
4. Freedom from paying excessive taxes
5. Freedom from being an employee

Question 1

Sole proprietorship

Answer 1

• business firm w/ 1 owner

- most popular 75%

Question 2

Disadvantages of sole proprietorship

Answer 2

• Unlimited personal financial liability
• Limited management & employee skills
• Limited life
• Limited availability of money

Question 3

Partnership

Answer 3

• AKA general partnership
• business enterprise w/ 2 or more owners
• least popular 10%

Question 4

Partnership agreement ?’s

Answer 4

1. Who are partners
2. What is each’s responsibility
3. How are profits divided
4. How partner withdraws from Co.
5. How can partnership be dissolved

Question 5

Advantages of partnership

Answer 5

> Greater management skills
Greater retention of component employees
Greater sources of financing
Ease of formation & freedom to manage

Question 6

Disadvantages of partnership

Answer 6

+Unlimited personal financial liability (greatest disadvantage)
+Uncertain life
+Conflicts between partners

Question 7

Limited partnership

Answer 7

• invest money in partnership & can inspect books & share in profits
• no management or business decisions
• can only lose what he invested

Question 8

Surety

Answer 8

act of becoming security for or pledging to undertake another’s debt

Question 9

Corporation

Answer 9

• independent from owner
• separate entity created & recognized by law
• financial liability based on investment
• owners own shares

Question 10

private corporation

Answer 10

private citizens are the owners

Question 11

public corporation

Answer 11

general public owns & gov’t manages

Question 12

Advantages of corporation

Answer 12

• Limited personal financial liability of stockholders (primary)
• Experienced management & specialized employees
• Continuous life
• Ease in raising financial capital

Question 13

Disadvantages of corporation

Answer 13

~Higher taxes
~Greater gov't regulation
~Lack of secrecy 
~Impersonality
~Rigidity

Question 14

Corporate organization structure

Answer 14

stock holders> board of directors> president> vice president> middle managers> line managers> employees

Question 15

Biblical principles w/ business kinds

Answer 15

• stewardship
• witness
• Golden Rule
• prayer
• seek God’s will