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Intro to Business 1 > Chapter 8 > Flashcards

Flashcards in Chapter 8 Deck (37):

sole proprietorship

a business that is established, owned, operated, and often financed by one person.



an association of two or more individuals who agree to operate a business together for profit.


general partnership

A partnership in which all partners share in the management and profits. Each partner can act on behalf of the company and has unlimited liability for all its business obligations.


limited partnership

a partnership with one or more general partners who have unlimited liability, and one or more limited partners whose liability is limited to the amount of their investment.


general partners

Partners who have unlimited liability for all of the company's business obligations and who control its operations.


limited partners

Partners whose liability for the company's business obligations is limited to the amount of their investment. They help to finance the business but do not participate in the company's operations.


limited liability partnership (LLP)

in a limited liability partnership, each individual 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.



A legal entity with its own rights and responsibilities separate from its shareholders, who therefore are not personally liable for the entity's actions and liabilities. a corporation is chartered by the province.


public corporation

A corporation whose shares are widely held and available to the general public.


private corporation

A corporation whose number of shareholders is limited; there are normally restrictions on the transfer of shares to third parties, and its shares do not trade on a recognized stock exchange.



The owners of a corporation who hold shares of stock that provide certain rights, also known as stockholders.


board of directors

a group of people elected by the shareholders to handle the overall management of a corporation, such as setting major corporate goals and policies, hiring corporate officers, and overseeing the company's operations and finances.


one-person corporation

A corporation with only one person as the shareholder; common in professional practices (e.g., medical doctors, accountants, or lawyers) and in trades (e.g., plumbers and electricians).


crown corporations

companies that only the provincial and federal governments can set up.



A legal entity typically formed by people with similar interests, such as suppliers or customers, to reduce costs and gain economic power. A cooperative has limited liability, an unlimited life span, an elected board of directors, and an administrative staff; all profits are distributed to the member-owners in proportion to their contributions.


joint venture

two or more companies that form an alliance to pursue a particular project for a specified time period. By sharing management expertise, technology, products, financial and operational resources, companies can reduce the risk shared by new enterprises.


direct selling

direct selling is a popular marketing structure that connects the sellers "directly" with the customers.



The combination of two or more companies to form a new company, which often takes on a new corporate identity.



the purchase of one company by another company or by an investor group; the identity of the acquired company might be lost.


friendly takeover

a takeover that is supported by the management and board of directors of the targeted company.


hostile takeover

a takeover that goes against the wishes of the target company's management and board of directors.


horizontal merger or acquisition

a merger or an acquisition involving companies at the same stage of the supply chain in the same industry; done to reduce costs, expand product offerings, or reduce competition.


vertical merger or acquisition

mergers or acquisitions involving companies at different stages of the supply chain in the same industry; done to gain control over supplies of resources or to gain access to different markets.


conglomerate merger or acquisition

a merger of acquisition involving companies in unrelated businesses; done to reduce risk.


leveraged buyout (LBO)

a corporate takeover financed by large amounts of borrowed money; can be done by outside investors or by a company's own management.



a form of business organization based on a business arrangement between a franchisor, which supplies the product concept, and the franchisee, which sells the goods or services of the franchisor in a certain geographic area.



in a franchising arrangement, the company that supplies the product concept to the franchisee.



in a franchising arrangement, the individual or company that sells the goods or services of the franchisor in a certain geographic area.


franchise agreement

a contract setting out the terms of a franchising arrangement, including the rules for operating the franchise, the services provided by the franchisor, and the financial terms. Under the contract, the franchisee is allowed to use the franchisor's business name, trademark, and logo.


advantages of a sole proprietorship

ease and low cost to create, the owner's rights to all the profits, the owner's control of the business, less government regulation, absence of special taxes, and ease of dissolution.


disadvantages of a sole proprietorship

owner's unlimited liability for debts, difficulty in raising capital, limited managerial expertise, large personal time commitment, unstable business life.


advantages of partnerships

ease of formation, availability of capital, diversity of managerial skills and expertise, flexibility to respond to different business conditions, no special taxes, and little government control.


disadvantages of partnerships

unlimited liability for general partners, potential conflict between partners, sharing of profits, and difficulty exiting or dissolving the partnership.


advantages of corporations

limited liability, ease of transferring ownership, and ability to attract financing


disadvantages of corporations

include double taxation of profits at a somewhat reduced rate, the cost and complexity of formation and government restrictions.


business can be

sole proprietorships, partnerships, corporations, cooperatives, joint ventures, and franchises.


three types of mergers

a horizontal merger, a vertical merger, and a conglomerate.