Forms of the Business Organization

Question 1

Sole Proprietorship

Answer 1

• owned by one person
• most small businesses
• easy to establish due to lack of regulation
• no separate legal entity is formed; full liability on the owner

Question 2

Partnership

Answer 2

• a formal arrangement by two or more to form a business

Question 3

General Partnership

Answer 3

• a partnership wherein all parties share equal legal and financial responsibility

Question 4

Limited Liability Partnerships

Answer 4

• partners’ personal liability are limited

Question 5

Limited Partnerships

Answer 5

• hybrid of general and limited partnerships
• consists of a general and silent partner
• general partner: shares liability
• “silent”: liability is limited to the amount he has invested, does not normally participate in daily business operations

Question 6

Corporation

Answer 6

• a separate legal entity from its owners through legal process of incorporation
• shareholders/owners have limited liability
• “legal person”: corporations have the rights and responsibilities legal individuals have, can sue, enter contracts, loans, hire employees and pay yaxes