Los 20.a Flashcards
(7 cards)
What is an organizational form and what does it include?
Whether the business is a separate legal entity from the owner(s)
Whether the owners of the business also operate the business, and if not, the nature of the relationship between its owners and operators
Whether the owners’ liability for the actions and debts of the business is limited or unlimited
The tax treatment of profits or losses from the business
Access to additional capital to fund expansion and to distribute risk
Wha
Owned and operated by one individual.
No legal distinction between owner and business.
Owner has unlimited liability.
Profits taxed as personal income.
Limited expansion potential due to reliance on owner’s financing.
What distinguishes a general partnership from a sole proprietorship?
Owned by two or more individuals.
Partners share responsibility for business operations and profits/losses.
Partners have unlimited liability.
Profits taxed as personal income for each partner.
Partners define their roles and shares through an agreement.
What are the key features of a limited partnership?
Involves general partners (with unlimited liability) and limited partners (with limited liability).
General partners manage the business.
Limited partners are passive investors and cannot manage the business.
Profits taxed as personal income.
Limited liability for limited partners.
What are the distinguishing features of a corporation?
A separate legal entity from its owners and managers.
Shareholders have limited liability (only lose their investment).
Profits may or may not be distributed to shareholders.
Corporations have greater access to capital through debt and equity.
Shareholders elect a board of directors to manage the company.
What is the difference between a public and a private corporation?
Public Corporation: Shares sold to the public and traded on stock exchanges.
Private Corporation: Limited number of shareholders with restrictions on share transfers.
