Organization Forms etc. Flashcards
(14 cards)
What are the three general types of organizations?
- For-profit organizations = companies
- Non-profit organizations
- Governments
What are the three general organizational forms?
Sole Trader or Sole Proprietorship
Partnership
Limited Company
What are several attributes on which organizational forms differ?
Legal identity
Owner-manager relationship
Owner liability
Taxation
Access to financing
What is a Sole Trader or Proprietorship?
The owner provides the capital needed to start and operate the business and retains full control over management, while participating fully in the firm’s financial returns and risks. Simple and flexible but limited in accessing financing.
What is a General Partnership?
A general partnership has two or more owners called general partners (GPs). General partnerships are like sole proprietorships, with the important distinction that they allow for additional resources to be brought into the business by additional owners, along with the sharing of business risk and return.
What are three types of partnerships?
General partnership
Limited partnership
Limited liability partnership
What is a Limited Partnership?
There must be at least one General Partner with unlimited liability that often manages the business. Remaining partners, called Limited Partners, have limited liability, meaning their losses are limited to the size of their investment.
What are pass-through businesses?
Businesses who are not taxed at entity level but at personal level of the partners.
What is a Limited Liability Partnership (LLP)?
A partnership that can consist of only limited partners (LPs), thus resolving the risk of unlimited liability for the GP.
What is a Private Limited Company?
Similar to Limited Partnership but the form includes limited liability for all owners, improved transferability of ownership interests by dividing ownership into units called shares that are more easily tradeable, and a distinction between owners and managers. Owners, or shareholders, elect a Board of Directors to manage the company and authorize any distributions of profits to owners. Known as LLC or S Corporation.
What is a Public Limited Company or Corporation?
Similar to Private Limited Companies but in most jurisdictions, they face no legal restrictions on the number of owners, while still featuring limited liability and separation of ownership and management. The disadvantage is double taxation both at business level and personal level.
What is a Corporate Issuer?
Corporations that raise capital in the financial markets.
What is an issuer’s free float?
The percentage of total shares outstanding that are not held by insiders, strategic investors or sponsors.
How are private company shares distributed?
Through a private placement among qualified or accredited, sophisticated investors.
