BADM chapter 5

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sole proprietorship

a business owned, and usually managed by one person

disadvantages (LLC)

no stock, fewer incentives, taxes, paperwork

acquisition

one company's purchase of the property and obligations of another company

limited liability

the responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders have limited liability

unlimited liability

the responsibility of business owners for all debts of the business

merger

the result of two firms forming one company

cooperative (co-op)

a business owned and controlled by the people who use it- producers, consumers, or workers with similar needs who pool their resources for mutual gain

corporation

a legal entity with authority to act and have liability separate from its owners

partnership

a legal form of business with two or more owners

general partnership

a partnership in which all owners share in operating the business and in assuming liability for the business's debts

limited liability partnership (LLP)

a partnership that limits partners' risk of losing their personal assets to only their own acts and omissions and of people under their supervision

master limited partnership (MLP)

a partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax

limited partnership

a partnership with one or more general partners and one or more limited partners

conventional (C) corporation

a state chartered legal entity with authority to act and have liability separate from its owners (its stockholders)

s corporations

a unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships

franchise agreement

an arrangement whereby someone with a good idea for a business (franchisor) sells the rights to use the business name and sell a product or service (franchise) to others (franchisees) in a given territory

leveraged buyout (LBO)

an attempt by employees, management, or a group of private investors to buy out the stockholders in a company

general partner

an owner (partner) who has unlimited liability and is active in managing the firm

limited partner

an owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment

advantages (sole proprietorship)

ease of starting and ending the business, being your own boss, pride of ownership

disadvantages (corporations)

initial cost, extensive paperwork, two tax returns, size

disadvantages (home-based franchises)

isolation, long hours

disadvantages (franchises)

large start-up costs, shared profit, management regulation, restrictions on selling

advantages (corporations)

limited liability, ability to raise more money for investment, size, ease of attracting talented employees

advantages (LLC)

limited liability, flexible ownership rules, flexible distribution of profits and losses, operating flexibility

advantages (franchises)

management and marketing assistance, personal ownership, nationally recognized name, lower failure rate

advantages (partnership)

more financial resources, shared management skills and knowledge, longer survival

advantages (home-based franchises)

relief from commuting stress, extra family time, low overhead expenses

limited liability companies

similar to an S corporation but without the special eligibility requirements

conglomerate merger

the joining of firms in completely unrelated industries

vertical merger

the joining of two companies in different stages of related businesses

horizontal merger

the joining of two firms in the same industry

disadvantages (partnership)

unlimited liability, division of profits, disagreements among partners

disadvantages (sole proprietorships)

unlimited liability, limited financial resources, management difficulties


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