Chapter 8 - Sole Proprietorship
Supply the missing information: start-up procedure
- certificate of incorporation
Supply the missing information: advantages for stockholders
- gain benefit of limited liability
Disadvantages of business franchise:
- high franchising fees - strict operating standards - purchasing restrictions - limited product line
Supply the missing information: regulatory requirements
- hold annual meetings - careful record of business transactions
Supply the missing information: possible combinations
- horizontal mergers - vertical mergers - conglomerates
Capital and taxation advantages of partnerships:
- larger partnerships - business doesn't have to pay taxes - add partners - employees
Advantages of business franchises:
- management training and support - standardized quality - National Advertising program - financial assistance - centralized buying power
Supply the missing information: advantages for businesses
- more growth.. raise money, purchase capital - offer as many shares of stock as its charter allows - selling bonds = raise money - hire the best! - continues even if owner dies
Liability disadvantages of partnerships:
- one partners actions = loss of firm - all other partners suffer - general personal conflicts
Purpose of nonprofit organizations:
- operate like business, but for no profit - provide service - benefiting society
Supply the missing information: taxation
- pay taxes on their income
Examples of nonprofit organizations:
- public schools - churches - hospitals
Supply the missing information: corporate structure
- stockholders (corporate owners) elect board - board of directors - make major decisions, appoint officers - corporate officers - oversee production, hire managers and employers - manager and employees - various departments
Typical examples of a general partnership:
1) doctors 2) lawyers 3) accountants
List and explain the advantages of sole proprietorship.
1) ease of start up - just takes small amount of paperwork & legal expense 2) relatively few regulations - least regulated form of business organization 3) sole receiver of profit - owner keeps profit after income taxes 4) full control - owners run how they wish to 5) easy to discontinue - easily stop operations
Items often covered under articles of partnership:
1) partner's right and responsibilities 2) share profits or losses 3) new partnerships 4) duration of partnership 5) tax responsibilities
List and explain the disadvantages of sole proprietorship.
1) unlimited person liability - liability is legally bound obligation to pay debts 2) limited access to resources - banks are unwilling to offer financing 3) lack of permanence - has a limited life
Sole proprietorship - percentages of U.S. sales generated:
6%
Sole proprietorship - percentage of U.S. businesses:
75%
Sole proprietorship is owned and managed by:
a single individual
Reviewing Key Terms: - only one partner is required to be a general partner in a... - money and other valuables make up a person's or firm's... - ownership interests and management responsibilities are legislated under the...
a. limited partnership b. assets c. Uniform Partnership Act
Find the term that does not belong - business license, certificate of occupancy, business organization, registration of business name
business organization - all of the others are required to start up a business
What limited partners do and do not do:
do: contribute money do not: 1) actively manage business 2) have control of business 3) maintain liability
Find the term that does not belong - human capital, fringe benefits, physical capital, financial resources
fringe benefits - others are used to create goods
Find the term that does not belong - liability, health codes, zoning laws, dangerous chemical codes
liability - all others are enforced code businesses must follow
Reviewing key terms: - royalties - trade association - cooperative
royalties - share of earnings given as payment trade association - nonprofit association that promotes the interests of a particular industry cooperative - a business organization owned and operated by a group of individuals for their mutual benefit
How limited liability partnerships compare with general partnerships:
they are the same except in an LLP are limited from personal liability in certain situations