BUS 101 Chapter 5

advantages of a limited liability companies

1. Limited liability 2. Choice of taxation 3. Flexible ownership rules

Advantages of a corporation

1. ability to raise more money for investment 2. limited liability

disadvantages of incorporating

1. extensive paperwork 2. double taxation 3. initial cost

LLCs do have to submit articles of organization and an operating agreement, but do not have to:

1. file written resolutions 2. hold annual meetings 3, keep minutes

the attributes of a corporation include that:

1. it is state charted 2. it is a legal entity 3. corporate liability is separate from owners

Disadvantages of a sole proprietorship

1. limited financial resources 2. unlimited liability

rank order members of a corporation

1. owners/stockholders elect board of directors 2. board of directors hire officers of the corporation 3, officers hire managers of the corporation 4. managers hire employees

business ownership forms based on ease of starting

1. sole proprietorship 2. partnership 3. corporation

A company similar to an S corporation but without the special eligibility requirements

LLC

Sole Proprietorship

a business that is owned and managed by one

franchisor

a company that sells others the right to sue their name to make and sell their products.

limited liability company

a form of business ownership that provides limited liability, as in a corporation, but is taxed like a partnership

Corporation

a legal entity with authority to act apart from its owners

horizontal merger

a merge of two firms in the same industry that allows the companies to diversify or expand their products

conglomerate merger

a merger that joins firms in completely unrelated industries

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

acquisition

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

an S corporation

Leveraged buyout

an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing

in addition to the article of incorporation, a corporation has ___, which describe how the firm is to be operated from both legal and managerial points of view.

bylaws

when farmers join together to get better prices for their food products, they form a farm _____.

cooperative

the ______ form of business allows people to become owners without having to work at the firm

corporate

a corporation is a legal ____ with authority to act and have liability separate from its owners

entity

leaving a ____ means owners can leave an ongoing business for future generations

legacy

many smaller businesses elect to form a corporation because of the two main advantages of ____ liability and possible tax advantages.

limited

the responsibility for a loss only up to the amount invested is ______ liability.

limited

advantage of the corporate form of business ownership

limited liability

when the continued operation of the business is dependent on the life of the business owner, it is referred to as:

limited life span

number of S corporation's shareholders

no more than 100

unlimited liability as it relates to sole proprietorships is the risk of loss of _____ assets beyond the assets of the business

personal

LLC members must pay _____ taxes such as medicare, SS, which are taxes paid by sole proprietorships and partnerships on their profits.

self employment

corporation

state-chartered entity that exists in the eyes of the law and controls risk to the owners of the firm

a corporation allows people to own ____and share in the profits of the firm.

stock

corporations issue ___ to shareholders and this allows ownership to change when it is sold.

stock

ease of ownership means that buying or selling ____ is all that is necessary to become an owner or past owner of a corporation

stock

, it is called vertical merger.

when two firms operating in different stages of related businesses join