Chapter 5 - Choosing a Form of Business Ownership

sole proprietorship

A business that is owned, and usually managed, by one person.

limited partner

An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investments.

acquisition

One company's purchase of the property and obligations of anothers company.

conglomerate merger

The joining of firms in completly unrelated industries.

vertical merger

The joining of two companies involved in different stages of related businesses.

horizontal merger

The joining of two firms in the same industry.

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 of the debts of the business.

merger

The result of two firms forming one company.

franchise

The right to use a specific business's name and sell its products or services in a given territory.

cooperative

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

limited liability company (LLC)

A company similar to an S corporation but without the specail eligibility requirments.

franchisor

A company that develops a product concept and sells other the rights to make and sell the product.

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 debts.

limited liability partnership (LLP)

A partnership that limits partner's risk of losing their personal assets to only their own acts and omissions and to the acts and omissions 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) butis 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 partner.

franchisee

A person who buys a franchise

conventional (C) corporation

A state-chartered legal entity with authority to act and have liability seperate from its owners.

S corporation

A unique goverment 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 bussiness sells the rights to use the business name and sell a product or service to others in a given territory.

leveraged buyout (LBO)

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

general partner

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