Chapter 8 - Sole Proprietorship

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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


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