Economics Chapter 8

List the 5 advantages of a sole proprietorships.

1. ease of start-up 2. relatively few regulations 3. sole receiver of profits 4. full control of business 5. easy to discontinue

List the 3 disadvantages of a sole proprietorships.

1. unlimited personal liability 2. limited access to resources 3. lack of permanence

Sole proprietorships generate what percentage of U.S. sales?

4%

Sole proprietorships are what percent of U.S. businesses?

70%

Partnership

A business co-owned by two or more people, or "partners," who agree on how responsibilities, profits, and losses should be divided.

Conglomerate

A business composed of companies that produce unrelated goods or services.

Franchise

A business made up of semi-independent businesses that all offer the same products or services.

Sole Proprietorship

A business owned and controlled by one person.

Corporation

A business owned by shareholders, also called stockholders, who own the rights to the company's profits but face only limited liability for the company's debts and losses.

Bond

A contract a corporation issues that promises to repay borrowed money, plus interest, on a fixed schedule.

A corporation's by-laws set out the rules for operating the business. Suppose you are a sole proprietor and you are considering incorporating your business

A corporation has many by-laws to follow and stockholders, managers, and all employees have to adhere to these rules.

What is the major difference between a corporation and other kinds of businesses?

A corporation is owned by stockholders who elect the decision makers.

Private Company

A corporation that controls who can buy or sell its stock.

Public Company

A corporation that issues stock that can be freely traded.

Multinational Corporation

A corporation with branches in several countries.

Limited Liability

A istuation in which a business owner's liability for business debts and losses is limited.

Limited Liability Partnership

A partnership in which all partners are not responsible for the debts and other liabilites of the other partners.

Limited Partnership

A partnership in which at least one partner is not involved in running the business and is liable only for the funds he or she invested.

General Partnership

A partnership in which each partner shares the management of the business and is liable for all business debts and losses.

Franchisee

A semi-independent business that pays a fee for the right to sell the parent company's products or services in a particular area.

Unlimited Liability

A situation in which a business owner is responsible for all losses and debts of a business.

Unlimited Life

A situation in which a corporation continues to exist even after a change in ownership.

Limited Life

A situation in which business ceases to exist if the owner dies, retires, or leaves.

Cooperative

A type of business operated for the shared benefit of the owners, who are also its customers.

Business Organization

An enterprise that produces goods or provides services, usually to make a profit.

Nonprofit Organization

An institution that acts like a buisness but exists to benefit society rather than to make a profit.

What are the three different categories of Cooperative Organizations?

Consumer cooperative, Service Cooperative, and Producer Cooperative.

What limited partners do and do not do?

Do--contribute money Do Not--manage business or have unlimited liability

Give at least two examples of a general partnership.

Doctors and lawyers

How limited liability partnerships compare with general partnerships?

Functions the same except limited liability partnerships are limited from personal liability.

Describing the 3 types of partnerships

General partnership is where each partner takes part in management of the business and are more responsible and liable for the debts. Limited partnership is where one partner isn't involved. They're only in charge of the funds the invested. Limited liability partnership is where all of the partners are involved and responsible for only the things they invest in. So they only have losses if that's what they invested in.

List at least two liability dis advantages of partnerships.

General-unlimited liability and one partners actions can cost the firm.

What are the disadvantages of a Business Franchises?

High franchising fees and royalties, strict operating standards, purchasing restrictions, limited production line.

What are the advantages of a Business Franchises?

Management training and support, standardized quality, national advertising programs, financial assistence, and centralized buying power.

Why might a bank be more likely to loan money to a partnership than to a sole proprietorship?

Partners usually have more assets to secure loans.

What are at least two capital and taxation advantages of partnerships?

Pooled assets improve borrowing capacity, add partners to raise funds, and offer more advantages to employees.

List at least two items often covered under articles of partnership.

Rights and responsibilities, how new partners will be added and duration and taxes.

Stock

Shares of ownership in a corporation.

how corporations are organized.

Stockholders elect board of directors. Board of director elect corporate of offices and employees and managers.

Vertical Merger

The combining of two or more businesses involved in different steps of producing or marketing a product or service.

Horizontal Merger

The joining of two or more companies that offer the same or similar products or services.

Dividened

The part of a corporation's profit that the compnay pays the stockholders.

What major advantage does a partnership have over a sole proprietorship?

The responsibility for the business is shared.

What is the purpose of Nonprofit Organizations?

Their purpose is to benefit the public, not to obtain a profit.

Sole proprietorships are owned and managed by?

single individuals.