Understanding Business Ch 5

cooperative

A business owned and controlled by the people who use it—producers, consumers, or workers with similar needs who pool their resources for mutual gain. (co-op)

sole proprietorship

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

limited liability company (LLC)

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

corporation

A legal entity with authority to act and have liability apart from its owners.

limited liability partnership (LLP)

A partnership that limits partners' 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) but is taxed like a partnership and thus avoids the corporate income tax.

franchisee

A person who buys a franchise.

conventional (C) corporation

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

S corporation

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

franchisor

Develops a product A company that develops a product concept and sells others the rights to make and sell the product

vertical merger

different stages The joining of two companies involved in different stages of related busines

leveraged buyout (LBO)

is an attempt by employees, management, or a group of private investors to buy out the stockholders in a company, primarily by borrowing the necessary funds.

partnership

A legal form of business with two or more owners

general partnership

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

limited partner

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

acquisition

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

horizontal merger

Same industry joins two firms in the same industry and allows them to diversify or expand their products

limited liability

The responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders (stockholders) 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.

conglomerate merger

unrelated to each other The joining of firms in completely unrelated industries