Types of Business Ownership

dividend

a portion of the corporation's profit

question 6

A clock store would need limited liability because it's easier to manage by one person.

question 5

A cooperative is a business owned, controlled, and operated for the mutual benefit of its members--people who use its services, buy its goods, or are employed by it.

question 7

An entrepreneur should consider the products/services he/she would provide and whether he/she wants to keep all profit or not and if they're prepared for the workload.

nonprofit corporation

a legally defined type of business ownership in which the company operates not to provide profit for its shareholders but to serve the good of society

share of stock

a unit of ownership in a corporation

unlimited liability

obligation in which a business owner can be legally forced to use personal money and possessions to pay the debts of the business

disadvantages of partnerships

-because general partners have unlimited liability, they risk losing personal money and possessions to pay business debts -profit is split between the partners -each partner is responsible for the business-related actions of all the others -partners may have trouble agreeing on how the business should be operated

disadvantages of corporations

-more difficult and expensive to set up and maintain than other business structures -must follow very specific procedures for keeping records and selling shares -corporate profit is taxed twice

disadvantages of sole proprietorships

-only one individual is responsible for the business -that person has to carry a heavy workload--raising the financial backing to set up, operate, and expand the business -difficult to borrow money or attract investors making it hard to expand business

advantages of partnerships

-setting up and maintaining a general partnership is relatively simple (it requires little paperwork compared to a corporate structure -can rely on the entrepreneurial skills and financial backing of at least two individuals instead of just one, making it easier to borrow money or appeal to outside investors -can attract and motivate employees with the incentive of becoming partners in the business at some point in the future

advantages or corporations

-shareholders have a limited liability -shareholders can end their ownership by selling their shares to someone else -the life span o a corporation is not tied to the life span of its owners

advantages of sole proprietorships

-simplest and least expensive option for business owners -business income and costs are reported on the owner's personal income tax return (less paperwork and easier tax accounting for the sole proprietorship) -sole proprietor is also the sole decision maker, with the complete control over the management of the business

question 3

A partnership agreement is a legal document that clearly defines how the work, responsibilities, rewards and liabilities of a partnership will be shared by the partners.

question 1

Limited liability means that a business owner cannot be legally forced to use personal money and possessions to pay business debt as opposed to unlimited liability which legally allows a business owner to do so.

question 2

Sole proprietorship is owned by a single individual who collects all the profit as opposed to a general partnership which is owned by at least two individuals and the profit is shared.

question 4

The life span of a corporation is not tied to the life span of its owners and management of a corporation is delegated to the board of directors, who typically hire the corporation's officers.

cooperative

a business owned, controlled, and operated for the mutual benefit of its members--people who use its services, buy its goods, or are employed by it

partnership agreement

a legal document that clearly defines how the work, responsibilities, rewards, and liabilities of a partnership will be shared by the partners

partnership

a legally defined type of business organization in which at least two individuals share the management, profit, and liability

sole proprietorship

a legally defined type of business ownership in which a single individual owns the business, collects all profit from it, and has unlimited liability for its debt

corporation

a legally defined type of business ownership in which the business itself is considered a "person" (an "entity") under the law, and limited liability is granted to the business owner(s)

limited liability company

a legally defined type of business ownership similar to a C corporation, but with simpler operating requirements and tax procedures and greater liability protection for the business owners (who are called members)

general partnership

business in which all partners have unlimited liability

limited partnership

business in which at least one partner (the general partner) has limited liability for the debts of the business but the other partners have no say in the company's day-to-day opersation but are are only investors

subchapter S corporation

corporation that isn't taxed as an entity, but rather its income or loss is applied to each shareholder and appears on their tax returns

C corporations

corporations that are taxed as entities by the federal government

limited liability

obligation in which a business owner cannot be legally forced to use personal money and possessions to pay debt

liability

the legal obligation of a business owner to use personal money and possessions to pay the debts of the business

shareholders

the owners of a corporation

stockholders

the owners of a corporation; shareholders

incorporate

to set up a corporation in accordance with the laws of the particular state where the business is located