BADM chapter 5
sole proprietorship
a business owned, and usually managed by one person
disadvantages (LLC)
no stock, fewer incentives, taxes, paperwork
acquisition
one company's purchase of the property and obligations of another company
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 debts of the business
merger
the result of two firms forming one company
cooperative (co-op)
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
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's debts
limited liability partnership (LLP)
a partnership that limits partners' risk of losing their personal assets to only their own acts and omissions and 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
limited partnership
a partnership with one or more general partners and one or more limited partners
conventional (C) corporation
a state chartered legal entity with authority to act and have liability separate from its owners (its stockholders)
s corporations
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 (franchisor) sells the rights to use the business name and sell a product or service (franchise) to others (franchisees) in a given territory
leveraged buyout (LBO)
an attempt by employees, management, or a group of private investors to buy out the stockholders in a company
general partner
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
advantages (sole proprietorship)
ease of starting and ending the business, being your own boss, pride of ownership
disadvantages (corporations)
initial cost, extensive paperwork, two tax returns, size
disadvantages (home-based franchises)
isolation, long hours
disadvantages (franchises)
large start-up costs, shared profit, management regulation, restrictions on selling
advantages (corporations)
limited liability, ability to raise more money for investment, size, ease of attracting talented employees
advantages (LLC)
limited liability, flexible ownership rules, flexible distribution of profits and losses, operating flexibility
advantages (franchises)
management and marketing assistance, personal ownership, nationally recognized name, lower failure rate
advantages (partnership)
more financial resources, shared management skills and knowledge, longer survival
advantages (home-based franchises)
relief from commuting stress, extra family time, low overhead expenses
limited liability companies
similar to an S corporation but without the special eligibility requirements
conglomerate merger
the joining of firms in completely unrelated industries
vertical merger
the joining of two companies in different stages of related businesses
horizontal merger
the joining of two firms in the same industry
disadvantages (partnership)
unlimited liability, division of profits, disagreements among partners
disadvantages (sole proprietorships)
unlimited liability, limited financial resources, management difficulties
