Chapter 8: Business Organizations
What are the advantages of a corporate form of business organization?
-access to resources -professional managers -limited liability -unlimited life
What are the advantages that sole proprietorships have various advantages over other forms of business organizations?
-easy to close/open -few regulations -freedom and control -owner keeps profits
What are the disadvantages of corporations?
-start-up cost/effort -heavy regulation -double taxation -loss of control
How long does a declared bankruptcy stay on your record?
10 years
cooperative
a business operated for benefit of owners who are also its customers
sole proprietorship
a business owned and managed by a single person
unlimited liability
a business owner is responsible for all the losses, debts, and other claims against the business
nonprofit organization
a business that aims to benefit society, not to make a profit
conglomerate
business composed of several companies, each producing unrelated goods or services
franchise
business made up of semi-independent businesses that all offer the same products or services
corporation
business owned by individuals, called shareholders or stockholders
What is the responsibility of a corporate board of directors?
hire corporate officers to be in charge of sales, production, finance, etc.
In the case of a sole proprietorship or partnership, what occurs to the owners if they declare bankruptcy?
may lose their homes, cars, or personal savings if their businesses fail
merger
several large companies into one mega-company -horizontal: similar/same products or services -vertical: different steps of production
Which type of business potentially ceases to exist if the owner dies?
sole proprietorship
Describe the relationship of stockholders to a corporation.
they own the corporation
joint venture
two or more parties that retain distinct identities create an enterprise
What are the disadvantages to sole proprietorships?
-limited funds -limited life -unlimited liability
When organizing a partnership, what contract should exist between partners?
UPA (Uniform Partnership Act) lays out basic partnership rules
partnership
a business co-owned by two or more people who agree on how responsibilities, profits, and losses will be divided
What form of business generates the largest share of business revenue in the US?
corporations
How do common stockholders manage their corporation?
electing board of directors
multinational
large corporation with branches in several countries
consumer cooperatives
membership payment; purchase goods in large volumes
service cooperatives
offer members a service, usually to reduce cost of health insurance for employees
What is double taxation?
officers are aware of taxes on profits; stockholders pay taxes from dividend income as well
limited partnership
one partner is not involved in the day-to-day running of business and is liable only for the funds he or she has invested
How does bankruptcy affect a person's finances?
one still must pay all debts, even without income
producer cooperative
owned by producers to ensure cheaper, more efficient processing
stock
ownership rights acquired through this; shares of ownership in the corporation
dividend
part of company profit that the company pays to stockholders
general partnership
partners share responsibility for managing the business and are liable for all business debts and losses
Which form of business has many of the same advantages and disadvantages as proprietorships?
partnerships
What form of business is most numerous in the US?
sole proprietorship
limited liability
all partners are limited partners and not responsible for the debts and liabilities of other partners