Chapter 4: Business Types Flashcards Preview

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Flashcards in Chapter 4: Business Types Deck (20)
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1
Q

Advantages of a sole proprietorship

A
  • Ease of start-up and closure
  • Pride of ownership
  • Retention of all profits
  • No special (corporation) taxes
  • Flexibility of being your own boss
2
Q

Disadvantages of sole proprietorship

A
  • Unlimited liability
  • Lack of continuity
  • Lack of money
  • Limited management skills
  • Difficulty in hiring employees
3
Q

Two possible types of partners (partnerships)

A
  • General partner

- Limited partner

4
Q

Articles of partnership

A

An agreement listing and explaining the terms of the partnership.

5
Q

Advantages of partnerships

A
  • Ease of start-up
  • Availability of capital and credit
  • Personal interest
  • Combined business skills and knowledge
  • Retention of profits
  • No special taxes
6
Q

Disadvantages of partnerships

A
  • Unlimited liability
  • Management disagreements
  • Lack of continuaties
  • Frozen investment
7
Q

Name the rights of a corporation

A
  • The right to start and operate a business
  • The right to buy or sell property
  • The right to borrow money
  • The right to sue or be sued
  • The right to enter into binding contracts
8
Q

Name information in the articles of incorporation

A
  • The firm’s name and address
  • The incorporators’ names and addresses
  • The purpose of the corporation
  • The maximum amount of stock and types of stock to be issued
  • The rights and privileges of stockholders
  • The length of time the corporation is to exist
9
Q

Name two tipes of stock

A
  • Common stock

- Preferred stock

10
Q

Major responsibilities of the board of directors

A

To set company goals and develop general plans/strategies for meeting those goals.
The board is responsible for the firm’s overall operation.

11
Q

What to the corporate officers do?

A

They help the board to:
- make plans,
- carry out strategies established by the board,
- hire employees,
- manage day-to-day business activities.
They periodically report to the board of directors.

12
Q

Advantages of corporations

A
  • Limited liability
  • Ease of raising capital
  • Ease of transfer of ownership
  • Perpetual life
  • Specialized management
13
Q

Disadvantages of corporations

A
  • Difficulty and expense of formation
  • Government regulation and increased paperwork
  • Conflict within the corporation
  • Double taxation
  • Lack of secrecy
14
Q

Criteria qualifying an S-corporation

A
  • No more than 100 stockholders are allowed
  • Stockholders must be individuals, estates, or certain trusts
  • There can be only one class of outstanding stock
  • The firm must be a domestic corporation
  • There can be no partnerships, corporations, or nonresident-alien stockholders
  • All stockholders must agree to the decision to form an S-corporation
15
Q

Advantages of an S-corporation

A
  • Avoid double taxation
  • Limited liability
  • Corporation that is taxed as a partnership
16
Q

Advantages of a Limited-liability company

A
  • Can be taxed like a sole-proprietorship, partnership or a company
  • Limited-liability
  • Management flexibility (no annual meetings etc.)
17
Q

Reasons for seeking Corporate growth

A
  • Greater profit (greater sales revenue)
  • Growing economy means that a business must grow (in order not to shrink relative to the economy)
  • Means for executives to boost their power, prestige and reputation.
18
Q

Horizontal Merger

A

Merger between firms that make and sell similar products and services in similar markets.
This is to reduce the number of firms in an industry - thus reducing competition.

19
Q

Vertical Merger

A

Merger between firms that operate at different levels.

One of the merging firms is generally either a supplier or customer of the other.

20
Q

Conglomerate Mergers

A

Merger between firms in completely different industries.