Economics Chapter 8 – Flashcards
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Sole proprietorship
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A business owned and managed by a single individual
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Business organization
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The ownership structure of a company or firm
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According to the IRS ____% businesses are organized as sole proprietorship
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70
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They account for about ___% of all U.S. sales
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4
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Examples of sole proprietorship
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Local bakery, barber shop, bike-repair shop, corner grocery, and hair salon
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Characteristics of sole proprietorship
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Ambitious, risk takers, willing to risk failure
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What are the following questions an entrepreneur has to answer to find out the profiles of an entrepreneur
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1. Are you organized? 2. Are you responsible? 3. Are you energetic? 4. Are you goal oriented? 5. Do you know how to run a business?
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What are the advantages of a sole proprietor
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1. Easy to start and end 2. Relatively few regulations 3. Sole receiver of profit 4. Full control
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What are the minimum requirements to start a business
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1. Authorization 2. Site permit 3. Name
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Business license
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Authorization to operate a business issued by a local gov.
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Zoning laws
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Laws in a city or town that designate certain areas, or zones, for residential and business use
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What are the disadvantages of sole proprietorship
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1. Unlimited personal liability 2. Limited access to resources 3. Lack of permanence
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Liability
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The legal obligation to pay debts
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Fringe benefits
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Payments to employees other than wages or salary
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Partnership
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A business organization owned by two or more persons who agree on a specific division of responsibilities and profits
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U.S. partnerships account for ___% of all businesses
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9
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They generate about ____% of all receipts and nearly a quarter of all income earned by all businesses
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12
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3 categories of the partnership
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1. General partnership 2. Limited partnership 3. Limited liability partnership
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General partnership
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A type of partnership in which all partners share equally in both responsibility and liability
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Examples of General Partnership ************
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Doctors, accountants, and lawyers
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Limited partnership
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A type of partnership in which only one partner is required to be a general partner
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What is the responsibility of the partner who is not a general partner
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They contribute only money
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Limited liability partnership
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A type of partnership in which all partners are limited partners
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Examples of an LLP
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Attorneys, physicians, dentists, and accountants
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What are articles of partnership
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A partnership agreement that spells out each partner's rights and responsibilities
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Are all partnership required to have an article of partnership
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No
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What is the Uniform Partnership Act
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Laws by most states to establish rules for partnerships
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Assets
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The money and other valuables belonging to an individual or business
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Disadvantages of partnerships
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1. Unlimited liability 2. potential for conflict 3. Lack of permanence
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Business franchise
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A semi independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area
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What is the parent company called
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Franchiser
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What is the owner referred to as
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Franchisee
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What are the advantages of a franchise
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1. Management training and support 2. Standardized quality 3. National advertising programs 4. Financial assistance 5. Centralized buying power
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What are the disadvantages of a franchise
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1. High franchising fees and royalties 2. Strict operating standards 3. Purchasing restrictions 4. Limited product line
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Corporation
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a legal entity or being owned by individual stockholders each of whom have limited liability for the firm's debts
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Stock
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A certificate of ownership in a corporation
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U.S. corporation account for ____% of all businesses
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20
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Account for more than ___% of all sales
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80
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Corp. Generate nearly ___% of the net income earned in the nation
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60
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Closely held corporation
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A type of corporation that issue stock to only a few people who are often family members
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Publicly held corporation
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A type of corporation that sells stock on the open market
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What is the structure of a corporation ************
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The owner - the stockholders - elect a Board of Directors
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Advantages of corporations for stockholders
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1. Potential for growth 2. Ability to raise capital money 3. Longer life span 4. Ability to hire specialists
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Advantages for the corporation
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1. Stock is transferable 2. Corporations are able to exist longer than simple proprietorships or even partnerships
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Bond
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A formal contract issued by a corporation or other entity that includes a promise to repay borrowed money with interest at fixed intervals
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Certificate of incorporation
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A license to form a corporation issued by State Government
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Dividends
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The portion of corporate profits paid out to stockholders
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Limited liability corporation
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A type of business with limited liability for the owners with the advantage of not paying corporate income tax
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Horizontal merger
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Business combination of two or more firms competing in the same market with the same good or service
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examples of a horizontal merger
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Wireless telephone company
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Vertical mergers
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Two or more firms involved in different stages of producing the same good or service
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Conglomerates
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A business combination merging more than 3 businesses that produce unrelated products or services
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Multi national corporation
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A large corporation that produces and sells its goods and services in more than one country
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Multinational corporations are required to_______
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Obey laws and pay taxes in each country where they operate
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In the early 2000 there in estimated_____multinational firms. Which operated about ________ branches.
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1. 64,000 2. 866,000
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How many people did the foreign affiliates provide jobs for
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53 million people
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What are some of the home countries for the multinational corporations
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U. S. , France, Germany, Britain, Japan, and China
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Advantages of multinationals
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Benefit consumers & workers by providing jobs and products around the world
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Disadvantages of multi nationals
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Unduly influence the culture and politics in the countries in which they operate
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Cooperative
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(of a farm, business, etc.) owned and run jointly by its members, with profits or benefits shared among them.
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What are the principles that a cooperative are based on ***********
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1. Voluntary and open membership 2. Control of organization by its members 3. Benefits by members
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how is a cooperative taxed
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They don't pay income tax but pay a personal income
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Examples of cooperative
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Farming, energy to healthcare and childcare
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Consumer cooperative
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Retail outlet owned and operated by consumers that sells merchandise to members at reduced prices
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Example of consumer cooperative
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discount price clubs, compact disc or book dubs, health food stores housing cooperations
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Service cooperative
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Type of cooperative that provides a service rather than a good
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Examples of a service cooperative
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Discount insurance, booking healthcare
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Producer cooperative
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Agriculture marketing cooperative that helps members sell their product
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Examples of a producer cooperative
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Crops and livestock
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Non-profit organizations
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Institution that functions much like a business, but doesn't operate for the purpose of generating profit
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Examples of non profit organizations
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Museum, public schools, American Red Cross
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Professional organizations
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Nonprofit organization that works to improve the image working conditions and skill levels of people in particular occupation
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Examples of professional organizations
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Public school, College, University workers
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Business associations
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Group organized to promote the collective business interests of an area or group of similar business
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Trade associations
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Non-profit organizations that promote the interests of particular industries
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Examples of trade associations
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American Marketing, Association aiming to improve the image of companies that sell goods and services
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Labor union
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An organized of workers whose aim is to improve working conditions hours, wages, and fringe benefits of members
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Advantages of a partnership
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1. Easy of start-up 2. Financial impact 3. Shared decision making
