Chapter 8 – Business Organization – Flashcards
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Business Organization
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an establishment formed to carry on commercial enterprise (company or firm)
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Sole proprietorship
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A business owned and managed by a single individual
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What is the most common form of business?
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Sole proprietorship
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What percent of businesses are sole proprietorships? What percent of sales do they generate?
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75% 6%
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Steps of starting up a Sole Proprietorship
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Authorization-business license Site Permit-needed when using another building for business Name-Register a business name
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What is the least-regulated form of business organization?
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Sole Proprietorship
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Zoning laws
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law in a city or town that designates separate areas for residency and for business
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Advantages of Sole Proprietorship
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Sole Receiver of profit, full control, easy to discontinue
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Disadvantages of Sole Proprietorships
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Unlimited Personal Liability, Limited access to resources, Lack of permanence
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Liability
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legally bound obligation to pay debts
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Fringe Benefits
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Payments to employees other than wages or salaries such as paid vacation, retirement pay and health insurance
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Partnership
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business organization owned by two or more persons who agree on a specific division of responsibilities and profts
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Partnerships account for what percent of all businesses? What percent do they generate of all sales what what percent of all income?
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7%, 5%, and 10%
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List the three categories of partnerships
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general partnerships, limited partnerships and limited liability partnerships
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General Partnership
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-Most common -Partners share equally in responsibility and liability -ex) doctors, lawyers, accountants , small retail stores, farms
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Limited Partnership
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-Only one partner is required to be a "general partner " making only one person have unlimited liability & the other, the limited partner just contributes $$$ -only 1 general but can have multiple limited partners
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Limited Liability Partnership
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-All members are limited partners -functions like a general partnership except ALL partners are limited from personal liability
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Advantages of Partnerships
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Easy Start-up- articles of partnership, Uniform partnership Act Shared Decision Making and Specialization- not just 1 person making decisions and u get other ppls qualities Larger Pool of Capital-each partners assets Taxation-not subject to special taxes
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Articles of Partnership
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a partnership agreement- discusses rights and responsibilities
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Uniform Partnership Act (UPA)
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act ordering common ownership interests, profit and loss sharing and shared management responsibilities in a partnership
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Assets
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money and other valuables belonging to an individual or business
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Disadvantages of Partnerships
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Unlimited Liability & potential conflict
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Whats the most complex form of business?
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Corporation
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Corporation
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a legal entity or being, owned by individual stockholders, each of whom faces limited liability for the firms debts -Corporation is defined as an "entity" because it has a legal identity separate from those of its owners
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stock
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a certificate of ownership on a corporation
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Abilities of a corporation
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pay taxes, engage in business, make contracts, sue other parties and get sued by others
