Business Study Guide Chapter 4

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Sole Proprietorship
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1 Owner, Individual income taxed, Unlimited Liability, Owned by a single individual and is the easiest way to conduct business – Business owned and operated by one individual; the most common form of business organization in the United States
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Partnership
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2 or more owners, Individual Owners’ income taxed, Somewhat limited, Easy way for two individuals to conduct business – A form of business oragnization defined by the Uniform Partnership Act as “an association of two or more persons who carry on as co-owners of a business for profit”
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General Partnership
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A partnership that involves a complete sharing in both the management and the liability of the business
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Limited Partnership
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A business organization that has at least one general partner, who assumes unlimited liability, and at least one limited partner, whose liability is limited to his or her investment in the business
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Articles Of Partnership
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Legal documents that set forth the basic agreement between partners
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Corporation
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Any number of shareholders, Corporate and shareholder taxed, Limited Liability, A legal entity with shareholders or stockholders – A legal entity, created by the state, whose assets and liabilities are separate from its owners
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S Corporation
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Up to 75 shareholders, Taxed as partnership, Limited Liability, A legal entity with tax advantages for restricted number of shareholders – Corporation taxed as though it were a partnership with restrictions on shareholders
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Limited Liability Company
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Unlimited number of shareholders, Taxed as a partnership, Limited Liability, Avoid personal lawsuit
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Stock
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Shares of a corporation that may be brought or sold
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Dividends
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Profits if a corporation that are distributed in the form of cash payments to stockholders
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Corporate Charter
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A legal document that the state issues to a company based on information the company provides in articles of incorporation
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Private Corporation
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A corporation owned by just one or few people who are closely involved in managing the business
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Public Corporation
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A corporation whose stock anyone may buy, sell, or trade
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Initial Public Offering (IPO)
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Selling a corporation’s stock on public markets for the first time
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quasi-public corporations
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Corporations owned and operated by federal, state, or local government
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nonprofit corporations
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Corporations that focus on providing a service rather than earning a profit but are not owned by a government entity
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Board of directors
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A group of individuals elected by the stockholders to oversee the general operation of the corporation, who set the corporation’s long-range objectives
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Preferred Stock
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A special type of stock whose owners, thought not generally having a say in running the company, have a claim to profits before other stockholders do
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Common Stock
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Stock whose owners have voting rights in the corporation, yet do not receive preferential treatment regarding dividends
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Joint Venture
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A partnership established for a specific project or for a limited one
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Cooperative (co-op)
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An organization composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization
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Merger
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The combination of two companies (usually corporations) to form a new company
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Acquisition
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The purchase of one company by another, usually by buying its stock
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Leveraged Buyout (LBO)
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A purchase in which a group of investors borrows money from banks and other institutions to acquire a company (or a division of one), using the assets of the purchased company to guarantee repayment of the loan

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