Chapter 4 Business

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The most effective form of business organization for raising capital/artificial person
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Corporation
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Advantages of Corporation
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1. limited liability (limited to amt paid) 2. Ease of raising capital * 3. Ease of transfer ownership 4. Perpetual life 5. Specialized management
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Disadvantages of Corporation
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1. Difficult to form 2. Gov. regulations 3. Conflict with corporation 4. Double taxation 5. Lack of secrecy
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Which form of business is the easiest to start?
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Sole Proprietorship
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Advantages of Sole Proprietorships
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1. Easy to start up/close 2. Pride of ownership 3. Retention of all profits (no double taxes) 4. No special taxes 5. Flexibility of being your own boss
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Disadvantages of Sole Proprieterships
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1. Unlimited liability (responsible for all debts) 2. Lack of continuity 3. Lack of $ 4. Limited management skills 5. Difficulty hiring employees
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What is Mars, Inc. (maker of candy and 100% owned by the Mars family) referred to as?
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Closed Corporation
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How are partnerships taxed?
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Each partner is taxed in the same way as a sole proprietor.
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The person who assumes full co-ownership of a partnership, including unlimited liability
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General Partner
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The purchase of one corporation by another
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Merger
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A partnership formed to operate for a specific time period or to accomplish a specific purpose
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Joint Venture
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Corp taxed as if it were a partnership
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S- Corp
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Limited liability company
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form of business ownership that has benefits of partnership but avoids the restrictions
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Invests only money in the business but has no management responsibility
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Limited partner
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A person who assumes full responsibility for a business.
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General Partner
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A limited liability company is taxed like what (no double taxes)?
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Partnership
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A voluntary association of two or more people acting as co-owners of a business
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Partnership
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Advantages of Partnership
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1. Ease of startup 2. Availability of capital & credit 3. Personal interest 4. Combined skills 5. Retention of profits 6. No special taxes (taxed same as sole prop.)
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Disadvantages of Partnership
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1. Unlimited liability 2. Management disagreements 3. Lack of continuity 4. Frozen investment
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Indiv. / firms can vote on corporate matters
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Common stock
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No voting rights, paid before common stock
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Preferred stock
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Distribution of profits to stockholders in corporation
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Dividend
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Perform specific tasks requiring large amt of capital
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Syndicate
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Horizontal merger
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Similar products/similar markets (EX: AT&T and T-Mobile)
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Vertical merger
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Different but related levels of production
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Conglomerate
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Completely different industries

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