Understanding Business Chapter 5

Flashcard maker : Lily Taylor
Sole Proprietorship
A business that is owned, and usually managed, by one person.
Partnership
A legal form of business with two or more owners.
Corporation
A legal entity with authority to act and have liability separate from its owners.
Unlimited Liability
Responsibility of business owners for all of the debts of the business.
General Partnership
A partnership in which all owners share in operating the business and in assuming liability for the business’s debts.
Limited Partnership
A partnership with on or more general partners and one or more limited partners.
General Partner
An owner/partner who has unlimited liability and is active in managing the firm.
Limited Partner
An owner who invests money in the business but doesn’t have any management responsibility or liability for losses beyond investment.
Limited Liability
Responsibility of a business’s owners for losses only up to the amount they invest; (limited partners and shareholders)
Limited Liability Partnership (LLP)
Partnership that limits partners’ risk of losing their personal assets to only their own acts and omissions and to the acts and omissions of people under their supervision.
Convential (C) Corporation
State-chartered legal entity with authority to act and have liability separate from its owners.
S Corporation
Unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships.
Merger
Result of 2 firms forming 1 company.
Acquisition
1 company’s purchase of property and obligations of another company.
Vertical Merger
Joining of 2 companies involved in different stages of related businesses.
Horizontal Merger
Joining of 2 firms in same industry.
Conglomerate Merger
Joining of firms in completely unrelated industries.
Leveraged Buyout (LBO)
An attempt by employees, management, or a group of investors, to purchase an organization primarily through borrowing.
Franchise Agreement
Agreement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory.
Franchisor
Company that develops a product concept and sells others the rights to make and sell the products.
Franchise
Right to use a specific business’s name and sell its products or services in a given territory.
Franchisee
Person who buys a franchise.
Cooperative
Business owned and controlled by the people who use it–producers, consumers, or workers with similiar needs who pool their resources for mutal gain.
Limited Liability Company
A company similar to an S corporation but without the special eligibility requirements.
Master Limited Partnership (MLP)
A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.

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