Vocabulary
A business owned by one person
Sole proprietorship
What is an advantage of sole proprietorships?
(1) Easy and inexpensive to form, (2) few government regulations, and (3) the business avoids corporate income taxes
What is an advantage of partnerships?
1) Low cost, 2) ease of formation, 3) shared responsibility, and 4) combination of skills and knowledge
What is an advantage of corporations?
(1) Unlimited life, (2) Easy transferability of ownership interest, and (3) Limited liability
Which is the simplest form of business?
Sole Proprietorship
A business owned by two or more people
Partnership
What is a disadvantage of sole proprietorships?
(1) Difficult to obtain large sums of capital; (2) unlimited personal liability for the business’s debts, and (3) the life of the business is limited to the life of the owner
What is a disadvantage of partnerships?
(1) Unlimited liability, (2) limited life of the organization, (3) difficulty of transferring ownership, and (4) difficulty of raising large amounts of capital
What is a disadvantage of corporations?
(1) Earnings may be subject to double taxation and (2) more complex and time-consuming to set up
Which is the most complex form of business?
Corporation
A legal entity created by a state that is separate and distinct from owners
Corporation
Name a type of business that would work well as a sole proprietorship.
Answers will vary
True or False: The assets of the owners in a partnership can be used to satisfy the debts of the business.
True
How can ownership in a corporation be transferred?
By the transferring of shares of stock
Which form of business is most commonly used?
Sole Proprietorships
What is a unit of ownership in a corporation called?
Stock (share of stock)
How is a sole proprietorship started?
Get necessary licenses and begin business operations
True or False: All partners in a partnership must contribute the same amount of money to start the business.
False
Name a business you know that is organized as a corporation.
Answers will vary
Which form of business typically generates the most sales dollars?
Corporations
What is money needed to start a business called?
Capital
Who is responsible for the debts of a business organized as a sole proprietorship?
The owner
True or False: All partners in a partnership are equally liable for the debts of a business.
False-partners have pro rata liability; however, if one partner cannot meet their obligations, other partners are liable for remaining debts
True or False: The assets of the owners of a corporation can be used to satisfy the debts of the business.
False
What is one piece of paperwork that is needed to start a corporation?
A charter and a set of bylaws