Sole Proprietorships
The most popular business model in the United States today is
sole proprietorship
What universal human problem leads to some of the disadvantages of partnerships?
human sin nature leads people to want their own way which can lead to conflicts between partners
What is the chief advantage of incorporating a company?
limited personal liability
Which type of business is most open to governmental regulation?
corporation
becoming security for another's debt
surety
To which type of business do the Bible's cautions about surety most directly apple?
The biblical caution against surety clearly applies to general partnerships. In this type of business, each partner is legally liable for the financial decisions and mistakes of the other
Which business type gives its owner(s) the most freedom?
sole proprietorship
What great risk balances out the many advantages of both the sole proprietorship and partnership models?
unlimited financial liability
In the eyes of the law, a corporation possesses which two important qualities?
individuality and immortality
A business with fewr than 35 shareholders can incorporate as an
subchapter S corporation
portions of ownership in a company
stock
What book of the Bible gives much advice about personal financial practices?
Proverbs
What important business factor can sole proprietorships protect better than corporations can?
information
greater financial resources
What are the two main tax disadvantages of corporations?
higher taxes and double taxation of earnings
What two main types of corporations are mentioned in the text? Explain each
Private and public corporations
Private - owned by private citizens
Public - owned by general public and managed by the government
president of a corporation
CEO
an investor with no liability and few or no duties in the company
limited partner
List disadvantages of a sole proprietorship
Unlimited personal financial liability
Limited management and employee skills
Limited life
Limited availability of money
What two types of partnerships exist? Explain each
General and limited
General - all partners are fully responsible for the financial decisions of each other
Limited - allows some partners to avoid full financial liability in exchange for less input in the management and decision making of the company
According to the text, what disadvantage often results from corporations' great size?
impersonality
Corporations have two advantages in raising financial capital. What are they?
-can sell more stock to raise money
- they tend to get better deals on loans because they are considered more likely to pay back the loan than sole proprietorships or partnerships are
someone to whom a debt is owed
creditor
List advantages of sole proprietorships
Freedom to enter and exit the market easily
Freedom from outside control
Freedom to retain information
Freedom from paying excessive taxes
Freedom from being an employee
List advantages of a partnership
Greater management skills
Greater retention of competent employees
Greater sources of financing
Ease of formation and freedom to manage
Corporations' complex organizational structure can sometimes lead to accusations of
an inability to respond to the market
Corporation advantages
Limited personal financial liability of stockholders
Experienced management and specialized employees
Continuous life
Ease in raising financial capital
someone who agrees to pay back a loan if the original borrower cannot
cosigner