sole proprietorships
businesses owned and operated by one person. The most common form of business organization in the United States
Advantages of Sole Proprietorships
1.Easy to start up
2.secrecy
3. Profit stays with the owner
4. Flexibility and control (makes all the decisions)
5. Government regulation (have the most freedom)
6. Taxation (no double taxes)
7. Closing the business is easy
Disadvantages of a sole proprietorship
1. Unlimited liability (owner is responsible for everything)
2. limited sources of funds
3. Limited Skills (owner must be the banker, salesman, janitor etc)
4. lack of continuity (life of business is determined by the health and wellness of the owner)
5.
Partnership
a form of business organization defined by the Uniform Partnership Act as "an association of 2 or more persons who carry on as co- owners of a business for profit
Types of partnerships
1. General
2.Limited
General patnership
a partnership that involves a complete sharing in both the management and the liability of a business
Limited partnership
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
Articles of partnership
legal documents that set forth the basic agreement between partners
Advantages of a Partnership
1. Ease of Organization (not that hard to start up)
2. Availability of Capital and Credit (more people=more resources)
3. combined knowledge and skills
4. Decision Making (few people to argue with)
5. Regulatory controls (does not have to file public fina
Disadvantages of a Partnership
1. Unlimited Liability
2. Business Responsibilities
3. Life of partnership (when one dies its over)
4. distribution of profit (made by the articles of partnership so even if one is working harder than the other it goes by the books not time put in)
5. Lim
Corporation
A legal entity created by the state whose assents and liabilities are separate from its owners
stock
shares of a corporation that may be bought and sold
dividends
profits of a corporation that are distributed in the form of cash payments to stockholders.
Types of Corporations
1. Domestic
2. foreign
3. Private
4. Public
5. Alien
What do you need to do to create a corporation?
1. name and address
2. objectives
3. classes of stock
4. Expected life (forever)
5. financial capital
6. provisions for transferring shares for stock between owners
Corporate charter
a legal document that the state issues to a company based on information that company provides in the article of incorporation
Domestic and Foreign and Alien Corporations
Domestic: does business in the state it is chartered
Foreign: Does business out of the state it is chartered
Alien: does business outside the the nation
Private Corporation
owned by just one of a few people who are closely involved in managing the business
Public Corporation
Anyone may buy, sell, trade stock
Initial public offering (IPO)
selling a corporation's stock on public markets for the first time
quasi- public corporations
owned and operated by the federal state and local government
non profit corporation
focus on providing a service rather than earning a profit but are not owned by the government
Board of Directors
a group of people elected by the stockholders to oversee the general operation of the corporation who set the corporation's long rage objectives.
preferred stock
a special type of stock whose owners (don't usually have a say) have a claim to profits before other stockholders
common stock
owners have voting rights in the corporation yet do not recieve preferential treatment regarding dividends
Advantages of a corporation
1.limited liability
2. ease of transfer of ownership
3. perpetual life (last forever)
4. External sources of funds
5. expansion potential
Disadvantages of a corporation
1. Double Taxation
2. Start up
3. disclosing information
4. employee and owner separation (employees aren't usually stock holders)`
Joint venture
a partnership established for a specific project or for a limited time
S corporation
taxed as though it were a partnership with restrictions on shareholders
limited liability company (LLC)
form of ownership
Co-op
an organization composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization
merger
the combination of 2 companies to form a new company
acquisition
the purchase of one company by another, usually by buying stock.
Leveraged buyout (LBO)
purchases where a group of investors borrow money from banks and other institutions to acquire a company using the assets of the purchased company to guarantee repayment of the loan.