business organization
an establishment formed to carry on commercial enterprise
sole proprietorship
a business owned and managed by a single individual
advantages of sole proprietorship
easy start-up, few regulations, sole receiver of profit, full control, easy to discontinue
business license
authorization to start a business issued by the local government
zoning laws
law in a city or town that designates separate areas for residency and for business
liability
the legally bound obligation to pay debts
disadvantages of sole proprietorship
unlimited personal liability, limited access to resources, physical capital, human capital, lack of permanence
fringe benefits
payment other than wages or salaries
partnership
A business organization owned by two or more persons who agree on a specific division of responsibilities and profits
general partnership
partnership in which partners share equally in both responsibility and liability
limited partnership
only one partner is required to be a general partner
limited liability partnership (LLP)
all partners are limited partners
articles of partnership
a partnership agreement
Uniform Partnership agreement (UPA)
act ordering common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership
advantages of a partnership
ease of start up, shared decision making and specialization, larger pool of capital, taxation
Disadvantaged of a partnership
atleast one partner has unlimited liability, bound by each other's actions, potential for conflict
assets
money and other valuables belonging to an individuals or business
corporation
a legal entity owned by individual stockholders
stock
a certificate of ownership in a corporation
closely held corporation
corporation that issues stock to only a few people, often family members
publicly held corporation
corporation that sells stock on the open market
advantages of incorporation
limited liability for owners
transferable ownership
ability to attract capital
long life
advantages for stockholders
gain benefit of limited liability, more flexibility
advantages for corporations
more potential for growth
bond
a formal contract to repay borrowed money with interest at fixed intervals
certificate of incorporation
licence to form a corporation issued by state government
disadvantages of incorporation
expense and difficulty of start up
double taxation
potential loss of control by the founders
more legal requirements and regulations
dividend
the portion of corporate profits paid out to stockholders
horizontal merger
the combination of two of more firms competing in the same market with the same good or service
vertical merger
the combination of two or more firms involved in different stages of producing the same good or service
conglomerate
business combination merging more than three businesses that make unrelated products
multinational corporation (MNC)
large corporation that produces and sells its goods and services throughout the world
advantages of multinationals
provide jobs and products around the world, spread new technology and production methods, help poorer nations gain better standards of living
disadvantages of multinationals
unduly influence the culture and politics in the countries in which they operate
business franchise
a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area
royalty
share of earnings given as payment
cooperative
a business organization owned and operated by a group of individuals for their mutual benefit
advantages of a franchise
1 management training and support
2 standardized quality
3 national advertising programs
4 financial assistance
5 centralized buying power
disadvantaged of a franchise
1 high franchising fees
2 strict operating standards
3 purchasing restrictions
4 limited product line
consumer cooperative
retail outlet owned and operated by consumers
service cooperative
cooperative that provides a service rather than a good
producer cooperative
agricultural marketing cooperative that helps members sells their products
nonprofit organization
institution that functions much like a business, but does not operate for the purpose or generating a profit
professional organization
nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations
business association
nonprofit organization that promotes collective business interests for a city, state, or other geographical area, or similar business
trade association
nonprofit organization that promotes the interests of a particular industry
labor union
organized group of workers whose aim is to improve working conditions, hours, wages, and fringe benefits.