MIE 201 Exam 2: Chapters 4, 5, 8 Makanui
NCSU Exam/117 Q’s and A’s
3 types of business ownership - -- sole propreitorship
- partnership
- corporation
-sole proprietorships - -- businesses owned by one individual
- the most common form of business organization in the United States
- easiest and least expensive form of business to start
- ex: tutoring/bookkeeping/landscaping etc...
-sole proprietorship advantages - -- simplicity
- single layer of taxation - taxed at individual rates
- privacy
- flexibility and control
- personal satisfaction
- fewer limitations on personal income
-complete ownership of the profits
-sole proprietorship disadvantages - -- unlimited liability
- finite life span
- resource limitations
- limited managerial experience
- demands on owner
- no employee benefits for the owner
-lack of qualified employees (can't match wage demands)
-Many sole proprietors will focus on ______ - -services (like child care, salons,
etc) rather than on the manufacture of goods
-unlimited liability - -- means that the owner is personally and fully
responsible for all losses and debts of the business
- major drawback to a sole proprietorship or a partnership
- from a legal standpoint the owner and business are one and the same
-definition of a partnership - -an association of two or more persons to carry
on, as co-owners, a business for profit; profits will be divided as specified in
the agreement
-types of partnerships - -- general partnerships
- limited partnerships
- MLP
- LLP
, -general partnerships - -- partners are considered equal by law and all are
liable for the business's debts
- partners share ownership and both have unlimited liability
ex) lawyers, accountants, etc.
-limited partnerships - -- one or more persons act as general partners who
run the business while the remaining partners are passive investors (not
involved in managing the business)
- called this because their liability (amount of money they can lose) is limited
to the amount of the capital they invested at the beginning of their
partnership
- passive investors and have limited liability
-articles of partnership - -legal documents that set forth the basic
agreement between partners
-list the money or assets that each partner contributed
-states each partner's individual management role/duty
- defines the steps a partner must take to sell his or her partnership interest
or what will happen if one of the patterns dies
-MLP (master limited partnership) - -- allowed to raise money by selling
units of ownership to the general public in the same way that corporations
sell shares of stock to the public
- gives MLPs the fundraising capabilities of corporations without the double-
taxation disadvantage
- mainly oil and gas companies
-LLP (limited liability partnership) - -- form of business was created to help
protect individual partners in certain professions from major mistakes (such
as errors that trigger malpractice lawsuits) by other partners in the firm
- each partner has unlimited liability only for his or her own actions and at
least some degree of limited liability for the partnership as a whole
-advantages of a partnership - -- simplicity
- single layer of taxation
- more resources than a sole proprietorship
- cost sharing between partners
- broader skills and experience
- longevity
-disadvantages of a partnership - -- unlimited liability for general partners
- interpersonal problems
managing partner & unproductive partners
- limited partners have no voice in the management of the business
, - distribution of profits
-corporations - -- businesses that are owned by many investors who buy
shares of stock
- a legal entity with the power to own property and conduct business
- can receive, own, and transfer property; make contracts; sue; and be sued
- faces limited liability because it is its own legal entity
-a corporation is like what? - -- a horcrux
- they can be in so many types of business that even if you take out one
component they will still survive and thrive in all their other components of
business
-ownership of corporations - -- shareholders
- stock certificates
-shareholders - -- owners of a corporation who are issued shares of stock in
return for their investments
-stock certificate - -- represents shares of stock owned by shareholders of a
company
- may be sold or given to upon the death of the owner to someone else
-types of corporations - -- public corporations
- private corporations
-public corporations - -- many shareholders
- stock is publicly traded
- stock available for sale to the general public
-private corporations - -- few shareholders
- stock not publicly traded
- stock is held only by a few individuals or companies and is not publicly
traded
- owners retain complete control over their operations and ownership by
withholding their stock from public sale
- finance their operating costs and growth from either company earnings or
bank loans
-corporations change from private to public ownership and vice versa
when?? - -- their financial needs and strategic interests change
-Quasi-public corporation - -corporations owned and operated by the
federal, state, or local government
ex) NASA, and USPS
NCSU Exam/117 Q’s and A’s
3 types of business ownership - -- sole propreitorship
- partnership
- corporation
-sole proprietorships - -- businesses owned by one individual
- the most common form of business organization in the United States
- easiest and least expensive form of business to start
- ex: tutoring/bookkeeping/landscaping etc...
-sole proprietorship advantages - -- simplicity
- single layer of taxation - taxed at individual rates
- privacy
- flexibility and control
- personal satisfaction
- fewer limitations on personal income
-complete ownership of the profits
-sole proprietorship disadvantages - -- unlimited liability
- finite life span
- resource limitations
- limited managerial experience
- demands on owner
- no employee benefits for the owner
-lack of qualified employees (can't match wage demands)
-Many sole proprietors will focus on ______ - -services (like child care, salons,
etc) rather than on the manufacture of goods
-unlimited liability - -- means that the owner is personally and fully
responsible for all losses and debts of the business
- major drawback to a sole proprietorship or a partnership
- from a legal standpoint the owner and business are one and the same
-definition of a partnership - -an association of two or more persons to carry
on, as co-owners, a business for profit; profits will be divided as specified in
the agreement
-types of partnerships - -- general partnerships
- limited partnerships
- MLP
- LLP
, -general partnerships - -- partners are considered equal by law and all are
liable for the business's debts
- partners share ownership and both have unlimited liability
ex) lawyers, accountants, etc.
-limited partnerships - -- one or more persons act as general partners who
run the business while the remaining partners are passive investors (not
involved in managing the business)
- called this because their liability (amount of money they can lose) is limited
to the amount of the capital they invested at the beginning of their
partnership
- passive investors and have limited liability
-articles of partnership - -legal documents that set forth the basic
agreement between partners
-list the money or assets that each partner contributed
-states each partner's individual management role/duty
- defines the steps a partner must take to sell his or her partnership interest
or what will happen if one of the patterns dies
-MLP (master limited partnership) - -- allowed to raise money by selling
units of ownership to the general public in the same way that corporations
sell shares of stock to the public
- gives MLPs the fundraising capabilities of corporations without the double-
taxation disadvantage
- mainly oil and gas companies
-LLP (limited liability partnership) - -- form of business was created to help
protect individual partners in certain professions from major mistakes (such
as errors that trigger malpractice lawsuits) by other partners in the firm
- each partner has unlimited liability only for his or her own actions and at
least some degree of limited liability for the partnership as a whole
-advantages of a partnership - -- simplicity
- single layer of taxation
- more resources than a sole proprietorship
- cost sharing between partners
- broader skills and experience
- longevity
-disadvantages of a partnership - -- unlimited liability for general partners
- interpersonal problems
managing partner & unproductive partners
- limited partners have no voice in the management of the business
, - distribution of profits
-corporations - -- businesses that are owned by many investors who buy
shares of stock
- a legal entity with the power to own property and conduct business
- can receive, own, and transfer property; make contracts; sue; and be sued
- faces limited liability because it is its own legal entity
-a corporation is like what? - -- a horcrux
- they can be in so many types of business that even if you take out one
component they will still survive and thrive in all their other components of
business
-ownership of corporations - -- shareholders
- stock certificates
-shareholders - -- owners of a corporation who are issued shares of stock in
return for their investments
-stock certificate - -- represents shares of stock owned by shareholders of a
company
- may be sold or given to upon the death of the owner to someone else
-types of corporations - -- public corporations
- private corporations
-public corporations - -- many shareholders
- stock is publicly traded
- stock available for sale to the general public
-private corporations - -- few shareholders
- stock not publicly traded
- stock is held only by a few individuals or companies and is not publicly
traded
- owners retain complete control over their operations and ownership by
withholding their stock from public sale
- finance their operating costs and growth from either company earnings or
bank loans
-corporations change from private to public ownership and vice versa
when?? - -- their financial needs and strategic interests change
-Quasi-public corporation - -corporations owned and operated by the
federal, state, or local government
ex) NASA, and USPS
