D432 Exam Questions with Verified Correct
Answers
Sole Proprietorship
a business owned and managed by a single individual
Benefits of Sole Proprietorship
Easy and inexpensive to form, few legal requirements
Profits all go to owner
Direct control of the business
No special taxation- do not pay corporate taxes
Freedom form govt regulation-
Ease of dissolution- can sell business at any time
Disadvantages of Sole Proprietorship
Unlimited liability- business owner is responsible for all debt
Difficulty raising capital- unprotected against claims of creditors so must use their personal
funds
Limited managerial expertise
,Trouble finding qualified employees- hard to offer same pay and benefits as big companies
Personal time commitment - long days and sacrifices
Unstable business life
Losses are owners responsibility
Partnerships
An assosiation of two or more individuals who agree to operate a business together for profit
General Partnership
All partners share in the management and profits, they co own the assets and can act on
behalf of the firm
limited partnership
Two types of partners: one or more general partners who have unlimited liability and own or
more limited partners whose liability is limited to the amount of their investment. Limited
partners agree to not take part in day to day management but they help finance the business
Limited liability partnerships
Partners are not held responsible for the business debt and liabilities
Limited liability limited partnership
Limited partnership with addition of limited liability hence protecting the general partner
from the debt and liabilities of the partnership
Advantages of partnership
,Ease of formation- easy to form
Availability of capital- can raise funds more easily
Diversify of skills and expertise
Flexibility
No special taxes
Relative freedom from govt control
Distances of partnerships
Unlimited liability- partner can be held liable for debts
Potential for conflicts between partners
Complexity of profit sharing
Difficulty by exiting a partnership
Corporation
A corporation is a legal entity subject to the laws of the state in which it was formed.
A corporation can own property, enter into contracts, sue and be sued, and engage in business
operations.
, Unlike sole propertiershuos and partnerships, Corporations are taxable entities with a life
separate from their owners who are not personally liable for its debt
Five steps of incorporation of a company
Select the companies name
,Write letters of incorporation and filing them with the appropriate state office, paying
required fees and taxes, holding an organizational meeting, adopting by laws, electing
directors, passing first operating resolutions
Stockholders (or shareholders)
Owners of the corporation, holding shares of stock that provide them with certain rights.
They may receive a portion of the corporations profits in the form of dividends, and they can
sell them or transfer their ownership in the corporations.
Stockholders can attend meeting, and vote on matters that affect the corporations.
Each stock share is usually one vote
Board of directors
Stockholders elect them.
They govern and handle the overall management of the corporations.
They set major goals and policies, hire corporate officers, oversee a firms operations and
finances.
Officers of a corporation
Answers
Sole Proprietorship
a business owned and managed by a single individual
Benefits of Sole Proprietorship
Easy and inexpensive to form, few legal requirements
Profits all go to owner
Direct control of the business
No special taxation- do not pay corporate taxes
Freedom form govt regulation-
Ease of dissolution- can sell business at any time
Disadvantages of Sole Proprietorship
Unlimited liability- business owner is responsible for all debt
Difficulty raising capital- unprotected against claims of creditors so must use their personal
funds
Limited managerial expertise
,Trouble finding qualified employees- hard to offer same pay and benefits as big companies
Personal time commitment - long days and sacrifices
Unstable business life
Losses are owners responsibility
Partnerships
An assosiation of two or more individuals who agree to operate a business together for profit
General Partnership
All partners share in the management and profits, they co own the assets and can act on
behalf of the firm
limited partnership
Two types of partners: one or more general partners who have unlimited liability and own or
more limited partners whose liability is limited to the amount of their investment. Limited
partners agree to not take part in day to day management but they help finance the business
Limited liability partnerships
Partners are not held responsible for the business debt and liabilities
Limited liability limited partnership
Limited partnership with addition of limited liability hence protecting the general partner
from the debt and liabilities of the partnership
Advantages of partnership
,Ease of formation- easy to form
Availability of capital- can raise funds more easily
Diversify of skills and expertise
Flexibility
No special taxes
Relative freedom from govt control
Distances of partnerships
Unlimited liability- partner can be held liable for debts
Potential for conflicts between partners
Complexity of profit sharing
Difficulty by exiting a partnership
Corporation
A corporation is a legal entity subject to the laws of the state in which it was formed.
A corporation can own property, enter into contracts, sue and be sued, and engage in business
operations.
, Unlike sole propertiershuos and partnerships, Corporations are taxable entities with a life
separate from their owners who are not personally liable for its debt
Five steps of incorporation of a company
Select the companies name
,Write letters of incorporation and filing them with the appropriate state office, paying
required fees and taxes, holding an organizational meeting, adopting by laws, electing
directors, passing first operating resolutions
Stockholders (or shareholders)
Owners of the corporation, holding shares of stock that provide them with certain rights.
They may receive a portion of the corporations profits in the form of dividends, and they can
sell them or transfer their ownership in the corporations.
Stockholders can attend meeting, and vote on matters that affect the corporations.
Each stock share is usually one vote
Board of directors
Stockholders elect them.
They govern and handle the overall management of the corporations.
They set major goals and policies, hire corporate officers, oversee a firms operations and
finances.
Officers of a corporation
