BUSN11 Chapter 6 EXAM PREP ALREADY
PASSED
Sole Proprietorship - =single owner who manages the company
Partnership - =voluntary agreement between two or more co-owners of a business for profit
General Partnership - =all partners take an active role in managing the business and have
unlimited liability for claims against the firm
Corporation - =Business is considered a legal entity that id separate and distinct from its owners.
Created by filing the articles of incorporation and paying a fee of incorporation to the appropriate
state agency. Owners of a corporation have limited liability.
Limited Liability Company - =offers limited liability to owners and flexible tax treatment
Advantages of Sole Proprietorship - =ease of formation, retention of control, pride of ownership,
retention of profits, possible tax advantage
Disadvantages of Sole Proprietorship - =limited financial resources, unlimited liability, limited
ability to attract and maintain talented employees, heavy workload and responsibilities, lack of
permanence
General Partnerships - =No limit on the number of partners. Partnership agreement should entail
details regarding initial financial contributions, specific duties and responsibilities, sharing
profits and losses, settling disagreements, and death or withdrawal of a partner
Advantages of Partnerships - =ability to pool financial resources, ability to share responsibilities
and capitalize on complementary skills, ease of formation, and possible tax advantages
Disadvantages of Partnerships - =unlimited liability, potential for disagreements, lack of
continuity, and difficulty in withdrawing from a partnership
, Limited Partnership - =Includes at least one general partner who actively manages the company
and accepts unlimited liability. Other partner gives up the right to actively manage the company
in exchange for limited liability.
Limited Liability Partnership (LLP) - =All partners have the right to participate in the
management and have limited liability for company debts.
C Corporation - =Offers limited liability to all its stockholders. Formation of a corporation
requires filing articles of incorporation, paying filing fees, and adopting corporate bylaws.
Stockholders can be institutional investors. Issues common stock as the basic ownership interest.
Some corporations issue preferred stock as well.
Institutional Investor - =Organization that pools contributions from investors, clients, or
depositors. Uses pooled funds to buy stocks and securities.
Board of Directors - =Elected by stockholders to represent their interests. Oversee the operation
of their company and protect their interests. Appoint a chief executive officer (CEO) and other
corporate officers to manage the company on a daily basis.
Advantages of C Corporations - =limited liability, permanence, ease of transfer of ownership,
ability to raise financial capital, and ability to make use of specialized management
Disadvantages of C Corporations - =expense and complexity or formation and operation,
complications when operating in multiple states, double taxation of earnings and additional
taxes, more paperwork and regulation and less secrecy, and possible conflicts of interest
Advantages of S Corporation - =Internal Revenue Service does not tax earnings of S
Corporations separately and stockholders have limited liability
Disadvantages of S Corporation - =can have only 100 stockholders and with rare exceptions,
each stockholder must be a U.S. citizen or permanent resident of the United States
PASSED
Sole Proprietorship - =single owner who manages the company
Partnership - =voluntary agreement between two or more co-owners of a business for profit
General Partnership - =all partners take an active role in managing the business and have
unlimited liability for claims against the firm
Corporation - =Business is considered a legal entity that id separate and distinct from its owners.
Created by filing the articles of incorporation and paying a fee of incorporation to the appropriate
state agency. Owners of a corporation have limited liability.
Limited Liability Company - =offers limited liability to owners and flexible tax treatment
Advantages of Sole Proprietorship - =ease of formation, retention of control, pride of ownership,
retention of profits, possible tax advantage
Disadvantages of Sole Proprietorship - =limited financial resources, unlimited liability, limited
ability to attract and maintain talented employees, heavy workload and responsibilities, lack of
permanence
General Partnerships - =No limit on the number of partners. Partnership agreement should entail
details regarding initial financial contributions, specific duties and responsibilities, sharing
profits and losses, settling disagreements, and death or withdrawal of a partner
Advantages of Partnerships - =ability to pool financial resources, ability to share responsibilities
and capitalize on complementary skills, ease of formation, and possible tax advantages
Disadvantages of Partnerships - =unlimited liability, potential for disagreements, lack of
continuity, and difficulty in withdrawing from a partnership
, Limited Partnership - =Includes at least one general partner who actively manages the company
and accepts unlimited liability. Other partner gives up the right to actively manage the company
in exchange for limited liability.
Limited Liability Partnership (LLP) - =All partners have the right to participate in the
management and have limited liability for company debts.
C Corporation - =Offers limited liability to all its stockholders. Formation of a corporation
requires filing articles of incorporation, paying filing fees, and adopting corporate bylaws.
Stockholders can be institutional investors. Issues common stock as the basic ownership interest.
Some corporations issue preferred stock as well.
Institutional Investor - =Organization that pools contributions from investors, clients, or
depositors. Uses pooled funds to buy stocks and securities.
Board of Directors - =Elected by stockholders to represent their interests. Oversee the operation
of their company and protect their interests. Appoint a chief executive officer (CEO) and other
corporate officers to manage the company on a daily basis.
Advantages of C Corporations - =limited liability, permanence, ease of transfer of ownership,
ability to raise financial capital, and ability to make use of specialized management
Disadvantages of C Corporations - =expense and complexity or formation and operation,
complications when operating in multiple states, double taxation of earnings and additional
taxes, more paperwork and regulation and less secrecy, and possible conflicts of interest
Advantages of S Corporation - =Internal Revenue Service does not tax earnings of S
Corporations separately and stockholders have limited liability
Disadvantages of S Corporation - =can have only 100 stockholders and with rare exceptions,
each stockholder must be a U.S. citizen or permanent resident of the United States
