Ch. 5 Understanding Business: How to Form a Business
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Created by:
KristiL7781 on September 28, 2011
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25 terms
Terms | Definitions |
|---|---|
 Sole Proprietorship | A business that is owned, and usually managed,by one person |
| Partnership | A legal form of business with two or more partners. |
| Corporation | A legal entity with authority to act and have liability apart from its owners. |
| Unlimited Liability | The responsibility of business owners for the debts of a business. |
| General Partnership | A partnership in which all owners share in operating the business and assuming liability for the business's debts. |
| Limited Partnership | A partnership with one or more general partners and one or more limited partners. |
| General Partner | An owner (partner) who has unlimited liability and is active in managing the firm. |
| Limited Partner | An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment. |
| Limited Liability | The responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders have limited liability. |
| Master Limited Partnership (MLP) | A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax. |
| Limited Liability Partnership (LLP) | A partnership that limits partners' risk of losing their personal assets to only their own acts and omissions and to the acts and omissions of people under their supervision. |
| Conventional (C) Corporation | A state-chartered legal entity with authority to act and have liability separate from its owners. |
| S Corporation | A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships. Reason formed: to avoid double taxation. Company must have no more than 100 shareholders, shareholders are individuals or estates, US permanent residents, have only one class of stock |
| Limited Liability Companies (LLC) | Similar to an S corporation without the special eligibility requirements. |
| Merger | The result of two firms forming one company. |
| Acquisition | One company's purchase of the property and obligations of another company. |
| Vertical Merger | The joining of two companies involved in different stages of related businesses. ie. soft drink company and artificial sweetener maker. |
| Horizontal Merger | The joining of two firms in the same industry. ie. soft drink company and a mineral water company. |
| Conglomerate Merger | The joining of firms in completely unrelated industries. |
| Leveraged Buy Out (LBO) | An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing. |
| Franchise Agreement | An arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory. |
| Franchisor | A company that develops a product concept and sells others the rights to make and sell the products. |
| Franchise | The right to use a specific business's name and sell its products or services in a given territory. |
| Franchisee | A person who buys a franchise. |
| Cooperative | A business owned and controlled by the people who use it - producers, consumers, or workers with similar needs who pool their resources for mutual gain. |
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