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Econ Review (Chapter 8)

Terms in this set (55)

A business organization is an enterprise that does one of 2 things- What are they?
Produces goods and provides a service
One meaning of the word enterprise is "to do something difficult" or "something that requires effort" In economics an enterprise is a
business
What kind of firm would have one owner
sole proprietorship
A legal term that means you are responsible by law
liability
Put a check mark in front of all the (+) aspects of being the only owner of a company
- easy to start
- easy to stop/go out of business
-make quick decisions
what do you call a jointly owned business operated by two or more people
partnerships
A business that is owned jointly by two individuals who share equally in the responsibility and liability would be called a
general partnership
a business that is owned and managed by one person is called a
sole proprietorship
a business that is owned by individuals called shareholders or stockholders who face limited liability is called
corporations
a business that is owned jointly by two individuals who do not share equally in the responsibility and liability of the "silent partner" is limited to his/her investment
limited partnership
the legal status of a person or business that cannot repay debts that are owned to others. This comes about by a court order and literally means "broken bank."
bankruptcy
a legal term that means you are responsible by law
liability
True or False:
In a partnership if one partner dies the company dies also and must restart
True
Getting a loan for a partnership is easier than getting a loan if you are the only owner
True
In a partnership you are responsive for the business activities of your partners
true
when starting partnership you probably have less paperwork than companies run by one person
false
A share in the ownership of a corporation is called
stock holder
Owner always be the "boss"
Advantage- sole proprietorship
Can continue operations indefinitely
Advantage- Corporation
Funding limited by amount of personal savings and ability to borrow
Disadvantage- Sole Proprietorship & Partnership
Each owner acts on behalf of the business and is personally responsible
Disadvantage- Partnership
Lack of opportunities for employees since firms are generally small
Disadvantage- Sole Proprietorship & Partnership
Easiest kind of business to organize
Advantage- Sole proprietorship
Limited liability
Advantage- Corporation
Ownership can be easily transferred through transfer of stock
Advantage- Corporation
Often requires a lawyer to formally set up the business
Disadvantage- Corporation
Unlimited Liability
Disadvantage- Sole Proprietorship & Partnership
People can buy and sell their shares of ownership without the business ending
Advantage- Corporations
Business profits are made by individual owner(s)
Advantage- Corporation
The death of the owner can result in the termination of the business
Disadvantage- Sole Proprietorship & Partnership
Double taxation
Disadvantage- Corporation
Can grow to be very large
Advantage- Corporation
Owner(s) can quickly react to business problems
Advantage- Sole Proprietorship & Partnerships
Must pay a special tax on the profits
Disadvantage- Corporation
Management often separate from ownership
Disadvantage- Corporation
Does not have to pay corporation income tax
Advantage- Sole Proprietorship & Partnerships
Combines funds of more than one person for the start-up or expansion
Advantage- Partnerships & Corporations
Sole Proprietorship
A business owned and controlled by one person
Limited Life
A situation in which a business ceases to exist if the owner dies, retires, or leaves
Unlimited Liability
A situation in which a business owner is responsible for all the losses and debts of a business
Partnership
A business co-owned by two or more people, or "" partners,"' who agree on how responsibility, profits, and losses should be divided
General Partnership
A partnership in which each partner shares the management of the business and is liable for all business debts and losses
Limited Partnership
A partnership in which at least one partner is not involved in running the business and is liable only for the funds he or she invested
Limited Liability Partnership
A partnership in which all partners are not responsible for the debts and other liabilities of the other partners
Corporation
A business owned by shareholders, also called stockholders, who own the rights to the company's profits but face only limited liability for the company's debts and losses
Stock
Shares of ownership in a corporation
Dividend
The part of a corporation's profit the company pays the stockholders
Bond
A contract a corporation issues that promises to repay borrowed money, plus interest, on a fixed schedule
Unlimited Life
A situation in which a corporation continues to exist even after a change in ownership
Horizontal Merger
The joining of two or more companies that offer the same or similar products or services
Vertical Merger
The combining of two or more businesses involved in different steps of producing or marketing a product or service
Conglomerate
A business composed of companies that produce unrelated goods or services
Multinational Corporation
A corporation with branches in several countries
Cooperative
A type of business operated for the shared benefit of the owners, who are also its customers
Nonprofit Organization
An institution that acts like a business but exists to benefits society rather than to make a profit
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