Forms of Business Ownership

FBLA intro to business concepts

acquisition

The purchase of a target company by another corporation or by an investor group typically negotiated with the target company board of directors.

board of directors

A group of people elected by the stockholders to handle the overall management of a corporation, such as setting major corporate goals and policies, hiring corporate officers, and overseeing the firm’s operations and finances.

buyer cooperative

A group of cooperative members who unite for combined purchasing power.

C corporation

A conventional or basic form of corporate organization.

conglomerate merger

A merger of companies in unrelated businesses; done to reduce risk.

cooperative

A legal entity typically formed by people with similar interests, such as suppliers or customers, to reduce costs and gain economic power. A cooperative has limited liability, an unlimited life span, an elected board of directors, and an administrative staff; all profits are distributed to the member-owners in proportion to their contributions.

corporation

A legal entity with an existence and life separate from its owners, who are not personally liable for the entity’s debts. A corporation is chartered by the state in which it is formed and can own property, enter into contracts, sue and be sued, and engage in business operations under the terms of its charter.

franchise agreement

A contract setting out the terms of a franchising arrangement, including the rules for running the franchise, the services provided by the franchisor, and the financial terms. Under the contract, the franchisee is allowed to use the franchisor’s business name, trademark, and logo.

franchisee

In a franchising arrangement, the individual or company that sells the goods or services of the franchisor in a certain geographic area.

franchising

A form of business organization based on a business arrangement between a franchisor, which supplies the product or service concept, and the franchisee, who sells the goods or services of the franchisor in a certain geographic area.

franchisor

In a franchising arrangement, the company that supplies the product or service concept to the franchisee.

general partners

Partners who have unlimited liability for all of the firm’s business obligations and who control its operations.

general partnership

A partnership in which all partners share in the management and profits. Each partner can act on behalf of the firm and has unlimited liability for all its business obligations.

horizontal merger

A merger of companies at the same stage in the same industry; done to reduce costs, expand product offerings, or reduce competition.

joint venture

Two or more companies that form an alliance to pursue a specific project, usually for a specified time period.

leveraged buyout (LBO)

A corporate takeover financed by large amounts of borrowed money; can be started by outside investors or the corporation’s management.

limited liability company (LLC)

A hybrid organization that offers the same liability protection as a corporation but may be taxed as either a partnership or a corporation.

limited partners

Partners whose liability for the firm’s business obligations is limited to the amount of their investment. They help to finance the business but do not participate in the firm’s operations.

limited partnership

A partnership with one or more general partners, who have unlimited liability, and one or more limited partners, whose liability is limited to the amount of their investment in the company.

merger

The combination of two or more firms to form one new company.

partnership

An association of two or more individuals who agree to operate a business together for profit.

S corporation

A hybrid entity that is organized like a corporation, with stockholders, directors, and officers, but taxed like a partnership, with income and losses flowing through to the stockholders and taxed as their personal income.

seller cooperative

Individual producers who join together to compete more effectively with large producers.

sole proprietorship

A business that is established, owned, operated, and often financed by one person.

stockholders (or shareholders)

The owners of a corporation who hold shares of stock that carry certain rights.

vertical merger

A merger of companies at different stages in the same industry; done to gain control over supplies of resources or to gain access to different markets.