Chapter 5: Choosing a Form of Ownership

These flashcards cover key concepts related to business ownership structures, including sole proprietorships, partnerships, corporations, and franchising.

Sole Proprietorship

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

Partnership

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

General Partnership

A partnership where all partners share management and profits equally.

Limited Partnership

A partnership with at least one general partner and one limited partner who typically has limited liability.

Corporation

A legal entity with an existence and life separate from its owners, protecting them from personal liability for the entity's debts.

S Corporation

A hybrid entity taxed like a partnership but organized like a corporation, limited to 100 shareholders.

Limited Liability Company (LLC)

A hybrid organization that offers liability protection like a corporation but can be taxed as either a partnership or corporation.

Franchising

A business arrangement between a franchisor, which supplies the product concept, and a franchisee, who sells the goods or services of the franchisor.

Franchisee Agreement

An agreement where the franchisee follows operating rules, buys equipment, and maintains sales/service levels.

Advantages of Franchising

Includes increased expansion ability, royalty fees, and market information for the franchisor.

Disadvantages of Franchising

Includes loss of control, restricted operating freedom, and costs associated with franchising for the franchisee.