Connect Chapter 4

Sole Proprietor

Businesses owned and operated by one individual.

Partnership

A form of business organization defined by the Uniform Partnership Act as “an association of two or more persons who carry on as co-owners of a business.

Corporation

A legal entity, created by the state, whose assets and liabilities are separate from its owners.

In the U.S., sole proprietorships constitute about _____ percent of all businesses.

75

What is the maximum number of shareholders an S corporation can have?

100

Typically, sole proprietorships employ fewer than ___ people.

50

What taxes do sole proprietorships pay?

Income tax that includes both the business and individual income.

Partnership

A legal form of business with two or more owners.

What are 3 skills a sole proprietorship should possess?

Marketing, personnel management, and accounting.

The 2 main types of partnership:

General and Limited.

Continuity

A business being dependent on the life of the business owner.

General Partnership

A partnership that involves a complete sharing in both the management and liability of the business.

Limited Partnership

When there is one or more general partners and one or more limited partners.

Master Limited Partnership

A limited partnership that is traded on securities exchanges.

Articles of Partnership

Legal documents that set forth the basic agreement between partners.

What are 2 advantages of the partnership form of ownership?

More financial resources and more skills are available.

An example of a master limited partnership is ________.

Oil and gas.

What 2 items are usually listed in the articles of partnership?

How profits will be distributed and the responsibility of each partner.

In a partnership, the liability of limited partners is limited to their _______.

Initial investment.

As with sole proprietorships, partnerships may have to pay _____ interest rates on funds borrowed from banks.

Higher

Corporation

A state-chartered legal entity with authority to act and have liability separate from its owners.

Dividends

Profits of a corporation that are distributed in the form of cash payments to stockholders.

Domestic Corporation

The corporation does business in the state in which it is chartered.

Foreign Corporation

The corporation does business in a state other than the one in which it was chartered.

Alien Corporation

The corporation does business outside the nation in which it was incorporated.

Corporation Charter

A legal document that the state issues to a company based on information the company provides in the articles of incorporation.

Quasi-Public Corporation

Corporations owned and operated by the federal, state, or local government.

Initial Public Offering

The selling of a corporation’s stocks on a public market for the first time.

Perpetual Life

The death of one owner does not end the corporation.

Nonprofit Corporation

Corporations that focus on providing a service rather than earning a profit, but are not owned by a government entity.

Double Taxation

When a corporation pays a tax on its profits, individual stockholder each pay tax on dividends distributed by the corporation.

Public corporations must file reports with the ______________________.

Securities and Exchange Commission

Joint Venture

A partnership established for a specific project or for a limited time.

S Corporation

Corporation taxed as though it were a partnership with restrictions on shareholders.

How many shareholders can an S Corporation have?

100

A limited liability company is taxed like a ________.

Partnership

Cooperative

An organization composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization.

Merger

The result of two firms combining to form one company.

Acquisition

The purchase of one company by another, usually by buying its stock.

Horizontal Merger

When firms make and sell similar products to the same customers merge.

Vertical Merger

When companies operating at different but related levels of industry merge.

Conglomerate Merger

When two firms in unrelated industries merge.

Corporate Raider

A company or individual that wants to acquire or take over another company.

Poison Pill

A firm allows stockholders to buy more shares of stock at lower prices than the current market value.

Shark Repellent

Management requires a large majority of stockholders to approve the takeover.

White Knight

A more acceptable firm that is willing to acquire the threatened company.

In a leveraged buyout, employees, managers, or investors finance the purchase of the company by _______.

Borrowing against its assets.

Tender Offer

A public proposal by a company or an outside investor to buy a large block of stock directly from existing shareholders at a fixed, premium price.