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test review 5-6 Bus

Sole Proprietorship
A form of business ownership with a single owner who usually actively manages the company.
Partnership
A voluntary agreement under which two or more people act as co-owners of a business for profit.
General partnership
A partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm.
Limited Partnership
A partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability.
Limited Liability
When owners are not personally liable for claims against their firm. Limited liability owners may lose their investment in the company, but their personal assets are protected.
Limited Liability Partnership (LLP)
A form of partnership in which all partners have the right to participate in management and have limited liability for company debts.
Corporation
A form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners.
C Corporation
The most common type of business corporation, where ownership offers limited liability to all of its owners, also called stockholders.
Articles of Incorporation
The document filed with a state government to establish the existence of a new corporation.
Corporate Bylaws
The basic rules governing how a corporation is organized and how it conducts its business.
Stockholder
An owner of a corporation.
Institutional Investor
An organization that pools contributions from investors, clients, or depositors and uses these funds to buy stocks and other securities.
Board of Directors
The individuals who are elected by stock-holders of a corporation to represent their interests.
S corporation
A form of corporation that avoids double taxation by having its income taxed as if it were a partnership.
Statutory Close Corporation
A corporation with a limited number of owners that oprates under simpler, less formal rules than a C Corporation.
Nonprofit Corporation
A corporation that does not seek to earn a profit and differs in several fundamental respects from general corporations.
Acquisition
A corporate restructuring in which one firm buys another. Afterwards, the target firm (the one being purchased) ceases to exist as an independent entity, while the acquiring firm continues to operate.
Merger
A corporate restructuring that occurs when two formerly independent business entities combine to form a new organization.
Horizontal Merger
A combination of two firms that are in the same industry.
Vertical Merger
A combination of firms at different stages in the production of a good or service.
Conglomerate Merger
A combination of two firms that are in unrelated industries.
Limited Liability Company (LLC)
A form of business ownership that offers both limited liability to its owners and flexible tax treatment.
Franchise
A type of business that is set up through a Franchise Agreement; which is a contract between a Fanchisor and a Franchisee to to use it’s name, trademark, aptents, copyright, business methods, and other property in exchange for monetary payments and other considerations.
Divestiture
The transfer of total or partial ownership of some of a firm’s assets to investors or to another company.
Business Format Franchise
A broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor.
franchise agreement
the contractual arrangement between a franchisor and franchisee that spells out the duties and responsibilities of both parties in detai.l
What are the four major forms of business ownership?
Sole proprietorship
Partnership
Corporation
Limited Liability Company
List the following characteristics of a sole proprietorship:
Number of Owners
Participation in Management
Owners Liability
Tax implications
State Filing Requirements
One owner
Managed by proprietor
Unlimited
Taxed as income to owner
No special filing required
List the following characteristics of a general partnership:
Number of owners
Participation in management
Owner’s liability
Tax implications
State filing requirements
2 or more
All partners participate
Unlimited
Taxed as income to owners
No special filing required
List the following characteristics of a general corporation:
Number of Owners
Participation in Management
Owners Liability
Tax implications
State Filing Requirements
No limit (on number of stockholders); stockholders do not participate.
Elected board directors appoints corporate officers who manage the corporation.
Limited.
Earnings subject to double taxation, also dividends are taxed as income to stockholders.
Must file articles of incorporation with state.
List the following characteristics of a limited liability company:
Number of Owners
Participation in Management
Owners Liability
Tax implications
State Filing Requirements
No limit
Member managed or manager managed
Limited
Taxed only as income to owners
Must file articles of organization with state
Why have corporations become the dominant form of business ownership?
The owners, stockholders, have limited liability
They can raise financial capital through issuing shares of stocks and bonds
They have unlimited life
What are the pros and cons of operating a business as a sole proprietorship?
Pros:
Simplest and least expensive form of ownership
Offers owner lots of flexibility
Owner keeps all of the profits
Cons:
Has unlimited liability for debts of business
Owner must work long hours and assume much responsibility
Usually have limited amount of funds for expansion
Why have limited liability companies become increasingly popular?
They give owners limited liability while avoiding the problem of double taxation
Fewer ownership restrictions than C corporations
LLCs also are subject to fewer regulations
Less strict management requirements than C corporations
How can corporations restructure using mergers and acquisitions?
The firm being acquired ceases to exist as an independent entity, while the acquiring firm continues to operate.
What are some advantages and disadvantages to each the franchisor and the franchisee?
Advantages for Franchisor: revenue gained without need to invest its own money.
Advantages Franchisees: gain the right to use a well-known brand name and proven business methods along with receiving training and support from franchisors.

Disadvantage Franchisor: dealing with a large number of franchisees can be difficult for franchisors. Irresponsible franchisees can have a negative impact on the entire organization. Disadvantages Franchisee: fees must be paid by the franchisee along with loss of control of the business.

What are some advantages and disadvantages of a General Partnership?
Advantages:
Can pool financial resources
Each co-owner takes an active role in management
Benefits of shared workload and complementary skills
Tax advantages
Disadvantages:
Unlimited liability
Potential for disagreements
Death or withdrawal can create a lack of continuity
What are the common objectives of a horizontal merger?
What is an example of a horizontal merger?
Common Objectives:
Increase size and market power within industry.
Improve efficiency by eliminating duplication of facilities and personnel.
Example:
2006 merger of telecommunications giants SBC and AT&T
What are the common objectives of a vertical merger? What is an example of a vertical merger?
Common objectives:
Provide tighter integration of production
Increased control over supply of crucial inputs
Example:
1996 merger of Time Warner with Turner Broadcasting
What is the common objective of a conglomerate merger?
What is an example of a conglomerate merger?
Common Objective:
Reduce risk by making the firm less vulnerable to adverse conditions in any single market. Example:
GE’s move into the entertainment industry by acquiring RCA in 1986 and Vivendi Universal’s movie and television units in 2004.
What are the key advantages of an S corporation?
What are the limitations?
Advantages:
Avoidance of double taxation
Stockholders have limited liability
Limitations:
Can have no more than 100 stockholders
Each stockholder must be a U.S. citizen
What are the key advantages of a statutory close corporation?
What are the key limitations?
Advantages:
Can operate under simpler arrangements than conventional corporations.
All owners can actively participate in management while still having limited liability. Limitations:
Number of stockholders limited Stockholders normally can’t sell their shares to the public without first offering the shares to existing owners.
Not all states allow formation of this type of corporation.
What are the key advantages of a nonprofit corporation?
What are the limitations?
Advantages:
Earnings are exempt from federal and state income taxes. Members and directors have limited liability.
Individuals who contribute money or property to the nonprofit can take a tax deduction.
Limitations:
Has members but not stockholders.
Cannot distribute dividends to the members.
Must keep accurate records and file paperwork to document taxexempt status.
Effective Communication
When you transmit rlevant meaning from the sender to the receiver.
Noise
Any interference that causes the message you send to be different from the message your audience understands.
Communication Barriers
Obstacles to effective communication, typically defined in terms of physical, language, body language, cultural, perceptual, and organizational barriers.
Intercultural Communication
Communication among people with differing cultural backgrounds.
Nonverbal Communication
Communication that uses factors other than words, such as gestures, facial expressions, eye contact, and body language.
Active Listening
Attentive listening that occurs when the listener focuses his or her complete attention on the speaker.
Communication Channels
The various ways in which a message can be sent, ranging from one-on-one in-person meetings to Internet message boards.
Bias
A preconception about members of a particular group. Common forms of bias include gerder bias, age bias, and rece, ethnicity, or nationality bias.
Active Voice
Sentence construction in which the subject performs the action expressed by the verb(My sister wrote the paper). Active voice works better for the vast majority of business communication.
Passive Voice
Sentence construction in which the subject does not do the action expressed by the verb; rather the subject is acted upon (The paper was written by my sister). Passive voice tends to be less effective for business communication.
Dynamic Delivery
Vibrant, compelling presentation delivery style that grabs and holds the attention of the audience
Sole Proprietorship & Profit %
72% are sole prop – Income 10%
Partnership & Profit %
9% are partnership – Income 20%
Corporation & Profit %
19 % are corporation – Income 70%

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