Define sole proprietorship: |
Business owned by one person |
What % of the US is sole proprietorship? |
70% |
What are the advantages of a sole proprietorship? (6) |
1-easy to start up 2-control over profits 3-control over operations 4-lower taxes 5-easy to dissolve 6-pride of ownership |
What are the disadvantages of a sole proprietorship? (6) |
1-bigger chance of failure 2-unlimited liability 3-difficult to raise capital 4-responsible for all losses 5-long hours 6-management knowledge-limited |
Define partnership: |
2 or more people sharing ownership and operation of business by contractual agreement |
What are the advantages of a partnership? (5) |
1-more capital 2-combined management skills 3-tax advantages 4-personal satisfaction 5-shared losses |
What are the disadvantages of a partnership? (5) |
1-unlimited liability 2-shared profits 3-possible conflicts 4-possible instability 5-difficult to withdraw assets |
What does a contract of partnership have to address? (7) |
1-name of company and description 2-names and type of partner of each party 3-the amount of investment by each 4-how profits and losses are shared 5-responsibilities of the partners 6-salaries of partners 7-dissolution of the partnership |
Define corporations: |
A legal entity-can buy and sell, contract, sue, and be sued Can be owned by 1 person or more |
What are the advantages of a corporation? (4) |
1-limited liability 2-greater capital 3-unlimited life 4-specialized management knowledge |
What are the disadvantages of a corporation? (4) |
1-increased taxes 2-difficult to start 3-red tape 4-increased government control |
What are the owners of a corporation known as? (2) |
Stockholders or shareholders |
In order to operate as a corporation what is needed? |
Written permission is needed from the state= Certificate of Incorporation |
What do stockholders elect that oversee the operations of the business? |
Board of Directors |
Profits from the business are: (2) |
1-reinvested in the business 2-paid to the owners as dividends |
What is a Cooperative? |
A business owned by the member it serves and managed in their best interest |
Describe 2 ways that a Cooperative normally assigns voting rights to its owners: |
1- Equally: one owner, one vote 2- Base on the amount of business the member does w/ the Coop |
The owner of a Cooperative is called a _______ |
member |
The name of the group of people that is elected by the owners of a Cooperative to oversee the operations of the Coop is _____ __ _________ |
Board of Directors |
What is the purpose of a Consumer's Coop? |
To buy thing for the members more cheaply |
What is the purpose of a Producer's Coop? |
To give members a channel to sell their products |
What is a Franchise? |
A business that through a contract, a local owner is allowed to sell a "well known" product in a specific manner by the parent |
What are advantages of a Franchise? |
1- easy to start 2- selling a "well known" product 3- management advice from the parent 4- national advertising provided |
What are disadvantages of a Franchise? |
1- requires a large amount of capital at start 2- must pay parent a percent of profits every year 3- very competitive |
If you decide to buy a McDonald's Franchise to open in DC, you are called the: |
franchisee |
If you decide to buy a McDonald's Franchise to open in DC, McDonald's Corporation is called the: |
Franchisor |
The owner is boss; makes all decisions: |
Sole Proprietorship |
Cannot engage in business unless approved by the state: |
Corporation |
May be owned by thousands of diff people: |
Partnership, Corporation, Cooperative |
Owner or owners get all profits; also responsible for debts of other owners: |
Sole Proprietorship, Partnership |
One of the owners may be personally responsible for debts of other owners: |
Partnership |
Considered the best type for raising large amounts of capital: |
Corporation |
Profits distributed in the form of dividends according to the number of shares owned: |
Corporation |
The business is managed by a board of directors: |
Corporation, Cooperative |
Earnings are paid back to members in proportion to their purchases: |
Cooperative |
The parent company often advertises for all the operators throughout the country: |
Franchise |
Pays an annual refund to members only: |
Cooperative |
Each owner has one vote for each share of stock: |
Corporation |
Organized to buy things for members as well as sell goods and services to members: |
Cooperative |
Each owner has only one vote regardless of number of shares she or he owns: |
Cooperative |
The owners are not liable for the debts of the firm: |
Corporation |
The operator pays a percentage of sales or a set fee to parent company: |
Franchise |
While these businesses are relatively easy to start, they require a lot of capital and are often very competitive: |
Franchise |