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Foundations of Business Exam 2 VT WITH VERIFIED SOLUTIONS
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Foundations of Business Exam 2 VT WITH VERIFIED SOLUTIONS
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Foundations of Business Exam 2 VTSole Proprietorship - correct answer ✔✔One person has complete control over a business
Advantages of Sole Proprietorship - correct answer ✔✔Easiest to start
Least regulated
Single owner keeps all the profits
Taxed once as personal income
Disadvantages of Sole Proprietorship - correct answer ✔✔unlimited liability
lack of continuity
lack of financing
limited management skills
unlimited liability - correct answer ✔✔Is a business incurred any debt the owner is personally liable
Partnership - correct answer ✔✔a business owned by two or more people
partnership agreement - correct answer ✔✔specifies everyone's rights and responsibilities
partnership agreement examples - correct answer ✔✔division of income
amount of cash
contributions made by each partner
Unlimited liability in partnership - correct answer ✔✔Each partner is liable for their actions AND their
partners actions
,limited partnership - correct answer ✔✔Partnership where one person (general partner) runs the
business and in turn has unlimited liability and another partner (limited partner(s) have limited
involvement are are limited to their amount an investment
general partner - correct answer ✔✔runs business and is responsible for liabilities
limited partner(s) - correct answer ✔✔More of an investor
- limited involvement and losses are limited to their amount of investment
Advantages of Partnership - correct answer ✔✔Two or more owners
More capital available
Relatively easy to start
Income taxed once as personal income
Continuity is not an issue
Disadvantages of Partnership - correct answer ✔✔Unlimited liability
share devision making
share profits
IPO - correct answer ✔✔Initial Public Offering
- a company becomes a corporation as it begins to sell stock
Corperation - correct answer ✔✔a separate legal entity that is entirely separate from the parties who
own it
-acts as a separate entity as they can enter contracts, buy and sell property, etc.
Shareholders - correct answer ✔✔Those who invest money in a business buy buying stock and therefore
owning part of the corperation
Stock - correct answer ✔✔Shareholders buy shares of what?
, Board of directors - correct answer ✔✔elected by shareholders and are legally responsible for governing
the corperation
functions of board of directors - correct answer ✔✔set goals and hold management responsible for
meeting them
hire and evaluate CEO
approves distribution in form of cash payments
Dividends - correct answer ✔✔earnings distributed to stockholders
Advantages of a corporation - correct answer ✔✔Limited liability
Potential unlimited life
Separation of ownership and management
Transfer of ownership is easy
Easier to raise capital
specialized management (able to attract high skilled workers as thy are able to pay more)
limited liability - correct answer ✔✔A form of business ownership in which the owners are liable only up
to the amount of their individual investments.
limited liability in corporations - correct answer ✔✔invests can lose no more than the amount they
originally invested
Disadvantages of a corporation - correct answer ✔✔corporate managers and shareholders may have
different plans
more costly to set up
subject to regulation and government oversight
double tax
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