sole proprietorship disadvantages - unlimited liability
- finite life span
- resource limitations
- limited managerial experience
- demands on owner
- no employee benefits for the owner
-lack of qualified employees (can't match wage demands)
Many sole proprietors will focus on ______ services (like child care, salons, etc) rather
than on the manufacture of goods
unlimited liability - means that the owner is personally and fully responsible for all losses
and debts of the business
- major drawback to a sole proprietorship or a partnership
- from a legal standpoint the owner and business are one and the same
, MIE 201 Exam 2: Chapters 4, 5, 8 Makanui
NCSU Questions With Solutions 100% Solved
definition of a partnership an association of two or more persons to carry on, as co-
owners, a business for profit; profits will be divided as specified in the agreement
types of partnerships - general partnerships
- limited partnerships
- MLP
- LLP
general partnerships - partners are considered equal by law and all are liable for the
business's debts
- partners share ownership and both have unlimited liability
ex) lawyers, accountants, etc.
limited partnerships - one or more persons act as general partners who run the business
while the remaining partners are passive investors (not involved in managing the business)
- called this because their liability (amount of money they can lose) is limited to the amount of
the capital they invested at the beginning of their partnership
, MIE 201 Exam 2: Chapters 4, 5, 8 Makanui
NCSU Questions With Solutions 100% Solved
- passive investors and have limited liability
articles of partnership legal documents that set forth the basic agreement between partners
-list the money or assets that each partner contributed
-states each partner's individual management role/duty
- defines the steps a partner must take to sell his or her partnership interest or what will happen if
one of the patterns dies
MLP (master limited partnership) - allowed to raise money by selling units of ownership
to the general public in the same way that corporations sell shares of stock to the public
- gives MLPs the fundraising capabilities of corporations without the double-taxation
disadvantage
- mainly oil and gas companies
LLP (limited liability partnership) - form of business was created to help protect
individual partners in certain professions from major mistakes (such as errors that trigger
malpractice lawsuits) by other partners in the firm
, MIE 201 Exam 2: Chapters 4, 5, 8 Makanui
NCSU Questions With Solutions 100% Solved
- each partner has unlimited liability only for his or her own actions and at least some degree of
limited liability for the partnership as a whole
advantages of a partnership - simplicity
- single layer of taxation
- more resources than a sole proprietorship
- cost sharing between partners
- broader skills and experience
- longevity
disadvantages of a partnership - unlimited liability for general partners
- interpersonal problems
managing partner & unproductive partners
- limited partners have no voice in the management of the business
- distribution of profits
corporations - businesses that are owned by many investors who buy shares of stock
- a legal entity with the power to own property and conduct business
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