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AU 60 - ASSIGNMENT 4 - UNDERWRITING THE COMMERCIAL ORGANIZATION
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AU 60 - ASSIGNMENT 4 - UNDERWRITING THE COMMERCIAL ORGANIZATION
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AU 60 - ASSIGNMENT 4 - UNDERWRITING THECOMMERCIAL ORGANIZATION
Sole proprietorship - Answers- A form of business in which one person owns the
business assets and is personally liable for the business's debts.
Unlimited liability - Answers- The liability that exists in sole proprietorships and certain
partnerships; if the business becomes bankrupt, creditors can seize business and
personal assets to satisfy claims.
Partnership - Answers- A for-profit business entity jointly owned by two or more persons
who share ownership and profits (or losses), although not necessarily on an equal
basis.
General partnership - Answers- A partnership in which each partner assumes unlimited
joint liability for all the partnership debts.
Corporation - Answers- An entity organized under law and entitled to the same rights as
a person, distinct from its owners.
Board of directors - Answers- The controlling entity of a corporation, elected by
stockholders.
Corporate charter (articles of incorporation) - Answers- A document prepared during the
formation of a corporation stating the corporation's goals and objectives and the kind of
business for which the corporation was organized.
Sole Proprietorships - Answers- include large enterprises with many employees and
hired managers, as well as part-time operations in which the owner is the only person
involved. In the United States, this type of company is more prevalent than any other
form of business entity.
Sole Proprietorships - Answers- ____ are usually subject to minimal state and federal
control (other than for obtaining required state and local licenses and permits) and may
be easily dissolved. In addition, profits are included in the owner's personal income and
not taxed separately.
Unlimited Liability - Answers- ____ is the most significant disadvantage of a sole
proprietorship. Potentially, the owner may lose not only his or her business, but also his
or her personal assets. Sole proprietorships are often thinly financed and remain so
because of difficulty in obtaining needed funds.
Partnerships - Answers- ____ are unincorporated businesses of two or more persons,
each of which has a financial interest in the business. The "persons" in in this type of
,business could be individuals, estates, trusts, other partnerships, or corporations and
are jointly liable for the debts of the business.
Partnerships - Answers- Unlike a sole proprietorship, a ____ is recognized as an entity
distinct from its individual members for certain purposes. For example, can sue and be
sued, as well as own and convey real estate.
Partnerships - Answers- ____, like sole proprietorships, do not pay taxes. Profits are
passed to partners, who pay taxes on the business's earnings.
General Partnerships - Answers- ____ are a form of partnership in which each partner
usually has an active role in the business and assumes unlimited joint liability for all the
partnership debts.
Limited Partnerships - Answers- ____ enable their partners to avoid having unlimited
liability. This type of partnerships are made up of one or more general partners, who
have unlimited liability for all business debts, and one or more limited partners, whose
liability is limited to the amount of capital they have contributed to the partnership.
Articles of Partnership - Answers- The ___ is a legal document that specifies each
partner's financial and managerial responsibilities toward one another. This partnership
agreement includes all types of partners and usually specifies these items:
- Each partner's name
- The investment of each partner
- Each partner's share of profits
- The duties of each partner
- The salary, if any, of each partner
- A method of withdrawing from the partnership
- A method of dissolving the partnership
Limited partnership - Answers- form of partnership made up of one or more general
partners, who have unlimited liability, and one or more limited partners, whose liability is
limited to the amount of capital they have contributed to the partnership.
Secret partner - Answers- A general partner who is active in a business but who is not
known to the public.
Silent partner - Answers- A partner who invests in a partnership and is known to the
public but takes no active role in the business.
Dormant partner - Answers- A partner who is neither known to the public nor active in
the business.
Nominal partner - Answers- An individual who lends expertise or experience to a
partnership but has no investment in the partnership and is not a true partner.
, Articles of partnership - Answers- A legal document that specifies each partner's
financial and managerial responsibilities toward one another.
Corporations - Answers- ____ are artificial beings, invisible, intangible, and existing
only in the contemplation of the law and can either be public or private.
Public - Answers- ____ corporations are a type of corporation that is owned by the
general public; its stock is sold on stock exchanges such as the New York Stock
Exchange (NYSE) and the National Association of Securities Dealers Automated
Quotation System (NASDAQ).
Private - Answers- ____ corporations are owned by only a few stockholders, and
ownership of their stock is usually not open to the public. Many of this type of
corporations are family owned, and control of the stock—and thereby control of the
corporation—is commonly described as being "closely held."
Board of Directors - Answers- Corporations are controlled by a ____. They hire the
management to operate the business.
Stockholders - Answers- ____, the owners of a corporation, are entitled to one vote for
each share of stock owned. These persons elect the board of directors.
Directors - Answers- ____ of corporations have responsibilities to the corporation and
the stockholders. They also have a legal duty to be loyal to the corporation and the
stockholders and to act in their best interests. This obligation means that they must
avoid conflicts of interest and not use his or her position for personal gain.
B. Individual partners have unlimited liability for the debts of the partnership. - Answers-
Which of the following represents a disadvantage associated with partnerships?
A. Partnerships are difficult to create.
B. Individual partners have unlimited liability for the debts of the partnership.
C. Partnerships are often thinly financed.
D. Partnerships offer insufficient flexibility as the demands of the business grow and
change.
Sole Proprietorship - Answers- The ____ is the simplest form of business because it is
owned by one person who is its manager.
Partnership - Answers- A ____ is an association of two or more persons who agree to
enter into a business to share in its profits and losses.
Corporation - Answers- A ____ is an artificial person created by law to conduct
business or carry out another specific purpose.
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