BUS 101 Chapter 8 Flashcards

Questions and Answers

Who are entrepreneurs?

People who take risks to start a new business (correct)

People who invest in existing businesses

People who work for others

People who avoid risks

What are sole proprietorships?

The most common form of business where the owner is the business.

What is a major advantage of a sole proprietorship?

Complete decision-making control of the business operations.

What is a major disadvantage of a sole proprietorship?

Unlimited liability for losses or liabilities incurred by the business. Signup and view all the answers

Unlimited liability means that personal assets can be seized in the event of business debts.

True Signup and view all the answers

What is a partnership?

An association of two or more persons to carry on as co-owners of a business for profit. Signup and view all the answers

What are the essential elements of a general partnership?

A sharing of profits or losses, a joint ownership of the business, an equal right to be involved in management. Signup and view all the answers

What is a limited partnership?

A partnership where some partners have limited liability and give up rights to management decisions. Signup and view all the answers

What does limited liability mean?

The limited partner is only liable up to the amount that was invested. Signup and view all the answers

What is a major advantage of a partnership?

Combined skills and competencies of two or more persons. Signup and view all the answers

Study Notes

Entrepreneurs

Key figures risk time and money to create new businesses, leading to the provision of goods and services.

Sole Proprietorships

Most common business form in the U.S., comprising 72% of all businesses.
Simplest structure: the owner is synonymous with the business.
Accounts for only 4% of total business sales receipts, indicating many sole proprietorships are typically small.

Advantages of Sole Proprietorship

Complete decision-making authority for the owner, fostering a sense of ownership pride.
All profits belong to the sole proprietor, who pays only personal income taxes.
Advantages include:
- Being your own boss
- Full profit retention
- No double taxation
- Simple to establish and dissolve

Disadvantages of Sole Proprietorship

Owner bears full responsibility for business losses and liabilities, risking personal assets.
Challenges in securing financial resources; potential difficulty in acquiring loans due to earnings volatility.
Ownership transfer requires moderate legal paperwork, limiting permanence.

Unlimited Liability

Personal debt liability means personal assets could be seized for business debts.
Lawsuits against the business can affect personal assets, merging personal and business liability.

Partnership

Involves two or more individuals working as co-owners for profit.
Formation requires mutual consent among partners, with at least one general partner responsible for management.

General Partnership

Defined by three elements:
- Shared profits and losses
- Joint ownership of the business
- Equal management rights among partners

Limited Partnership

Offers partners profit-sharing and joint ownership but limits their management rights and liabilities to their investment amount.

Limited Liability

Limits a limited partner's risk to their actual investment, protecting personal assets from business liabilities.

Advantages of a Partnership

Combines diverse skills and competencies, enhancing decision-making and business management.
Partners can focus on their specific strengths, improving overall business efficiency and performance.

Description

Test your knowledge on key concepts from BUS 101 Chapter 8 with these flashcards. This chapter focuses on entrepreneurship and the basics of sole proprietorships, including definitions and characteristics of each. Perfect for students looking to reinforce their understanding of foundational business concepts.