10 Questions
What is a characteristic of a sole proprietorship?
It has unlimited personal liability
In a partnership, what type of partner has limited liability?
Limited partner
What is the bid price in a transaction?
The highest price a buyer is willing to pay
What is a characteristic of a corporation?
It is a legal entity separate from its owners
What is the bid-ask spread?
The difference between the bid and ask prices
What is the primary risk associated with being a sole proprietor?
Unlimited personal liability
What type of partnership does not have general partners?
Limited partnership
What is the main advantage of a corporation over a sole proprietorship?
Limited liability for owners
What is the difference between the bid price and the ask price?
The bid price is lower, and the ask price is higher
Why do corporations issue shares?
To raise capital for business operations
Study Notes
Business Structures
- A sole proprietorship is owned and run by one person, typically with few employees, and carries unlimited personal liability.
- In a partnership, there are multiple owners, with two types of partners: general partners who are personally liable for debt, and limited partners who have limited liability.
Limited Liability
- A limited liability partnership has no general partners, and the limited partners run the business.
Corporation
- A corporation is a legal entity separate from its owners, responsible for its own obligations.
- Corporations allow for free trade in shares and can raise capital by selling ownership.
- However, corporations are subject to double taxation.
Trading Terms
- The bid price is the highest price a customer is willing to pay to buy a security.
- The ask price is the lowest price a seller is willing to accept to sell a security.
- The bid-ask spread represents the transaction costs.
Business Structures
- A sole proprietorship is owned and run by one person, typically with few employees, and carries unlimited personal liability.
- In a partnership, there are multiple owners, with two types of partners: general partners who are personally liable for debt, and limited partners who have limited liability.
Limited Liability
- A limited liability partnership has no general partners, and the limited partners run the business.
Corporation
- A corporation is a legal entity separate from its owners, responsible for its own obligations.
- Corporations allow for free trade in shares and can raise capital by selling ownership.
- However, corporations are subject to double taxation.
Trading Terms
- The bid price is the highest price a customer is willing to pay to buy a security.
- The ask price is the lowest price a seller is willing to accept to sell a security.
- The bid-ask spread represents the transaction costs.
Learn about the different types of business structures, including sole proprietorship, partnership, limited liability partnership, and corporation, and their characteristics.
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