Business Structures and Types
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Questions and Answers

What is a characteristic of a sole proprietorship?

  • It has limited personal liability
  • It has more than one owner
  • It is a legal entity separate from its owner
  • It has unlimited personal liability (correct)
  • In a partnership, what type of partner has limited liability?

  • Dividend partner
  • Limited partner (correct)
  • Sole proprietor
  • General partner
  • What is the bid price in a transaction?

  • The transaction cost
  • The highest price a buyer is willing to pay (correct)
  • The lowest price a seller is willing to accept
  • The average price of a security
  • What is a characteristic of a corporation?

    <p>It is a legal entity separate from its owners</p> Signup and view all the answers

    What is the bid-ask spread?

    <p>The difference between the bid and ask prices</p> Signup and view all the answers

    What is the primary risk associated with being a sole proprietor?

    <p>Unlimited personal liability</p> Signup and view all the answers

    What type of partnership does not have general partners?

    <p>Limited partnership</p> Signup and view all the answers

    What is the main advantage of a corporation over a sole proprietorship?

    <p>Limited liability for owners</p> Signup and view all the answers

    What is the difference between the bid price and the ask price?

    <p>The bid price is lower, and the ask price is higher</p> Signup and view all the answers

    Why do corporations issue shares?

    <p>To raise capital for business operations</p> Signup and view all the answers

    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.

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    Description

    Learn about the different types of business structures, including sole proprietorship, partnership, limited liability partnership, and corporation, and their characteristics.

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