10 Questions
What is the main characteristic of a sole proprietorship?
It is owned by only one person.
What is the main role of the board of directors in a corporation?
To hire the chief executive officer (CEO) and make decisions about the corporation's stocks and dividends.
What is the term for the combining of firms engaged in related businesses?
Vertical merger
What is a limited partner responsible for?
Investing money or assets with no managerial responsibilities or liability for losses.
What is the term for an offer to the shareholders of a company to purchase all of their stock at a price above current market value?
Tender offer
What is the term for the combining of firms that do business in completely unrelated industries?
Conglomerate merger
What is a general partner responsible for?
Participating in managing the business and having unlimited liability for its debts.
What is the term for the result of one firm simply buying the assets and obligations of another company?
Acquisition
What is a master limited partnership?
Similar to a limited partnership, except that shares of ownership can be traded on stock exchanges.
What is the term for the result of two firms formally joining their assets, liabilities, and ownership?
Merger
Study Notes
Forms of Business Ownership
- Sole Proprietorship: A business owned by one person
- Partnership: Co-ownership of a business by 2 or more people, with a written partnership agreement for protection
- Limited Partnership: Partnership with some partners investing money/assets with no managerial responsibilities or liability for losses
Partnership Roles
- General Partner: Participates in managing the business, with unlimited liability for debts
- Limited Partner: Does not participate in managing the company, liable for indebtedness only up to their investment
Corporation
- Entity owned by stockholders, granted powers and liabilities separate from individual stockholders
- Board of Directors: Group of individuals selected by stockholders to hire CEO, make decisions on stocks and dividends, and oversee major policy decisions
Mergers and Acquisitions
- Merger: Two firms formally joining their assets, liabilities, and ownership
- Types of Mergers:
- Vertical Merger: Combining firms in related businesses
- Horizontal Merger: Combining firms in the same industry
- Conglomerate Merger: Combining firms in unrelated industries
- Acquisition: One firm buying the assets and obligations of another company
- Tender Offer: Offer to shareholders to purchase all stock at a price above current market value
- Hostile Takeover: Acquisition of a company despite management's opposition
Other Forms of Business
- Master Limited Partnership: Similar to limited partnership, with tradable shares of ownership
- S Corporation (Subchapter S): Business taxed similarly to sole proprietorships and partnerships
- Cooperative: Business owned and managed by customers/members, paying annual dues/membership fees and sharing profits
- Joint Venture: Alliance of people/companies undertaking a specific, limited, or short-term project
Test your knowledge of different forms of business ownership, including sole proprietorship, partnership, limited partnership, and more. Learn about the roles and responsibilities of general partners and more.
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