Types of Ownership

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Questions and Answers

Which type of ownership is popular among small businesses?

Sole proprietorship (correct)

Corporation

Limited liability company

Partnership

What is one advantage of a sole proprietorship?

Flexibility and control (correct)

Limited managerial perspective

Multiple layers of taxation

No employee benefits for the owner

What is one disadvantage of a sole proprietorship?

Privacy

Financial liability (correct)

Resource limitations

Fewer limitations on personal income

What is a partnership?

A company owned by two or more people Signup and view all the answers

What type of business needs more resources and leadership talent than a sole proprietorship?

Partnership Signup and view all the answers

What is a disadvantage of a partnership?

Limited managerial perspective Signup and view all the answers

Which type of partnership has unlimited liability for the general partners and limited liability for the limited partners?

Limited partnership Signup and view all the answers

What is the main advantage of a partnership?

Single layer of taxation Signup and view all the answers

What is a corporation?

A legal entity owned by shareholders Signup and view all the answers

What is the main disadvantage of a corporation?

Reporting requirements Signup and view all the answers

What is corporate governance?

The process of overseeing the successful operation of a corporation Signup and view all the answers

What is a leveraged buyout (LBO)?

The acquisition of a company's publicly traded stock using borrowed funds Signup and view all the answers

Which type of partnership involves a long-term collaboration between companies to jointly develop, produce, or sell products?

Strategic alliance Signup and view all the answers

What is a joint venture?

A separate legal entity established by two or more companies to pursue common business goals Signup and view all the answers

What is the main purpose of a strategic alliance?

To jointly develop, produce, or sell products Signup and view all the answers

What is the main purpose of a joint venture?

To jointly develop, produce, or sell products Signup and view all the answers

What is a strategic alliance?

A short-term collaboration between companies Signup and view all the answers

What is the difference between a strategic alliance and a joint venture?

A strategic alliance involves the acquisition of another company, while a joint venture involves a partnership Signup and view all the answers

What is the purpose of establishing a joint venture as a separate legal entity?

To pursue common business goals Signup and view all the answers

What is the purpose of a strategic alliance?

To pursue common business goals Signup and view all the answers

Study Notes

Business Ownership Types

Sole proprietorship is a popular type of ownership among small businesses.
One advantage of a sole proprietorship is that the owner has complete control and decision-making authority.
One disadvantage of a sole proprietorship is that the owner has unlimited liability, meaning personal assets are at risk in case of business failure.

Partnerships

A partnership is a type of business owned by two or more individuals.
A partnership needs more resources and leadership talent than a sole proprietorship.
One disadvantage of a partnership is that partners are personally responsible for the actions of other partners.
A limited partnership has unlimited liability for the general partners and limited liability for the limited partners.
The main advantage of a partnership is that it allows for shared decision-making and risk-bearing.

Corporations

A corporation is a type of business that is separate from its owners, known as shareholders.
The main disadvantage of a corporation is that it is subject to double taxation, meaning profits are taxed at the corporate level and again at the individual level.
Corporate governance refers to the system of rules and practices by which a corporation is directed and controlled.

Mergers and Acquisitions

A leveraged buyout (LBO) is a type of transaction where a company is acquired using a significant amount of debt.

Collaborative Business Arrangements

A joint venture is a type of partnership that involves a long-term collaboration between companies to jointly develop, produce, or sell products.
The main purpose of a joint venture is to achieve specific business objectives, such as developing a new product or entering a new market.
A strategic alliance is a type of partnership that involves a collaborative agreement between companies to achieve mutual benefits.
The main purpose of a strategic alliance is to improve competitiveness, increase profitability, or gain access to new markets or technologies.
The main difference between a strategic alliance and a joint venture is that a joint venture involves a separate legal entity, while a strategic alliance does not.
Establishing a joint venture as a separate legal entity allows for shared ownership and decision-making authority, as well as limited liability for the partners.