Chapter 7 - personal liability 2. Limited ability to raise...

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Chapter 7 Sole proprietorship – A firm owned by a single individual and not organized as a corporation Partnership – a firm owned jointly by two or more persons and not organized as a corporations Corporation – a legal form of business that provides the owners with limited liability Asset – anything of value owned by a person or a firm Limited liability – the legal provision that shields owners of a corporation from losing more than they have invested in the firm SOLE PROPRIETORSHIP PARTNERSHIPCORPORATION Advantages 1. Control by owner 2. No layers of management 1. Ability to share work 2. Ability to share risks 1. Limited personal liability 2. Greater ability to raise funds Disadvantages 1. Unlimited personal liability 2. Limited ability to raise funds 1. Unlimited
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Unformatted text preview: personal liability 2. Limited ability to raise funds 1. Costly to organize 2. Possible double taxation of income Corporate governance - The way in which corporations are structured and the impact a corporations structure has on the firms behavior. Separation of ownership from control - In many large corporations the top management, rather than the shareholders, control day-to-day operations. Principal-agent problem - A problem caused by an agent pursuing his own interests rather than the interests of the principal who hired him. Liability - Anything owed by a person or a business. Balance sheet- A financial statement that sums up a firms financial position on a particular day, usually the end of a quarter or a year....
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This note was uploaded on 02/26/2008 for the course ECO 001 taught by Professor Gunter during the Fall '06 term at Lehigh University .

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