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chapter 5 notes - Connie Cheung World of Business Chapter 5...

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Connie Cheung 9/11/07 World of Business Chapter 5 Notes Basic forms of business ownership 3 Major forms of business ownership: 1) Sole proprietorships 2) Partnerships 3) Corporations Sole proprietorship-  a business that is owned and usually managed by one person Partnership-  a legal form of business with 2 or more owners Corporation-   a legal entity with authority to act and have liability separate from its owners Sole Proprietorships Advantages of Sole Proprietorships 1) Ease of starting and ending the business 2) Being your own boss 3) Pride of ownership 4) Leaving a legacy 5) Retentino of company profit 6) No special taxes Disadvantages of Sole Proprietorships 1) Unlimited liability—the risk of personal losses a. Unlimited liability-  the responsibility of business owners for all of the debts of  the business 2) Limited financial resources - funds available to the business are limited to the funds that  are the owner can gather
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3) Management difficulties 4) Overwhelming time commitment 5) Few fringe benefits 6) Limited growth 7) Limited life span Partnerships Different types of partnerships: 1) General partnership-  a partnership in which all owners share in operating the business  and in assuming liability for the business’s debts 2) Limited partnership-  a partnership with one or more general partners and one or more  limited partners 3) Master limited partnership (MLP)-  a partnership that looks much like a corporation but  is taxed like a partnership and thus avoids the corporate income tax 4) Limited partner-  an owner who invests money in the business but doesn’t have any  management responsibility or liability for losses beyond the investment Limited liability- 
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