homworkweek1 - 6% 1-1 a. A proprietorship, or sole...

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6% 1-1 a. A proprietorship , or sole proprietorship, is a business owned by one individual. The individual proprietor has the right to all the profits from the business and also responsibility for all the firm's liabilities. If the taxpayer is actively involved in the business, the net income is also subject to Self-Employment Tax . - A partnership exists when two or more persons associate to conduct a business. The essential characteristics of this business form, then, are the collaboration of two or more owners, the conduct of business for profit (a nonprofit cannot be designated as a partnership), and the sharing of profits, losses, and assets by the joint owners. - In contrast, a corporation is a legal entity created by a state, consisting of a person or group of persons who become shareholders. The corporation is separate and distinct from its owners and managers. Like a real person, a corporation can enter into contracts, sue and be sued, pay taxes separately from its owners, and do the other things necessary to conduct business. b) - A limited partnership (LP) consists of two or more persons, with at least one general partner and one limited partner. While a general partner in an LP has unlimited personal liability, a limited partner's liability is limited to the amount of his or her investment in the company. LP's are creatures of statute since they must file with the state to form them. Because of the limited liability of limited partnerships, they often are used as vehicles for raising capital. The limited partnership is a separate entity and files taxes as a separate entity - A limited liability partnership protects each partner from personal liability for certain obligations of the partnership . The limited liability partnership differs in one important way from general partnerships. Each partners is not liable to the other partner's debts or obligations as they would be in a general partnership. This combines the limited liability advantage of a corporation with the tax advantages of a partnership. - A professional corporation (PC), known in some states as a professional association (PA), has most of the benefits of incorporation but the participants are not relieved of professional (malpractice) liability. c. - Stockholder wealth maximization is the appropriate goal for management decisions. The risk and timing associated with expected earnings per share and cash flows are considered in order to maximize the price of the firm’s common stock. d. - The money market is better known as a place for large institutions and government to manage their short-term cash needs. However, individual investors have access to the market through a variety of different securities. The New York money market is the world’s largest.
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- A capital market is simply any market where a government or a company (usually a corporation) can raise money (capital) to fund their operations and long term investment. Selling bonds and selling stock are two ways to generate capital,
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This note was uploaded on 07/18/2011 for the course FI 515 taught by Professor Watson during the Spring '09 term at Keller Graduate School of Management.

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homworkweek1 - 6% 1-1 a. A proprietorship, or sole...

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