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AFM131 Study Guide - Final Guide: Small Business, Reward System

Accounting & Financial Management
Course Code
Robert Sproule
Study Guide

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September 23, 2010
Small Business
Right of first refusal: if a partner wishes to leave the partnership, they must first offer their share
to the remaining partner (before selling it to an outside party)
Why is this provision typical?
- The other partner has invested lots of time and interest in the company, they have the
knowledge, perspective, skill set, etc.
Shotgun Clause
- When one partner wants to dissolve the partnership, he first gives the other partner the
option to buy him out but if that is not possible, he must buy his partner out
Why would someone choose to be a limited partner?
- No commitment other than monetary (daily involvement)
- You are only liable for the money you invest in the partnership (risk tolerance)
Partnerships: Joint Ventures
- Shared risk
- Shared management or technical competence
- Shared financial resources
Mabel’s Labels
1. How did each of the forms of business impact the operations of Mabel’s Labels?
corporation: helped with financing
partnership: easy and quick, template from Staples.
2. How has each of the forms of business contributed to the success of Mabel’s Labels?
partnership: they were able to split up and focus on specific roles; equal responsibility
and roles outlined
corporation: allowed them to acquire more funding; took away some of the personal risk
- How you choose to run your business
- There are few restrictions on the type of business that can become a franchise
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