Chapter 4 notes (What I used to study for final)

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15 Dec 2010
Chapter 4
Sole proprietorship: a business owned and operated by one person
Unlimited liability: personal liability of all debts of the business
Partnership: a form of organization established when two or more persons agree to combine their
financial, managerial, and technical abilities for the pur pose of operating a business for prof it
General partnership: a type of partnership in which all partners are jointly liable for the
obligations of the business
Limited partnerships: a type of partnership with at least one general partner (who has unlimited
liability) and one or more limited partners. Limited partners cannot take part in day-to-day
managerial decisions or they lose their limited liability status
General partners: partners who are actively involved in the f irm and share the unlimited liability
Limited partners: partners who dont t ake part in the business and whose liability is limited to the
amount they invested in the partnership
Cor poration: a business that is a seperate legal entity that is liable for its own debts and those
whose owners’ liability is limited to their investment
Shareholders: people who hold shares of a company
Board of directors: a groupd of individuals elected by a firms shareholders and charged with
overseeing, and taking legal responsibility for, t he corporations actions
Inside directors: members of a cor porations board of directors who are also full-time employees
of the cor poration
Outside directors: members of a cor porations board of directors who are not employees
Public corporations: a business w hose shares are widely held and available for sale to the general
Private corporation: businesses whose shares are held by a small group of individuals and is not
usually available for sale to the general public
Initial public offering: sale of shares in a company for the first time to the general investing
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