Understanding Business 10e Chapter 5

3 Pages
Unlock Document

University of Maryland
Business and Management
BMGT 110
Howard Frank

● Sole proprietorship - a business that is owned and usually managed by one person. ● parmership - a legal form of business with two or more owners ● corporation - a legal entity with auhority to act and have liability apart from its owners ● Advantages of sole proprietorship ○ ease of starting and ending the business ○ being your own boss ○ pride of ownership ○ leaving a legacy ○ retention of company profits ○ no special taxes ● Disadvantages of sole proprietorships ○ unlimited liability - the risk of personal losses ○ limited financial resources ○ management difficulties ○ overwhelming time commitment ○ few fringe benefits - no paid health insurance, no paid disability insurance, no pension no vacantion pay etc. ○ limited growth ○ limited life span ● General partnership - all owners share in operating the business and assuming liability for the business debts. ● Limited partnership -has one or more general partners and one or more limited partners ● general partner - is an owner who has ulimited liability and is active in managing the firm every partnership must have at least one ● limited partner - an owner who invest money in the business but does not have any management responsibility or liability for losses beyond his investment. ● Limited liability -limited partners liability for the debts of the business is limited to the amount they put into the company, their personal assets are not at risk. ● Master limited partnership - looks much like a corporationg in that it acts like a corporation and is traded on stock exchanges like a corporation, but is taxed like a partnership and thus avoids the corporate income tax. ● Limited liability partnership - limits partners’risk of l;oosing their personal assets to the outcomes of only their own acts and omisions and those of people under their supervision. In many states this personal protection does not extend to the contract liabilities such as bank loans, leases and business debt that the partnership takes on. ● UPA(uniform partnership act) - defined the three key elements of any general partnerships ○ common ownership ○ shared profits and losses ○ the right to perticipate in managing the operations of the business ● Advantages of partnership ○ More financial resources ○ shared management and pooled/complementary skills and knowledge ○ longer survival ○ no special taxes ● Disadvantages of Partnerships ○ unlimited liability ○ devision of profits ○ disagreements among partners ○ difficulty of termination ● conventional corporations - state charted legal entity with authority to act and have liability seperate from its owners/shareholders. ● Advantages of corporations ○ limited liability ○ ability to raise more money for investment ○ size ○ perpetual life - because corporations are seperate from those who own them the death of one or more owners does not terminate the corporation ○ ease of ownership change ○ ease of attracting talanted employees ○ seperation of ownership from management ● Disadvantages of corpotations ○ initial cost ○ extensive paperwork ○ double taxation - tax on income as a company, than tax on income of owners ○ two tax returns - corporate and individual ○ size - inflexible with red tape not possible to respond rast ○ difficulty of termination - hard to end ○ possible conflict with stockholders and board of directors - ● S Corporation - a unique government creation that looks like corporation but i
More Less

Related notes for BMGT 110

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.