Business Organizations Chapter 8 Sole Proprietorship Partnership Corporations
Business Organizations Chapter #8 Sole Proprietorship Partnership Corporations
Forms of Business Organizations 8. 1 I. Sole Proprietorships A. *A sole proprietorship is a business run by one person. *It is the __________________________________________. (see table) B. The advantages to sole proprietorships are: *______; *________; *owner gets ______; *business itself pays no income taxes; *taxes paid only on the owner’s personal income; *__________of owning one’s business; *ease of closing the business. C. The disadvantages to sole proprietorships are: *the owner has _______; *it is ___________; *owner may not be able to hire enough personnel or stock enough inventory to ________; *cost of carrying minimum inventory; *owner may have ________; *hard to attract qualified employees; *business has limited life and legally stops existing when the owner dies or sells the business.
II. Partnerships A. A partnership is a business jointly owned by two or more persons. It is the ___________________________________________. B. 1) _________are a type of business in which all partners are involved in the management and finances. 2) In a __________, at least one partner is not involved in management. This partner may have helped to finance the business. C. ____________spell out how the partners divide up the profits or losses. D. The advantages of partnerships are: *the ease of ______; *ease of ______; *no special taxes on a partnership; *_______ to raise capital through bank loans or new partner; *larger size aids efficient operations; *easier to attract skilled employees. E. The disadvantages of partnerships are: *in a general partnership, _______________, *except in a limited partnership where the limits are spelled out; *______of partnerships ends if a partner leaves; *potential for partner ______.
III. Corporations A. A corporation is a business organization recognized by law as a ___________with all the rights of an individual. B. Corporations receive a ______, or government permission to create a corporation, which includes details about stock ownership. (see application for incorporation) C. Investors who buy 1) _____or 2) _____ stock in a corporation become owners of the firm. D. The advantages of corporations are: *ease of ______(sell stocks and bonds; *________may run the firm instead of the owners (shareholders); *owners have _______; *business’s ______; *easy to _____ ownership. E. The disadvantages of corporations are: *a charter is expensive; *ownership and management ______________; corporate income is ______; *subject to ________; *detailed records need to be kept for payment of taxes.
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Business Growth and Expansion I. Growth Through Reinvestment A. Business owners can ________to update and expand their firms. (i. e. factories, machinery, capital goods) B. _______are used to keep track of a business’ operations. C. Income statement—shows how a business ________it receives from sales to grow through reinvestment D. An income statement shows a firm’s ________. E. Revenue for Reinvestment may come from: 1) ______= fixed cost of replacement or a non-cash charge of capital goods An increase in depreciation lowers the earnings before tax but increases cash flow. Positive cash flow attracts investors. 2) ______= undistributed profits