Understanding Business - chapter 5

Definitions 1. 2. 3. 4. 5.
Sole Proprietorship: A business that is owned, and usually managed, by one person. Partnership: A legal form of business with two or more owners. Corporation: A legal entity with authority to act and have liability separate from its owners. Unlimited Liability: Responsibility of business owners for all of the debts of the business.

General Partnership: A partnership in which all owners share in operating the business and in assuming liability for the business's debts. 6. Limited Partnership: A partnership with on or more general partners and one or more limited partners. 7. General Partner: An owner/partner who has unlimited liability and is active in managing the firm. 8. Limited Partner: An owner who invests money in the business but doesn't have any management responsibility or liability for losses beyond investment. 9. Limited Liability: Responsibility of a business's owners for losses only up to the amount they invest; (limited partners and shareholders). 10. Limited Liability Partnership (LLP): Partnership that limits partners' risk of losing their personal assets to only their own acts and omissions and to the acts and omissions of people under their supervision. 11. Convential (C) Corporation: State-chartered legal entity with authority to act and have liability separate from its owners. 12. S Corporation: Unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships. 13. Merger: Result of 2 firms forming 1 company.

14. Acquisition: 1 company's purchase of property and obligations of another company. 15. Vertical Merger: Joining of 2 companies involved in different stages of related businesses. 16. Horizontal Merger: Joining of 2 firms in same industry. 17. Conglomerate Merger: Joining of firms in completely unrelated industries. 18. Leveraged Buyout (LBO): An attempt by employees, management, or a group of investors,
to purchase an organization primarily through borrowing.

19. Franchise Agreement: Agreement whereby someone with a good idea for a business sells
the rights to use the business name and sell a product or service to others in a given territory. 20. Franchisor: Company that develops a product concept and sells others the rights to make and sell the products. 21. Franchise: Right to use a specific business's name and sell its products or services in a given territory. 22. Franchisee: Person who buys a franchise.

23. Cooperative: Business owned and controlled by the people who use it--producers,

consumers, or workers with similar needs who pool their resources for mutual gain.