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Foundations of Business Exam 2 VT WITH VERIFIED SOLUTIONS

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Foundations of Business Exam 2 VT WITH VERIFIED SOLUTIONS

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  • September 12, 2024
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Foundations of Business Exam 2 VT

Sole Proprietorship - correct answer ✔✔One person has complete control over a business



Advantages of Sole Proprietorship - correct answer ✔✔Easiest to start

Least regulated

Single owner keeps all the profits

Taxed once as personal income



Disadvantages of Sole Proprietorship - correct answer ✔✔unlimited liability

lack of continuity

lack of financing

limited management skills



unlimited liability - correct answer ✔✔Is a business incurred any debt the owner is personally liable



Partnership - correct answer ✔✔a business owned by two or more people



partnership agreement - correct answer ✔✔specifies everyone's rights and responsibilities



partnership agreement examples - correct answer ✔✔division of income

amount of cash

contributions made by each partner



Unlimited liability in partnership - correct answer ✔✔Each partner is liable for their actions AND their
partners actions

,limited partnership - correct answer ✔✔Partnership where one person (general partner) runs the
business and in turn has unlimited liability and another partner (limited partner(s) have limited
involvement are are limited to their amount an investment



general partner - correct answer ✔✔runs business and is responsible for liabilities



limited partner(s) - correct answer ✔✔More of an investor

- limited involvement and losses are limited to their amount of investment



Advantages of Partnership - correct answer ✔✔Two or more owners

More capital available

Relatively easy to start

Income taxed once as personal income

Continuity is not an issue



Disadvantages of Partnership - correct answer ✔✔Unlimited liability

share devision making

share profits



IPO - correct answer ✔✔Initial Public Offering

- a company becomes a corporation as it begins to sell stock



Corperation - correct answer ✔✔a separate legal entity that is entirely separate from the parties who
own it

-acts as a separate entity as they can enter contracts, buy and sell property, etc.



Shareholders - correct answer ✔✔Those who invest money in a business buy buying stock and therefore
owning part of the corperation



Stock - correct answer ✔✔Shareholders buy shares of what?

, Board of directors - correct answer ✔✔elected by shareholders and are legally responsible for governing
the corperation



functions of board of directors - correct answer ✔✔set goals and hold management responsible for
meeting them

hire and evaluate CEO

approves distribution in form of cash payments



Dividends - correct answer ✔✔earnings distributed to stockholders



Advantages of a corporation - correct answer ✔✔Limited liability

Potential unlimited life

Separation of ownership and management

Transfer of ownership is easy

Easier to raise capital

specialized management (able to attract high skilled workers as thy are able to pay more)



limited liability - correct answer ✔✔A form of business ownership in which the owners are liable only up
to the amount of their individual investments.



limited liability in corporations - correct answer ✔✔invests can lose no more than the amount they
originally invested



Disadvantages of a corporation - correct answer ✔✔corporate managers and shareholders may have
different plans

more costly to set up

subject to regulation and government oversight

double tax

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