MIE 201 Midterm #2 – Makanui Questions
With Solutions 100% Solved
unlimited liability - means that the owner is personally and fully responsible for all losses
and debts of the business
- major drawback to a sole proprietorship or a partnership
- from a legal standpoint the owner and busine...
unlimited liability - means that the owner is personally and fully responsible for all losses
and debts of the business
- major drawback to a sole proprietorship or a partnership
- from a legal standpoint the owner and business are one and the same
types of partnerships - general partnerships
- limited partnerships
- MLP
- LLP
general partnerships - partners are considered equal by law and all are liable for the
business's debts
- partners share ownership and both have unlimited liability
limited partnerships - one or more persons act as general partners who run the business
while the remaining partners are passive investors (not involved in managing the business)
, MIE 201 Midterm #2 – Makanui Questions
With Solutions 100% Solved
- called limited partners because their liability (amount of money they can lose) is limited to the
amount of the capital they invested at the beginning of their partnership
- passive investors and have limited liability
partnership - a legal association of two or more people as co-owners of a business for
profit
MLP (master limited partnership) - allowed to raise money by selling units of ownership
to the general public in the same way that corporations sell shares of stock to the public
- gives MLPs the fundraising capabilities of corporations without the double-taxation
disadvantage
- mainly oil and gas companies
LLP (limited liability partnership) - form of business was created to help protect
individual partners in certain professions from major mistakes (such as errors that trigger
malpractice lawsuits) by other partners in the firm
- each partner has unlimited liability only for his or her own actions and at least some degree of
limited liability for the partnership as a whole
, MIE 201 Midterm #2 – Makanui Questions
With Solutions 100% Solved
the partnership agreement - a written document that states all the terms of operating the
partnership by spelling out the partner's right sand responsibilities
- not required by law
- spells out details as the division of profits, decision-making authority, expected contributions,
and dispute resolution
- defines the steps a partner must take to sell his or her partnership interest or what will happen if
one of the patterns dies
advantages of a partnership - simplicity
- single layer of taxation
- more resources than a sole proprietorship
- cost sharing between partners
- broader skills and experience
- longevity
disadvantages of a partnership - unlimited liability
corporations - businesses that are owned by many investors who buy shares of stock
- a legal entity with the power to own property and conduct business
- can receive, own, and transfer property; make contracts; sue; and be sued
- faces limited liability because it is its own legal entity
a corporation is like what? - a horcrux
- they can be in so many types of business that even if you take out one component they will still
survive and thrive in all their other components of business
ownership of corporations - shareholders
- stock certificates
shareholders - owners of a corporation who are issued shares of stock in return for their
investments
stock certificate - represents shares of stock owned by shareholders of a company
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