Chapter 5: How to Form a Business

Sole Proprietorship: _______

• A business owned by one person

• A business owned by two partners

• A business owned by a corporation

• A business owned by the government

Partnership: _______

• A business owned by two or more people

• A business owned by a single person

• A non-profit organization

• A government agency

Corporation: _______

• A business owned by stockholders who share in its profits but are not personally responsible for its debts

• A small business owned by a single individual

• A partnership where all partners share equal responsibility

• A non-profit organization focused on charity work

Unlimited Liability: _______

• The owner is personally and fully responsible for all losses and debts of the business

• The owner is only partially responsible for the debts of the business

• The business is responsible for its own debts

• The owner is not responsible for any losses 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.

• A partnership where only one owner is responsible for the business's debts.

• A partnership that limits the liability of some partners.

• A partnership that is formed for a single project or a limited time.

Limited Partnership: _______

• A partnership with one or more general partners and one or more limited partners.

• A partnership where all partners have limited liability.

• A partnership with only limited partners.

• A partnership with no general partners.

General Partner: _______

• An owner (partner) who has unlimited liability and is active in managing the firm.

• A partner who only invests money in the firm and has limited liability.

• A partner who is not involved in the day-to-day operations of the firm.

• A partner who has limited liability and is not active in managing the firm.

Limited Partner: _______

• An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment

• An owner who actively manages the business and is liable for all business debts

• An employee who works for the business without any ownership stake

• A consultant who provides advice to the business without any financial investment

Limited Liability: _______

• Financial responsibility of business owners only for what they invested in a business

• Complete financial responsibility for all debts of the business

• Shared financial responsibility with all employees

• No financial responsibility whatsoever

C Corporation: _______

• The most common type of corporation, which is a legal business entity that offers limited liability to all of its owners, who are called stockholders

• A type of corporation that is taxed as a partnership

• A corporation that is owned by a single individual

• A corporation that does not offer limited liability to its owners