1. Define the terms finance and financial management, and identify the major sub-areas of finance.
Finance is the study of applying specific value to things we own, services we use and decisions we make. Financial management is the process for and the analysis of making financial decisions in the business context. The major subareas of finance are investments, financial management, financial institutions, market, and international finance. Risk is a potential future negative impact to value and or cash flow. It is often discussed in terms of probability of loss and the expected magnitude of the loss.
2. "What are the three basic forms of business ownership? What are the advantages and disadvantages to each?
The three forms of business ownership are sole proprietorship, partnership, and corporations.
A sole proprietorship is a entity that is not legally separate from its owner.
The advantages to the sole proprietorship are single control over the business and its decisions, easy to start up, less regulations and paperwork burden that the other types of business. The disadvantages are unlimited liability for their company debts and actions. The law does not recognize any distinctions between the owner’s business assets and personal assets. Banks are very skeptical about lending to these types business because there is only one person to hold liable for repaying the debt.
A partnership is a business organization where the partners own the business together and are
| A general partnership is comprised of a group of two or more individuals who enter into an agreement to start a business. The partners and the business are legally the same. The partners enter into an agreement called the articles of partnership and are typically equally active in the business and the business’s management, unless otherwise stated in the partnership agreement. All profits and losses are shared by the partners in a joint business venture.
-A partnership is an organizational form that contains two or more people who are able to be joined together legally in order to share the management duties and make profit from the business.
A partnership is an arrangement between two or more groups, organizations or individuals to work together
SOLE PROPRIETORSHIP: Has only one owner. Easy to start up. Some of the advantages are: owners may do whatever they want to with the business and if they want to go on vacation they can. One of the disadvantages they cannot bring in another person to help run the business. This business form is particularly common.
A partnership is an arrangement between two or more groups, organizations or individuals who work together to achieve common aims or who have common interests.
General Partnership: Occurs when two or more individuals get together to operate a business with the intention of making profit. Each individual is a general partner of the business and all profits and losses are shared between the partners. General partnership agreements can be a written or verbal agreement.
A partnership is the creation of two or more people who operate a business as co-owners and share profits. There is a collective amount of money that is contributed to the organization as it pertains to all aspect of the business and in return each individual share equally the profits and losses of the business. Partnerships require that there be a partnership agreement established because more than one person can make decisions for the partnership. The agreement should include how future business decisions will be made, the profits will be split among the partners, and the dissolving of the partnership (sba.gov). The partnership must file an annual information return that reports income, deductions, gains, and losses that occur from normal business operations. The business does not pay income taxes but the business pass through any profits and losses to its partners. Taxes that are included in a partnership are: employment tax, excise tax, annual return of income, income tax, self-employment tax, and estimated tax. Other qualifications of a partnership is that partners must furnish a copy of their Schedule K-1 form to all the partners by the date of the Form. It is important to remember that partners are not employees and they are not to be issued a W-2 Form.
A Partnership is a business form that consists of two or more individuals. There are two types of partnerships; general and limited. General partners are liable for the full extent of debts and obligations within the business. Limited partnerships provide individuals with a limitation of responsibilities in the organization’s liability; this type of partnership is dependent upon the investment percentage. Advantages of partnerships consist of cost efficiency, shared financial responsibility, complementary skill association, and offer employees partnership incentives. Disadvantages of partnerships are joint and individual liability, disagreements between partners, and shared profits (“U.S. Small Business Administration,” 2013).
Some advantages of a sole proprietorship are that they have flexibility in operations. The sole proprietorship business is undertaken on a small scale. If any change is required in the operations, it is easy and quick to bring the changes. Another advantage in this type is the ease of promptness in decision-making, autonomy. When the decision is to be taken by one person, it is guaranteed to be quick. Thus, the entrepreneur, as a sole proprietor, can arrive at quick
One of the most important decisions when starting a company is to determine the type of legal entity best suited for your business. Each country has different legal business entities under its regulatory framework. According to Dewhurst (2014), the most common types of business structures within the United States are: proprietorship, partnership, corporation, limited-liability company, and cooperative. Additionally, there are other types of legal entities derived from the association of different corporations, such as joint ventures.
b) I consider the limited liability is an advantage. I have seen many small business owners closed their businesses and lost their homes under unlimited liabilities.
Liability: A major drawback to the sole proprietorship is that there is unlimited and unshared liability on the proprietor’s part. There is no distinction between the sole proprietor’s business or personal assets and liabilities from a creditor’s standpoint.
Partnership is the relations which exists between partners carrying on a business in common with a view of profit, which means there must be some continuity or repetition of trading activities and working on behalf of each other. (James 2014, p. 506-507)
1. Define the terms finance and financial management, and identify the major sub-areas of finance. Finance is the way in which money is used and handled; especially, the way in which large amounts of money are used and handled by governments and companies (Merriam-Webster, 2014). Financial Management is the planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization (Businessdictionary, 2014). The major sub-areas of finance are: investments—involves methods and techniques for making decisions about what kinds of securities to own; financial management—deals with a firm’s decisions in acquiring and using the cash that is received from investors or from
But with advantages, there are also disadvantages of owning your own business. Five disadvantages of a sole proprietorship are: 1) The owner is personally liable for all debts and incurs all losses. The sole proprietor is responsible for all debts that the company owes. The owner takes all losses. There are no other owners to