Download Taxation & Business Structures: Sole Proprietorship, Partnerships, Corporations, Hybrids and more Quizzes Introduction to Business Management in PDF only on Docsity! TERM 1 sole proprietorship DEFINITION 1 pros: easy to start, single tax, angel investors, venture capitalists, decision making cons: hard to raise and unlimited liability TERM 2 partnerships DEFINITION 2 pros: split costs, easily expand, banks are more likely to lend money to them cons: unlimited liability, each individual is taxed TERM 3 corporations DEFINITION 3 pros: limited liability, easy transfer of ownership, easy to increase capitalcons: double taxed income, corporation pays income tax, and stockholders pay taxes on dividends TERM 4 hybrids DEFINITION 4 S-corps: 100 shareholders, single taxation, limited liability, shared controlLLC: limited liability, limited on the amount of money they can raise, paid by partners, not double TERM 5 agency relationship DEFINITION 5 whenever one party (principle) hires someone else (agent) to work for him or her, it is called an agency relationship TERM 6 agency problem DEFINITION 6 when manager's best interest does not align with shareholder goals TERM 7 goal of management DEFINITION 7 shareholders-->board of director-->managementmanagers will operate the firm so that the shareholders realize maximum value for their equity. Then think about stakeholders -how best to bring additional funds into the firm -which projects to invest in -how best to return profits form those projects owners overtime maximizing the value of owners' equity can also be stated as maximizing current value per share or stock price of existing sharesother potential goals: maximizing net income or profit; minimizing costs; maximizing market share TERM 8 corporate income taxes DEFINITION 8 can change without changes of government administration or other changes in the business or public environmentprogressive (higher income = higher taxes) TERM 9 interest and dividends received by corporations DEFINITION 9 interest and dividends received by corporations are taxable, EXCEPT interest on state and local government bonds is exempt from federal -once corporation owns stock in another corp 70% of any dividends received from other corp is tax exempt (the 30% is taxed at the receiving corporation tax rate TERM 10 interest and dividends paid by corporations DEFINITION 10 interest and dividends paid by corporations appear on the income statement as an expense item, so we deduct interest payments from operating income when the firm calculates taxable income -but dividends paid are not tax deductable...encourages managers to finance with debt instead of selling more stock -capital structure-- debt vs. equity
