Chapter 8.2, Problem 1R

To determine

To explain the importance of the terms, Sole proprietorship, Proprietor, Unlimited liability, Assets, Partnership, Limited partnership, Limited liability company & Joint venture.

Explanation of Solution

The significance of the terms can be explained as:

·         Sole proprietorship: It is of major importance as it is the easiest one to set up as comparison to other business entities. It has a sole owner who shares all the profits or losses by himself & maintains 100% secrecy and control of the business.

·         Proprietor: This person is the sole owner who manages all the functioning of the business & is of major importance as everything done in the business is under his decisions & rules and regulations.

·         Unlimited liability: It is of major importance as it helps the creditors to take their money from the company’s owner even by using his personal property.

·         Assets: It is of major importance as it tells about the company’s profitability & the financial position of the company in the market.

·         Partnership: It is of huge importance as it helps in increasing the capital investment when people join and start working in the market which also is beneficial on the part of increasing profits and sharing of losses.

·         Limited partnership: It is of major significance as it provides the partners with limited liability the facility of limited business debt and less loss. They enjoy protected investment with the assurance of receiving the loss only up to the investment they made and not more than that.

·         Limited liability partnership: It has huge importance because it holds limited liability of the partners with flexible taxation policy & simplified operation of the business with its separate legal existence.

·         Joint venture: It has major importance as it helps in fast growth of the business with increased production & productivity for higher profit motives. It helps in increasing the networks of regulation with increased capacity.

Economics Concept Introduction

Introduction:

Sole proprietorship: It can be defined as the sole Ownership of a business of the person with unlimited liability.

Proprietor: It is the one who owns the business or the entity & has the legal rights to use assets for business operations.

Unlimited liability: It refers to the legal responsibility with the owner of the business of all the liabilities of the business.

Assets: It is the property of high value owned by any person or business entity.

Partnership: It is an agreement between two or more people or companies to come together and work for a profit earning motive.

Limited partnership: It is a form of partnership similar to the normal partnership just that it should have a minimum of one limited partner and one general partner.

Limited liability Company: A LLC is a business structure in the U.S in which the owners of the company aren’t liable personally for the company’s liabilities.

Joint venture: It is a business entity which is formed by two or more people in which they share the ownership, risks, governance & the returns of the business.