1.

Wilfred McClain JR
Business 115
4 August 2010
Professor Jackson
Chapter 5 Questions
1. Name five advantages of a sole proprietorship.
Five advantages of a sole proprietorship are the following: (1) They are easy and inexpensive to form,
(2) they allow a high level of secrecy, (3) all profits belong to the owner, (4) the owner has complete
control over the business, (5) and government regulation is minimal.
2. List two different forms of partnership and describe each.
Two different forms of partnership are general and limited partnerships. A general partnership involves
a complete sharing in the management of a business and a limited partnership has at least one general
partner, who assumes unlimited liability, and at least one limited partner, whose liability is limited to
his or her investment in the business.
3. Differentiate among the different types of corporations. Can you supply an example of each?
The different types of corporations are private corporations like Dollar General, Public corporations
like Ford Motor Company, quasi-public corporations like NASA, and nonprofit corporations like
American Red Cross.
4. Would you rather own preferred stock or common stock? Why?
I would rather own preferred stock because I would have a claim to profits before other stockholders
do.
5. Contrast how profits are distributed in sole proprietorships, partnerships, and corporations.
In sole proprietorships profits goes completely to the owner/manager of the company, in
partnerships profits are distributed amongst the partners of the company weather general or limited, and
corporations profits are spilt up amongst the stock holders of a company.
6. Which form of business organization has the least government regulation? Which has the most?
A sole proprietorships has the least amount of government regulation while corporations have the most
amount of government regulation.
7. Compare the liability of the owners of partnerships, sole proprietorships, and corporations.
The liability of a general partnership is unlimited meaning they are responsible for are all debt incurred
by the company. In a limited partnership the general partner or partners deal with most of the liability
while the limited partner has limited liability. In sole proprietorships owners have unlimited liability
like general partnerships for their liabilities in a company. In corporations the money and assets are
separate from the owner therefor they have limited liability because they are not held responsible for
the companies debt past their initial investment.
8. Why would secrecy in operating a business be important to an owner? What form of
organization would be most appropriate for a business requiring great secrecy?
Secrecy in operating a business might be important to an owner because he might have a great idea for
the way his or her business runs that he wouldn't like to get leaked out o the corporation. A sole
proprietorship would be most appropriate for a business requiring a great deal of secrecy.
9. Which form of business requires the most specialization of skills? Which requires the least and
why?
The form of business that requires the most specialization of skills is a partnership because the business
runs smoothly when the partners can each specialize in a certain aspect of the business. A sole
proprietorship requires the least amount of special skills because all ideas come from the owner of the
company itself.
10. The most common example of cooperative is a farm co-op. Explain the reasons for this and the
benefits that result for members of cooperatives.
The reason for this is so that they can either save money or become more profitable. The benefits of
this is they can save on buying goods and larger quanties and they get to generate their own demand.