1. Compare and contrast the common types of businesses. Explain your answer. (25 pts.

- The three basic legal forms for organizing a business are the sole proprietorship, the partnership and
the corporation. Each has different tax liabilities, management structures, and other considerations. A
sole proprietorship is a business owned by only one person. It is easy to set-up and is the least costly
among all forms of ownership. The owner faces unlimited liability; meaning, the creditors of the
business may go after the personal assets of the owner if the business cannot pay them. The sole
proprietorship form is usually adopted by small business entities; Partnership is a business owned by
two or more persons who contribute resources into the entity. The partners divide the profits of the
business among themselves. In general partnerships, all partners have unlimited liability. In limited
partnerships, creditors cannot go after the personal assets of the limited partners; while Corporation is
a business organization that has a separate legal personality from its owners. Ownership in a stock
corporation is represented by shares of stock. The owners (stockholders) enjoy limited liability but have
limited involvement in the company's operations. The board of directors, an elected group from the
stockholders, controls the activities of the corporation. When it comes to taxation, Sole proprietorships
and partnerships face a single tax on their business profits as income. The amount of income they earn
from their business will determine the income tax rate charged. Corporations pay income tax on their
own profits at the corporate income tax rate. Owners of corporations only pay tax on business income if
the corporation pays dividends.

2. Compare and contrast the common types of investments. Explain your answer. (25 pts.)

These are the common types of investments: Time deposit, Stock market, Mutual Fund, Bond,
and Shareholder/stockholder. A time deposit is an interest-bearing bank account that has a date of
maturity, such as a certificate of deposit (CD). Another name for this type of investment is term deposit.
The money in a time deposit must be held for the fixed term to receive the interest in full. Typically, the
longer the term, the higher the interest rate that the depositor receives. Time deposits are an extremely
safe investment but they have a low rate of return; The stock market refers to public markets that exist
for issuing, buying, and selling stocks that trade on a stock exchange or over-the-counter. Stocks, also
known as equities, represent fractional ownership in a company, and the stock market is a place where
investors can buy and sell ownership of such investible assets; A mutual fund is, basically, another term
for investment fund. A mutual fund is a type of financial vehicle made up of a pool of money collected
from many investors to invest in securities like stocks, bonds, money market instruments, and other
assets. Mutual funds are operated by professional money managers, who allocate the fund’s assets and
attempt to produce capital gains or income for the fund’s investors; Bonds is an umbrella term for any
type of debt investment. When you buy a bond, you loan money to an entity (a corporation or the
government, for example) and they pay you back over a set period of time with a fixed interest rate.
Bonds are considered a more stable investment compared to stocks because they usually provide a
steady flow of income. But because they’re more stable, their long-term return probably will be less
when compared to stocks; a shareholder can be a person, company, or organization that holds stock(s)
in a given company. A shareholder must own a minimum of one share in a company’s stock or mutual
fund to make them a partial owner. Shareholders typically receive declared dividends if the company
does well and succeeds. It is an owner of a company as determined by the number of shares they own.