Company lawLesson 1 of 1 in the course Business Structure Options: Legal, Tax, and Risk Issues

Company Financing, State Registration, Tax Nexus, and Technology Risk

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

This lesson explores how business structure relates to raising money, the differences between debt and investment, and how financing needs can change as a company grows.

A business needs capital to begin operations and to grow. Capital usually means money available to fund expenses, assets, and expansion. Entrepreneurs may use personal funds, borrow from banks or other lenders, bring in partners, or sell ownership interests to investors.

All flashcards

What is business capital?
Money available to fund a business’s expenses, assets, and growth.
What is equity financing?
Raising money by giving investors an ownership or other agreed-upon investment interest.
What is a business’s state of formation?
The state where the business entity is legally created.
What is economic nexus in sales taxation?
A connection to a state based on economic activity, such as sales volume.
Why does handling sensitive information affect business planning?
It can require safeguards, skilled personnel, and resources to meet security and compliance responsibilities.

Quiz questions

  1. How does a business loan generally differ from an equity investment?Answer: A loan generally requires repayment under agreed terms; equity gives the investor an ownership interest.
  2. A business formed in one state conducts business in another state. What may it need to do in the operating state?Answer: Register as a foreign entity and meet applicable local filing requirements.
  3. What did the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair enable states to do?Answer: Require some remote sellers to collect sales tax based on economic activity without physical presence.
  4. A small business handles health records or payment-card data. What should guide its security planning?Answer: The information handled and the legal or regulatory requirements that apply to it.
  5. Which statement describes a potential benefit and responsibility of an initial public offering?Answer: It can broaden access to capital and involves substantial legal, accounting, and reporting work.

Based on Entrepreneurship by Michael Laverty, Chris Littel (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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