Chapter 5- How to form a business

acquisition

A(n) ______ is where one company purchases the property and obligations of another

Select those items considered fringe benefits that people working for a company are likely to receive, but a sole proprietor has to develop on his own:

A. paid sick or vacation leave timeand B. paid health insuranceand C. a pension plan

What are some of the advantages of a corporation?

Ability to raise more money for investment. Limited liability

Which of these are advantages of a limited liability companies?

Choice of taxation Flexible ownership rules Limited liability

What are some of the disadvantages of a corporation?

Cost of forming a corporation. Double taxation

True or false: Partnerships are less likely to survive than sole proprietorships.

False

LLC's are considered to have operational flexibility because while they must submit articles of organization,they are not required to:

Keep minutes or hold annual meetings

A company similar to an S corporation but without the special eligibility requirements is an:

LLC

A ____________partnership has partners who do not share in operating the business.

Limited

A key advantage of LLCs is________ liability where personal assets are protected.

Limited

A form of business ownership that provides limited liability, as in a corporation, but is taxed like a partnership is a(n)______ ______ company.

Limited liability

Which of these are advantages of a limited liability companies?

Limited liability Flexible ownership rules Choice of taxation

About 20 percent of franchises are owned by African Americans, Latinos, Asians, and Native Americans. Franchisors are becoming more focused on recruiting __________franchisees

Minority

Shareholders are not liable for the debts of a corporation beyond the money they invest in it by buying company ______

Shares

A business that is owned and managed by one person is a(n) _________ ________

Sole Proprietorship

Which of the following are true regarding the process of forming a corporation.

The articles of incorporation must be filed in the state in which the company will be incorporated. The bylaws of the corporation describe how the firm is to be operated

A franchise owner will experience the coattail effect when:

a fellow franchisee does something that has an impact on growth and profitability

Because owners are only responsible for losses up to the amount they have invested in a corporation, limited liability is considered:

a major advantage

In a franchise, having management support from the franchisor is a(n)___________ whereas the coattail effect is considered a___________ .

advantage and disadvantage

A partnership ________can spell out the requirements of terminating a partnership.

agreement

A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships is:

an S corporation

One company's purchase of the property and obligations of another company is a(n) ______

aquisition

An advantage of the separation of ownership from management in corporations is that the company can raise money from investors but the investors:

are not involved in daily operations

A corporation is formally formed with:

articles of incorporation and bylaws

In addition to the articles of incorporation, a corporation has___________ , which describe how the firm is to be operated from both legal and managerial points of view.

bylaws

The actions of a fellow franchisee will affect your franchise. This is known as the _____ ________

coattail effect

A merger that joins firms in completely unrelated industries is a:

conglomerate merger

A business owned and controlled through pooled resources by the people who use it is a(n) ______.

cooperative

A state-chartered legal entity with authority to act and have liability separate from its owners is a:

corporation

A(n)_____ is a state-chartered entity that exists in the eyes of the law and controls risk to the owners of the firm.

corporation

Selling shares of stock to anyone allows a _________ to raise more money to grow.

corporation

A major disadvantage of the corporate form deals with the tax situation called______ taxation.

double

A corporation is a legal _______with authority to act and have liability separate from its owners.

entity

True or false: If producers, consumers, or workers with similar needs pool their resources for mutual gain, they have created a franchise.

false

LLCs do have to submit articles of organization and an operating agreement, but do not have to:

file written resolutions keep minutes hold annual meetings

One of the most important advantages of the sole proprietor form of ownership is that a business owner:

finds it easier to start and end a business

Ed has decided to purchase and follow a business format by becoming a franchisee. The________ _________ he will sign gives him the right to use the business name and sell the products of the firm.

franchise agreement

If you are your own boss, you are responsible for paying your own wages/salary and for your own ________ _______

fringe benefits

Mark, Cal, and Aidan have decided to form a business where all owners will share in operating the business and in assuming liability for the business debts. They are most likely forming a(n) _ _________partnership

general

The joining of two firms in the same industry is a(n) ______merger.

horizontal

The attributes of a corporation include that:

it is state chartered. corporate liability is separate from owners. it is a legal entity

LLC's are considered to have operational flexibility because while they must submit articles of organization,they are not required to:

keep minutes or hold annual meetings

In a general partnership, all partners share the responsibility for operating the business and assume______ for the business's debts.

liability

An S corporation has the liability protections of a corporation but is taxed:

like a partnership or sole proprietorship

Taryn and Eilysh have decided to form a partnership. Taryn will not have management responsibility, but will invest money in the business. Taryn will be considered a(n) _______partner.

limited

The result of two firms (usually corporations) combining to form one company is called a ________

merger

Limited liability, choice of taxation, flexible ownership rules, and operating flexibility are all advantages of a(n)______ ______ company.

limited liability

Which is an advantage of the corporate form of business ownership?

limited liability

Franchises are expanding internationally to access additional _____________that have new customers and to increase their profit potential.

markets

A key advantage of a home-based franchise is low ____________costs, which can be ongoing. These are the costs associated with rent, utilities, and other fixed costs.

overhead

An LLC submits a written operating agreement, similar to a(n) _________agreement, describing how the company is to be operated.

partnership

Limited liability is considered an advantage of forming an LLC because:

personal assets are protected

Stockholders are _________from the managers and employees of the firm because they are not actively involved in the operations of the firm.

separate

For a business to grow, prosper, and create economic opportunity, many people have to be willing to invest money in it. An advantage of a corporation is its ability to raise money through the sale of _______

shares

The easiest type of business entity to form is a

sole proprietorship

An advantage of partnerships is a longer________ rate than sole proprietorships, because they become more disciplined and the business's life is based on all the partners.

survival

Gathering leads on a company website, selling products and keeping up to date on news via email, and chat rooms all serve as examples of using _________to assist franchisees and customers.

technology

While your are still your own boss as a franchise owner, your territory or selling boundaries may be regulated by the franchisor.

true

The responsibility of the owner of a sole proprietorship for all of the debts of the business is _______liability.

unlimited

When you own a sole proprietorship you and the business are considered one, so you have_______ liability for financial obligations such as debt.

unlimited

If your company debts or damages are solely your responsibility you could be experiencing the disadvantage associated with owning a sole proprietorship called

unlimited liability

In a sole proprietorship, any debts or damages incurred by the business are your personal debts and you must pay them. This disadvantage is known as:

unlimited liability

A merger between a soft drink company and an artificial sweetener maker could be considered a(n) ________ merger

vertical

Ending a partnership can be difficult because of problems deciding:

when a partner can retire. how to distribute assets. the worth of a retiring partner's share.

Many people do not like working for someone, so being your own _________ is an advantage of sole proprietorships

Boss

Many brick and mortar franchisees are using ______ to expand their businesses online to lower costs and better meet the needs of their customers.

-websites -technologye -commerce