Chapter 6 Entrepreneurship
True/False The process of buying a franchise begins with the franchise disclosure document
False
True/False a business must incorporate in a state where it is physically located
False
True/False buying an existing business eliminates the potential problem of reluctant partners
False
True/False one advantage of joining a family-owned business is that conflicting interests are rarely a problem
False
True/False the tax benefits of a partnership are similar to those of a corporation
False
A sub chapter S corporation is designed to accommodate small businesses that have
Fewer than 100 stockholders
In some states, a DBA license is known as a
Fictitious name registration
What is an advantage of a family-owned business
Flexibility
What form of business requires a charter?
A corporation
A legal document describing the purpose, place of business and other details of the corporation
Charter
What are four benefits of being a sole proprietor?
Decision making, profits, easy to start and tax benefits
Name four start-up strategies for businesses
Do your research, establish the value of the business, review the laws, get help from the professionals
The legal document that contains information a franchise must know before purchasing a franchise and must be received by the buyer 14 days before an agreement is signed is the
Franchise disclosure document
The company that sells the rights of a franchise is the
Franchisor
What does a partnership agreement specify?
How much each partner will invest, partners responsibilities, how profits are to be shared
Name 4 organizations that can provide resources on state, local, and national franchise laws
IFA, SBA, US department of commerce, FTC franchise rule compliance
Who organization regulates that franchising industry
International franchise association
Can choose any organizational structure the member agree to but it has limited life
LLC (limited liability corporation)
No managing partner and all partners have limited personal liability
LLP (limited liability partnership)
What is a disadvantage of purchasing a franchise
Low start-up costs
3 disadvantages of buying an existing business
Purchase price, reluctant partners and obsolete inventory
What start-up and ongoing costs are associated with buying a franchise
Royalty payments and grand opening fee
What are 4 things you should do before you sign a contract to buy a business
Seek legal help to finalize ownership an attorney and an accountant
A person who invests in a business but takes no part in the day-to-day operations of the business is called a
Silent partner
A for-profit business that is owned and operated by a single person is known as a
Sole proprietorship
You are considering the purchase of a franchise XYZ Snack Shops. What questions should you ask about the franchise before deciding to purchase it?
The company's tax records and information about the management, record of performance and operation and if their experience with franchisor has been satisfactory
True/False a corporation is a legal entity
True
True/False a sole proprietor is personally responsible for all business debts
True
True/False businesses that hire employees must have an employer identification number assigned by the IRS
True
True/False in a general partnership, all of the partners have unlimited liability
True
True/False most franchises have strict rules of operation that must be followed by the franchisee
True
A partnership carries the risk of
Unlimited liability