How to form a business | Ultimate Set | Introduction to Business Chapter 5

A legal form of business with two or more owners is a(n):

partnership

Merger

The result of two firms forming one company

T/F: If you and a friend start a business together, you have started a sole proprietorship.

False

T/F: In a limited partnership, the liability of the limited partners is unlimited and personal assets are at risk.

False

True or False: Partnerships are less likely to survive for a longer time than sole proprietorships.

False

True or false: When working for a company, a comprehensive benefit plan may add up to 30 percent or more to a worker's salary

True

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

an S corporation

Among the advantages of farm cooperatives for their members is that they:

- Increase economic power -do not pay taxes as corporations do

Three major forms of business most common in the US are:

-Corporations -Partnerships -Sole Proprietorships

Rank the order in which members of a corporation are chosen in order to separate ownership from management. Start at the top of the managerial hierarchy.

-Owners/stockholders elect board of directors -Board of directors hire officers of the corporation -Offices hire managers of the corporation -Managers hire the employees

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

-hold annual meetings -file written resolutions -keep minutes

Select the disadvantages of a sole proprietorship:

-large time commitment -limited financial resources -unlimited liability

Among the reasons that disagreements can ruin a partnership are:

-opposing management styles -arguing over profits -disagreement over workload

The US Census Bureau estimates that ______ out of every _______ businesses in the US is a franchise.

1 out of every 10

Rank the order in which members of a corporation are chosen in order to separate ownership from management. Start at the top of the managerial hierarchy. (Fig. 5.4) Instructions

1, Owner/ Stockholder elect board of directors 2,Board of Directors hire officers of the corporation 3, Officers hire managers of the corporation 4, Managers hire employees

Rank the forms of business ownership based on ease of starting. Put the easiest form at the top. __________ 1. Sole proprietorship 2. Corporation 3. Partnership

1. Sole proprietorship 3. Partnership 2. Corporation

Rank the order in which members of a corporation are chosen in order to separate ownership from management. Start at the top of the managerial hierarchy.

1. owners/stockholders elect board of directors 2. Board of Directors hire officers of the corporations 3. Officers hire managers of the corporation 4. Managers hire employees

Rank the order in which members of a corporation are chosen in order to separate ownership from management. Start at the top of the managerial hierarchy. 1. Managers hire employees 2. Board of Directors hire officers of the corporation 3. Officers hire managers of the corporation 4. Owners/stockholders elect board of directors

4. Owners/stockholders elect board of directors 2. Board of Directors hire officers of the corporation 3. Officers hire managers of the corporation 1. Managers hire employees

Minority- owned businesses are growing at more than _ times the national rate

6

Minority-owned businesses are growing at more than ___ times the national rate.

6

minority-owned businesses are growing at more than ________ times the national rate.

6

Cooperative

A business owned and controlled by the people who use it--- producers, consumers, or workers with similar needs who pool their resources for mutual gain.

What is a sole proprietorship?

A business that is owned (and usually operated) by one person.

Master limited Partnership (MLP)

A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax

Limited Partnership

A partnership with one or more general partners and one or more limited partners

Franchisee

A person who buys a franchise

Conventional (C) corporation

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

S Corporation

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

What are some of the disadvantages of operating a franchise? __________ A. Management regulation B. Recognized name C. Shared profit D. Large start-up costs

A. Management regulation and C. Shared profit and D. Large start-up costs

The owner of a sole proprietorship must pay which of these taxes? __________ A. Social Security and Medicare B. Estimated income tax payments C. Personal income tax D. Life insurance coverage

A. Social Security and Medicare and B. Estimated income tax payments and C. Personal income tax

One company's purchase of the property and obligations of another is called a(n) __________ A. acquisition B. merger C. LLC D. partnership

A. acquisition

Among the reasons that disagreements can ruin a partnership are: __________ A. disagreement over workload B. the ability to borrow more money C. opposing management styles D. arguing over profits

A. disagreement over workload and C. opposing management styles and D. arguing over profits

When the corporation pays a tax on its profits and individual stockholders each pay tax on dividends distributed by the corporation, it is called: __________ A. double taxation B. return taxes C. a stock option D. splitting the stock

A. double taxation

A sole proprietorship has a limited life span unless: __________ A. it is taken over by an heir B. one of the partners buys remaining shares C. it is sold to someone else D. there is a leveraged buyout

A. it is taken over by an heir and C. it is sold to someone else

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 time B. paid health insurance C. a pension plan D. freedom to make your own hours

A. paid sick or vacation leave time and B. paid health insurance and C. a pension plan

Advantages of home-based work include: __________ A. relief from commuting stress B. shorter work hours C. less feeling of isolation from the company D. low overhead expenses

A. relief from commuting stress and D. low overhead expenses

Ending a partnership can be difficult because of problems deciding: __________ A. the worth of a retiring partner's share B. when a partner can retire C. whether to pay the taxes D. how to distribute assets

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

The advantages of becoming a conventional corporation include

Access to more capital

What is the term for a corporation chartered by a foreign government that is conducting business in the United States?

Alien corporation

Franchise agreement

An arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory.

When are joint ventures and syndicates dissolved?

As soon as their purposes have been achieved

Which are considered disadvantages of incorporating? A. Limited Liability B. Double Taxation C. Initial Cost D. Extensive paperwork

B. Double Taxation and C. Initial Cost and D. Extensive paperwork

A corporation is defined as: __________ A. an unchartered entity with authority to act directly with its owners B. a chartered legal entity with authority to act apart from its owners C. an unchartered entity with authority to act apart from its owners D. a chartered legal entity with authority to act directly with its owners

B. a chartered legal entity with authority to act apart from its owners

LLCs do have to submit articles of organization and an operating agreement, but do not have to: __________ A. pay self-employment taxes B. hold annual meetings C. keep minutes D. file written resolutions

B. hold annual meetings and C. keep minutes and D. file written resolutions

When there is one or more general partners and one or more limited partners, the firm is a(n): __________ A. general partnership B. limited partnership C. master limited partnership D. unlimited partnership

B. limited partnership

Select the disadvantages of a sole proprietorship: __________ A. unlimited growth B. management difficulties C. unlimited liability D. limited financial resources

B. management difficulties and C. unlimited liability and D. limited financial resources

Home-based franchises have many advantages such as: __________ A. ease of obtaining financing B. relief from the stress of commuting C. feeling more isolated D. low overhead expenses

B. relief from the stress of commuting and D. low overhead expenses

owned businesses are growing at more than the national rate.

Blank 1: Minority

A unique government creation that looks like a corporation but is taxed like a sole proprietorship or partnership is called a(n) corporation.

Blank 1: S

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

Blank 1: acquisition or buyout

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

Blank 1: agreement

A partnership can spell out the requirements of terminating a partnership. Listen to the complete question

Blank 1: agreement

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

Blank 1: double or dual

A corporation is formally formed with:

Blank 1: entity

The right to use a specific business' name and sell its products or services in a given territory is a(n) agreement.

Blank 1: franchise

Franchisors often use technology to meet the needs of both their customers and their because technology makes communication faster and more widespread.

Blank 1: franchisees, employees, suppliers, investors, or stakeholders

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.

Blank 1: general

Don wanted to incorporate his business and liked the attributes of an S-corporation, however, he did not feel the eligibility requirements would work for his purposes. He is likely to choose to form a(n) company.

Blank 1: limited Blank 2: liability

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

Blank 1: limited or s Blank 2: liability or corporation

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

Blank 1: partnership

Unlimited liability as it relates to sole proprietorships is the risk of loss of assets beyond the assets of the business.

Blank 1: personal

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

Blank 1: separate or independent

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.

Blank 1: technology

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

Blank 1: unlimited Blank 2: liability

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

Blank 1: vertical

When two firms operating in different stages of related businesses join, it is called a(n) merger.

Blank 1: vertical

A partnership where all owners share in operating the business and in assuming unlimited liability for the business's debts is a: __________ A. cooperative B. master limited partnership C. general partnership D. limited partnership

C. general partnership

What are the advantages of the LLC form of organization?

Choice of taxation Limited liability Flexible ownership rules

A business owned and controlled through a pooled resources by the people who use it is a ___________

Cooperative

What is the role of a cooperative?

Cooperatives are organizations owned by members/customers. Some people form cooperatives to acquire more economic power than they would have as individuals. Small businesses often form cooperatives to gain more purchasing, marketing, or product development strength.

Which of the following is a legal document that the state issues to a company based on information the company provides in the articles of incorporation?

Corporate charter

Separation of ownership from management

Corporations are able to raise money from many different owners/stockholders without getting them involved in management

If you start and manage a landscaping business on your own, you have likely started a: __________ A. partnership B. corporation C. franchise D. sole proprietorship

D. sole proprietorship

Because of the poor publicity at a fellow franchise location, you notice that sales at your location have decreased. The impact of the poor publicity on your company is referred to as __________ A. changes to the franchise agreement B. reinforcement of the franchise agreement C. unlimited liability D. the coattail effect

D. the coattail effect

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: __________ A. responsibility B. taxation C. limited liability D. unlimited liability

D. unlimited liability

What are some of the disadvantages of a corporation?

Double Taxation Cost of Forming a corporation

What are some of the disadvantages of a corporation

Double taxation Cost of forming a corporation

Which statements are accurate as related to corporate taxation

Double taxation occurs Stockholders pay income tax on the dividends they receive

Select the reasons a business might change ownership form

Dropping a partner from the firm Adding a partner to the firm Seeking limited liability

What are some of the advantages of franchising?

Financial advice Lower failure rate Recognized name

Which of these are advantages of a limited liability companies?

Flexible ownership rules Limited liability Choice of taxation

The right to use a specific business's name and sell its products of services in a given territory is a(n) ____ agreement.

Franchise

The ____ is the company that develops a product concept and sells others the rights in the form of a franchise to make and sell the product.

Franchisor

A partnership where all owners share in operating the business and in assuming unlimited liability for the business debts is a:

General Partnership

What are the main differences between general and limited partners?

General partners are owners (partners) who have unlimited liability and are active in managing the company. Limited partners are owners (partners) who have limited liability and are not active in the company.

Disadvantage of Corporations

Initial Cost Extensive Paperwork Double taxation Two tax returns Size Difficulty of termination Possible conflict with stockholders and board of directors

What is the definition of corporation?

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

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

LLC

No stock, limited life span, and fewer incentives are disadvantages of a(n)_

LLC

Which form of ownership is nontransferable because there is no stock

LLC

which form of ownership is nontransferable because there is no stock?

LLC

What are some of the disadvantages of operating a franchise

Large start-up costs Restrictions on selling Shared profit

What are leveraged buyouts, and what does it mean to take a company private?

Leveraged buyouts are attempts by managers and employees to borrow money and purchase the company. Individuals who , together or alone, buy all the stock for themselves are said to take the company private.

If the sole proprietor dies, is incapacitated, or retires, the business no longer exists. This disadvantage of a sole proprietorship is called ____ life span.

Limited

Which is considered an advantage of incorporating?

Limited Liability

What are some advantages of the LLC form of organization?

Limited Liability, Flexible ownership rules, and Choice of taxation.

A company similar to an S corporation but with the special eligibility requirements is a ____ ____ company.

Limited liability

The form of partnership that limits liability to the limited partner's own acts or those of the people they supervise is a:

Limited liability partnership

Which form of business ownership provides limited liability, as in a corporation, but is taxed like a partnership and is not restricted on the number of allowed stockholders?

Limited-liability company

Select all advantages of the partnership form of business

Longer survival Pooled skills More financial resources

Advantages of Franchises

Management and marketing assistance Personal ownership Nationally Recognized name Financial advice and assistance Lower failure rate

What does limited liability mean?

Means that corporate owners (stockholders) and limited partners are responsible for losses only up to the amount they invest. Their other personal property is not at risk.

The result of two firms joining to form one is called a

Merger

Disadvantages to LLC's

No stock Limited life span Fewer incentives Taxes Paperwork

Which type of corporation focuses on providing a service rather than earning a profit, but is not owned by a government entity?

Not-for-profit corporation

Acquisition

One company's purchase of the property and obligations of another company

Rank the order in which members of a corporation are chosen in order to separate ownership from management. Start at top of the managerial hierarchy (FIg. 5.4)

Owners/stockholders elect board of directors Board of Directors hire officers of the corporation Officers hire managers of the corporation Managers hire employees

Select ways an LLP deals with liability for partners

Partners are not held liable for each others' actions When a partner is sued individually for malpractice, it does not affect other partners Liability is limited to losing only personal assets directly related to personal acts

Select reasons why management difficulties are considered a disadvantage of sole proprietorships

People good at one skill like selling and may not be good at another such as managing One person is responsible to keep track of inventory, accounting operations and tax records It is hard to attract employees to help run the business due to competition with larger companies offering better benefits

The limited liability partnership ensures that the limited partners' ___ assets are not at risk.

Personal

Which of the following is an advantage of partnerships?

Pooled financial resources

choose the attributes that makes franchises successful in the United States and internationally.

Predictable levels of service, convenience, and quality

Which of the following is a special type of stock whose owners cannot vote regarding the running of the company, yet have a priority claims to profits?

Preferred

Which of the following is an advantage of a sole proprietorship?

Retention of all profits

A unique government creation that looks like a corporation but is taxed like a sole proprietorship or partnership is called _______ corporation.

S

A unique government creation that looks like a corporation but is taxed like a sole proprietorship or partnership is called a _______ corp.

S

A unique government creation that looks like a corporation but is taxed like a sole proprietorship or partnership is called a(n) _ corporation

S

What are some disadvantages of a franchise?

Shared profits, restrictions on selling, large startup costs.

If you start & manage a business on your own, you have likely started a

Sole Proprietorship

Which is the easier for of business to start up?

Sole Proprietorship

Rank the forms of business ownership based on the ease of starting (easiest on top)

Sole Proprietorship Partnership Corporation

Studies have indicated that partnerships are four times likely to succeed than

Sole proprietorship

What association might be formed because no one person or firm is willing to put up the entire amount required for the undertaking of a project; for example, to underwrite a large insurance policy or investment?

Syndicate

What are the advantages and disadvantages of partnerships?

The advantages include more financial resources, shared management and pooled knowledge, and longer survival. The disadvantage include unlimited liability, division of profits, disagreements among partners, and difficulty of termination.

What are the advantages and disadvantages of sole proprietorships?

The advantages of sole proprietorships include ease of starting and ending, ability to be your own boss, pride of ownership, retention of profit, and no special taxes. The disadvantages include unlimited liability, limited financial resources, difficulty in management, overwhelming time commitment, few fringe benefits, limited growth, and limited life span.

What are the benefits and drawbacks of being a franchisee?

The benefits include getting a nationally recognized name and reputation, a proven management system, promotional assistance, and pride of ownership. Drawbacks include high franchise fees, managerial regulation, shared profits, and transfer of adverse effects if other franchisees fail

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

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

In obtaining a franchise an important issue to consider when evaluating the market is

The current competition that exists in your territory.

Select all attributes that make the initial cost of incorporating a disadvantage?

The high cost of hiring lawyers and accountants for the complex filings needed. High start-up costs associated with documentation

Conglomerate Merger

The joining of firms in completely unrelated industries

Vertical Merger

The joining of two companies involved in different stages of related businesses

Horizontal Merger

The joining of two firms in the same industry

Limited Liability

The responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders (stockholders) have limited liability.

A business can start in one form of ownership, but does not have to stay in that form.

True

A disadvantage of a sole proprietorship is limited financial resources.

True

The owner of a sole proprietorship is responsible for developing any fringe benefits they have.

True

True or False: A comprehensive benefit plan may add up to 30 percent or more of a worker's salary.

True

True or false: Corporations pay tax on company income and shareholders pay again on any dividends received

True

True or false: Size is considered both an advantage and disadvantage to incorporating

True

True or false: The failure rate of franchises is lower than other business ventures

True

True or false: The main advantage of a sole proprietorship is ease of start up

True

Elements such as more financial resources, shared management, and longer survival are those used to define the:

Uniform Partnership Act

__________ liability means partners can lose everything they own if the business loses a lawsuit.

Unlimited

_____________ is a legal concept that holds a business owner personally responsible for all the debts of the business.

Unlimited liability

Disadvantages of Partnerships

Unlimited liability, Division of profits, Disagreements among partners, Difficulty of termination

A merger between a soft drink company and an artificial sweetener maker could be considered a _______ merger.

Vertical

A corporation is defined as

a chartered legal entity with authority to act apart from its owners

A corporation is defined as:

a chartered legal entity with authority to act apart from its owners

Limited Liability Company (LLC)

a company similar to an S corporation but without the special eligibility requirements

quasi-public corporation

a corporation charted by the government as an approved monopoly to perform services to the general public. Public utilities are examples of quasi-public corporations.

When choosing to form a partnership, a business owner should consider all of the following:

a partner's level of expertise in different areas of business the level of participation of each partner the financial contribution of each partner

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 pension plan paid health insurance paid sick or vacation leave time

royalty

a percentage commission based on sales, not profit

The advantage of becoming a convention corporation includes

access to more capital

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

acquisition

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

acquisition

One company's purchase of the property and obligations of another is called an

acquisition

One company's purchase of the property and obligations of another is called:

acquisition

When a company purchases the assets and debt of another company they are engaging in a (an)

acquisition

Reasons a business might change ownership form:

adding a partner to the firm, dropping a partner from the firm, seeking limited liability

In a franchise, having management support from the franchisor is a(an)_ whereas the coattail effect is considered a _

advantage disadvantage

A partnership ____ can spell out the requirements of terminating a partnership.

agreement

A partnership ________ can spell out the requirements of terminating a partnership.

agreement

A partnership _________ can spell out the requirements of terminating a partnership

agreement

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

Select all reasons that disagreements can ruin a partnership:

arguing over profits opposing management styles disagreement over overload

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

articles of incorporation and bylaws

A corporation is formally formed with:

articles of incorporation and bylaws

limited liability company

articles of organization and operating agreement; no eligibility requirements, may be difficult, depending upon operating agreement to terminate, varies according to dissolution dates in articles of organization, can't sell stock, limited partners' capital and loans, limited liability, taxes varies, management responsibilities varies, benefits varies, but are not tax deductible

The various responsibilities of each partner as well as any issues involving money should be included in the ___ of ___.

articles of partnership

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

boss

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

boss

Sole proprietors like being their own _, because they get satisfaction from making their own decisions

boss

why is size an advantage of the corporation?

build modern facilities, diversify through acquisition, acquire the latest equipment, attract experts for hire

Swiss drugmaker Roche paid $43 billion to take control of biotechnology giant Genentech. Belgium's InBev purchased the largest US brewer, Anheuser-Busch and its Budweiser and Bud Light brands, for $52 billion.

business acquisitions

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

how the firm is to be operated from both legal and managerial points of view:

bylaws

Bruce is meeting with his accountant to choose whether his LLC is to be taxed as a partnership or a corporation. This advantage of forming an LLC is called:

choice of taxation

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

coattail effects

When the actions of other franchises have an affect on your business operation, this is called:

coattail effects

the customer passion for high-flying franchisor Krispy Kreme sank as the market became flooded with new stores and the availability of the product at retail locations caused overexposure

coattail effects

The Uniform Partnership Act defines the three key elements of a general partnership as:

common ownership, shared profits and losses, participation in operations

The Uniform Partnership Act define three key elements of a general partnership as:

common ownership, shared profits, and participation in operations.

The higher-costs of starting a franchise in international markets are offset by less ____ from other companies and a rapidly expanding customer base.

competition

Though start-up costs are higher in international franchising, there is less ___ because there are not as many other companies in the franchisor's industries.

competition

If a software company and a snack food company merged, it would be called a _____________ merger.

conglomerate

If a software company and a snack food company merged, it would be called a(n) __________ merger.

conglomerate

The joining of films in completely unrelated industries is a(n) _ merger

conglomerate

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

conglomerate merger

The joining of firms in completely unrelated industries is a _________ ___________.

conglomerate merger

The joining of firms in completely unrelated industries is a(n) _______.

conglomerate merger

The higher costs of starting up an international franchise are usually counterbalanced by an expanding _ base and less competition

consumer

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

cooperative

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

cooperative

Being owned by those using the products of a firm rather than simply being a shareholder is what makes a _ unique

cooperative

When farmers join together to get better prices for their food products, they form a farm ________.

cooperative

When producers, consumers, or workers with similar needs pool their resources for mutual gain, they start a(n):

cooperative

when producers, consumers, or workers w/similar needs pool their resources for mutual gain, they start a:

cooperative

Increasing the economic power of others and not paying the same taxes are both advantages of _

cooperatives

Corporations have the ability to offer benefits such as stock options which serves to attract talented employees. This is an advantage of the _ form of business

corporate

Corporations have the ability to offer benefits such as stock options which serves to attract talented employees. This is an advantage of what form of business?

corporate

The _______ form of business assists people in becoming owners without having to work at the firm.

corporate

A _________ not only limits the liability of owners but often eanbles many people to share in the ownership (profits) without working there or having other commitments to it.

corporation

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

corporation

A legal entity with authority to act and have liability apart from its owners is a

corporation

A legal entity with authority to act and have liability apart from its owners is a:

corporation

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

corporation

If an entrepreneur wants to grow quickly, accumulate capital, and become an industry leader, the best form of business ownership would be a(n)

corporation

The form of ownership that is legal entity in itself and has no restrictions on the number of stockholders is a _____.

corporation

The owner of an LLC can be a person, partnership, or _

corporation

Which form of business has double taxation and limited liability as its characteristics

corporation

If the owner of a sole proprietorship wants to incorporate, the following disadvantages must be considered:

cost of incorporation, double taxation

Partners can not only bring money into the business, but also _, which allows the business to borrow additional resources

credit

In obtaining a franchise an important issue to consider when evaluating the market is the

current competition that already exists in your territory

Uniform Partnership Act (UPA) <Louisiana is the only state that does not adopt the UPA>

defines the three key elements of any general partnership as (1) common ownership, (2) shared profits and losses, and (3) the right to participate in managing the operations of the business.

When analyzing which type of merger a firm uses to grow, we can classify them by whether they are:

different industries in the same industry different levels of an industry

It is important to have Articles of Partnership because problems between partners may occur due to

disagreements over dividing profits

It is important to have Articles of Partnership because problems between partners may occur due to:

disagreements over dividing profits

Sole proprietors keep all of their profits, but partners must ________ profits based on their ownership stake.

divide

Sharing risk means sharing rewards in a partnership. A partner expects to be rewarded for putting time and money into a firm through:

division of profits

if one partner puts in more money and the other puts in more hours, each may feel justified in asking for a bigger share of the profits could cause conflicts

division of profits

Among the advantages of farm cooperatives for their members is that they:

do not pay taxes as corporations do increase economic power

Advantages of farm cooperatives for their members is that they:

do not pay taxes as corporations do, increase economic power

Advantages of farm cooperatives for their members:

do not pay taxes as corporations do, increase economic power

foreign corporation

does business in one state but is chartered in another. about one-third of all corporations are charted in Delaware because of its relatively attractive rules for incorporation. A foreign corporation must register in states where it operates.

alien corporation

does business in the United States but is chartered (incorporated) in another country

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

easier to start and end the business

A franchisee must know how much _ is needed to purchase the franchise and operate it

equity capital

Partners must ______ their taxes and make quarterly payments or suffer penalties for nonpayment.

estimate

what are some disadvantages of a corporation?

excessive paperwork and initial cost

Home-based franchises have many advantages, such as:

extra time for family activities, relief from stress of commuting, and low overhead expenses.

The initial goal of a(n) _ cooperative was to join together to get better prices for their food products

farm

When farmers join together to get better prices for their food products, this is a(n) ____ cooperative.

farm

The inital goal of a _________ __________ was to join together to get better prices for their food products.

farm cooperative

Select the most popular businesses for franchising

fast food restaurants full service restaurants gas stations with convenience stores

What are the most popular businesses for franchising?

fast food restaurants, gas stations with convenience stores, full service restaurants

What does a business need prior to opening a bank account or hiring employees?

federal tax identification number

The biggest disadvantage of a home-based franchise is___.

feeling of isolation

A major factor to consider in forming a partnership is the ability of partners to provide additional __________ resources.

financial

The paperwork needed to start a corporation is extensive, but a corporation must also keep detailed _ records documenting all financial transactions in detail

financial

The paperwork needed to start a corporation is extensive, but a corporation must also keep detailed ____ records documenting all financial transactions in detail.

financial

The failure rate for franchises is lower than other business ventures because of:

financial advice and assistance nationally recognized names

double taxation

first: corporation pays tax on its income before it can distribute any, as dividends, to stockholders, second: the stockholders pay income tax on the dividends they receive

A disadvantage of corporations is that they become too large to be____?

flexible

The disadvantage of corporations is that they become too large to be ____.

flexible

How can someone starting a business avoid losses if sued?

form a corporation

Bruce owns his own company, but is having trouble working alone because he feels he needs additional expertise, management help, and an influx of money to stay afloat. Bruce should consider:

forming a partnership

A business person concerned about startup costs of a business opportunity should consider a venture other than a(n) _ which has this disadvantage

franchise

An agreement that gives a business the right to use a business's name and sell a product or service in a given area is a(n):

franchise

Financial advice and a nationally recognized name are both benefits of owning a(n)

franchise

The right to use a specific business' name and sell its products of services in a given territory is a(n) _ agreement

franchise

The right to use a specific business' name and sell its products or services in a given territory is a ________________ agreement.

franchise

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

franchise agreement

Businesses that are _,like McDonald's, have both a direct and indirect impact on the economy through job creation and spending

franchises

A _ is a company that sells others the right to use their name to make and sell their products

franchisor

Many franchisors are small, obscure companies that prospective franchisees may know little about. Prospective franchisees must beware of:

fraudulent franchisors who provide little help

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 __________ partnership.

general

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

Drew and Owen are business partners. Drew invested money and manages the business while Owen invested his money, but does not participate in the business management. Drew is considered a _ partner while Owen is considered a _ partner

general limited

A partnership where all owners share in operating the business and assuming unlimited liability for the business's debts is a:

general partnership

A partnership where all owners share in operating the business and in assuming unlimited liability for the business's debts is a:

general partnership

A legal form of business with two or more owners is a(n) ____.

partnership

What are examples of types of partnerships?

general, limited, master limited

A _ partner has responsibility or liability for losses beyond their investment, but a _ partner only has liability to the amount they invest

general; limited

A ______ partner has responsibility or liability for losses beyond their investment, but a ______ partner only has liability for the amount they invest.

general; limited

How to qualify to be S corporation?

have no more than 100 shareholders<all members of a family count as one shareholder>, have shareholders that are individuals or estates, and who (as individuals) are citizens or permanent residents of the US, have only one class of stock, derive no more than 25 percent of income from passive sources<rents, royalies, interest>

Select all attributes that make the initial cost of incorporating a disadvantage

hiring lawyers for consolation enlisting the services of accountants start-up costs associated with documentation

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

hold annual meetings keep minutes file written resolutions

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

hold annual meetings, file written resolutions, keep minutes

Relief from the stress of commuting, extra time for family activities, and low overhead expenses are all advantages of - franchises.

home based

Relief from the stress of commuting, extra time for family activities, and low overhead expenses are all advantages of_-_ franchises

home based

Long hours and a feeling of isolation are two disadvantages of __________-__________ franchises.

home-based

The joining of two films in the same industry is a(n) __________ merger.

horizontal

The joining of two firms in the same industry is a __________ merger

horizontal

When a soft drink company and a mineral water company merge and then are able to supply a variety of drinking products they have formed a(n) _ merger

horizontal

A merger of two firms in the same industry that allows the companies to diversify or expand their products is a

horizontal merger

A merger of two firms in the same industry that allows the companies to diversify or expand their products is a ______________.

horizontal merger

A soft drink company is merging with a company that produces bottled water. This type of merger is considered a

horizontal merger

A merger of two firms in the same industry that allows the companies to diversify or expand their products is a(n):

horizontal merger.

When the management and board of directors of a firm targeted for acquisition disapprove of a merger, this is known as a:

hostile takeover.

Ending partnerships can be difficult because of problems deciding:

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

Jane wants to start a new Subway franchise in her town. In the initial stage of investigating, Jane must consider all of the following

how to terminate the franchise the financial strength of the franchisor how much capital is needed to purchase the franchise

Double taxation of a corporation occurs because the company pays tax on ___ , and then individual shareholders pay income tax on the dividends they receive.

income

An advantage of cooperatives is that they:

increase the economic power of members

An advantage of a sole proprietorship is

independent decision making

All taxes of a partnership are taxed as the ____ income of the owners.

individual

The three types of mergers are differentiated by analyzing whether the companies merging are in the same, related, or different _

industries

The three types of mergers are differentiated by analyzing whether the companies merging are in the same, related, or different ____________

industry

The ____ cost of incorporating can be expensive because of the need for accountants and lawyers to get started.

initial

nonprofit (or one-for-profit) corporation

is one that doesn't seek personal profit for its owners.

professional corporation

is one whose owners offer professional services (doctors, lawyers, etc.).Shares in professional corporations aren't publicly traded.

closed<private>corporation

is one whose stock is held by a few people and isn't available to the general public

A master limited corporation looks much like a corporation because it:

is traded on the stock exchange

A master limited partnership looks much like a corporation because it:

is traded on the stock exchange

The attributes of a corporation include that:

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

The attributes of a conventional corporation include that:

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

A partnership established for a specific project or for a limited time (for example a U.S. company joining with a foreign firm to enter new markets) is called a(n):

joint venture.

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

keep minutes file written resolutions hold annual meetings

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

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

keep minutes or hold annual meetings

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

keep minutes, file written resolutions, or hold annual meetings

disadvantages of franchises

large start-up costs, shared profit, management regulation, coattail effects, restrictions on selling, fraudulent franchisors

the start-up costs of filing for incorporation are high because:

lawyers

The start-up costs of filing for incorporation are high because:

lawyers and accountants are needed to do the complex filing

The start-up costs of filing for incorporation are high because:

lawyers and accountants are needed to do the complex filings.

Sole proprietors can leave their business to their heirs. This is called:

leaving a legacy

Sole proprietors can leave their business to their heirs:

leaving a legacy

Leaving a ____ means owners can leave an ongoing business for future generations.

legacy

When a sole proprietor leaves an ongoing business to a future generation, it is said the owner is leaving a ___________.

legacy

When a sole proprietor leaves an ongoing business to future generations, it is said that the owner is leaving a ___?

legacy

When a sole proprietor leaves an ongoing business to future generations, it is said that the owner is leaving a __________.

legacy

Select the attributes of a corporation

legal entity liability separate from owners state chartered

A __________ __________ can be initiated by employees, managers, or investors who borrow necessary funds to purchase all shares of a firm's stock.

leveraged buyout

A ___________ can be initiated by employees, managers, or investors who borrow necessary funds to purchase all shares of a firm's stock.

leveraged buyout

A ___________ ____________ can be initiated by employees, managers, or investors who borrow necessary funds to purchase all shares of a firm's stock.

leveraged buyout (LBO)

In a general partnership, all partners share the responsibility for operating the business and assume _ for the business' debts

liability

What are some ways an LLP deals with liability for partners?

liability is limited to losing only personal assets directly related to personal acts, when a partner is sued individually for malpractice, it does not affect other partners, partners are not held liable for each others' actions

attributes of a corporation:

liability separate from owners, legal entity, state chartered

Although members may choose to reconstitute an LLC after it dissolves, limited ___________ __________ is considered a disadvantage of this form of business.

life span

Although members may choose to reconstitute an LLC after it dissolves, limited_ is considered a disadvantage of this form of business

life span

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

like a partnership or sole proprietorship

If the sole proprietor dies, is incapacitated, or retires, the business no longer exists. The disadvantage of a sole proprietorship is called ____ life span.

limited

Limited liability would only be granted to a _____ partner.

limited

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 responsibility for a loss only up to the amount invested is _ liability

limited

The responsibility for a loss only upto the amount invested is ___________ liability

limited

All of the following are considered disadvantages of a sole proprietorship except:

limited liability

Bob and Dan are doctors in a medical practice. Dan is being sued for malpractice, but it will not affect Bob's assets because they formed a(n) ___ _____ partnership?

limited liability

Bob and Dan are doctors in a medical practice. Dan is being sued for malpractice, but it will not affect Bob's assets because they formed a(n) __________ __________ partnership.

limited liability

Bob and Dan are doctors in a medical practice. Dan is being sued for malpractice, but it will not affect Bob's assets because they formed a(n)_ partnership

limited liability

Bob and Dan are doctors in a medical practice. Dan is being sued for malpractice, but it will not affect Bob's assets because they formed an __________ ________ partnership.

limited liability

Don wanted to incorporate his business and liked the attributes of an S-corporation, however, he did not feel the eligibility requirements would work for his purposes. He is likely to choose to form a <n> ______.

limited liability

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

limited liability

Stockholders' liability for losses only up to the amount they invest is called ____.

limited liability

Stockholders' liability for losses only up to the amount they invest is called ______________.

limited liability

advantages of corporations

limited liability, ability to raise more money for investment, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management

Advantages of LLCs:

limited liability, choice of taxation<as partnerships or as corporations>, flexible ownership rules, flexible distribution of profits and losses, operating flexibility

Advantages of a corporation

limited liability, perpetual life, ease of transfer of ownership

What are some of the advantages of a corporation?

limited liability, perpetual life, ease of transfer of ownership

Which of the following is an advantage of corporations?

limited liability.

you can operate without the fear that one of your partners might commit an act of malpractice resulting in a judgment that takes away your house, car, retirement plan, even your collection of vintage Star Wars action figures, as would be the case in a general partnership.

limited partner in an LLP

advantages of franchising:

lower failure rate, personal ownership, recognized name

Franchises offer those starting a business the advantage of a recognized name, management assistance, and:

lower failure rates

The UPS Store provides its more than 4,700 franchisees with a software program that helps them build customer databases along with quick and personal one-on-one phone an de-mail support.

management and marketing assistance advantage of Franchises

advantages of franchises

management and marketing assistance, personal ownership, nationally recognized name, financial advice and assistance, lower failure rate

taking a firm private

management or a group of stockholders obtain all the firm's stock for themselves by buying it back from the other stockholders

Franchises are expanding internationally to access additional _ that have new customers and to increase their profit potential

markets

Sunoco Inc. formed the MLP Sunoco Logistics Partners (SXL) to acquire, own, and operate a group of crude oil and refined-product pipelines and storage facilities. Income received by SXL is not taxed before it is passed on to investors as dividends as it would be if SXL were a corporation.

master limited partnership (MLP)

The main types of partnerships are:

master limited, general, and limited

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

merger

The result of two firms (usually corporations) combing to form one company is called a __________.

merger

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

merger

When two firms join together to form one new company, it is called a ______________.

merger

When two firms join together to form one new company, it is called a(n)_

merger

Franchisors would like their franchisees to "mirror" their customer bases. Therefore, many franchisors, such as Domino's Pizza have developed _ franchisee recruitment initiatives

minority

A limited partnership is specially designed to help raise what?

money

The various responsibilities of each partner, especially any issues involving ____, should be agreed to in discussions and put in writing before agreeing to a partnership.

money

An advantage of having one or more partners is that:

more financial resources are available more skills and knowledge are available the organization may survive for a longer time

Advantages of Partnerships

more financial resources, shared management and pooled/complementary skills and knowledge, longer survival, no special taxes

A nationally established franchise provides a franchise with a _ that is recognized by consumers, and therefore, saves on marketing costs

name

sole proprietor ship

no documents needed to start, may need permit/license, easy to terminate/just pay debts and quit, terminates on death of owner, can be sold to quailified buyer, limited owner's capital/loans, unlimited liability, taxed as personal income, owner manages all areas of the business, usually fewer benefits/lower wages

Having carefully chosen partners with different skills and knowledge can help a partnership succeed because:

no one person has all the skills needed it provides for a more balanced life

Disadvantages of LLC:

no stock<nontransferable>, limited lifespan, fewer incentives, taxes<pay self-employment taxes-MC/SS taxes paid by sole proprietors and partnerships-on their profits>, paperwork

An advantage of starting an online franchise is that:

no upfront fee may be required franchisees pay only a set monthly fee online franchisees can compete in world markets

An advantage of starting an online franchise is that:

no upfront fee may be required online franchisees can compete in world markets franchisees pay only a set monthly fee

Amy wants to start a business but is concerned with starting from scratch. To alleviate her concern Amy could

obtain a franchise

every partnership must have at least ___ general partner.

one

A sole proprietorship often grows slowly because the _____ is the sole source of know-how and funding.

owner

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:

paid health insurance paid sick or vacation leave time a pension plan not freedom to make your own hours

Select ways an LLP deals with liability for partners:

partners are not held liable for each others' actions, liability is limited to losing only personal assets directly related to personal acts when a partner is sued individually for malpractice, it does not affect other partners.

general partnership

partnership agreement needed<oral/written>, may be hard to terminate<depends on agreement>, terminates on death/withdrawal of partner, must have other partner<s> agreement, limited to partners' capital/loans, unlimited liability, taxed as personal income, partners share management, fewer benefits/lower wages/promising employee could become partner

A legal form of business with two or more owners is a(n):

partnership.

A _ means that a corporation's existence will not terminate if one or more owners die

perpetual life

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

personal assets are protected

The partnership business entity is not taxed, because each partner pays tax on the business's profits as their _

personal income

The partnership business entity is not taxed, because each partner pays tax on the business's profits as their ____

personal income

Taking a firm _ is when a corporation decides to maintain. or in control of a firm internally by obtaining all of the stock

private

Taking a firm _____________ is when a corporation decides to maintain, or in some cases regain, control of a firm internally by obtaining all of the stock.

private

Flexible distribution of profits and losses is considered an advantage of an LLC because:

profit/losses do not have to be distributed in proportion to the money each person invests

An advantage of the corporate form of business is that limited liability allows it to:

raise larger sums of money from investors borrow larger sums of money

the most popular businesses for franchising are:

restaurants<fast food/full service>, gas stations<convenience stores>

_ of company profits is considered an advantage of a sole proprietorship

retention

_______ of company profits is considered an advantage of a sole proprietorship.

retention

In developing a partnership agreement, it is recommended that you:

seek legal advice

open<public>corporation

sells stock to the general public. General motors and ExxonMobil are examples of public corporations.

One of the fastest growing franchise sectors is _

senior care

what is the fastest growing franchised business?

senior care

disadvantages of operating a franchise:

shared profit, restrictions on selling, large start-up costs

In order to qualify to become a S corporation, a company must have:

shareholders who are individuals or estates no more than 100 shareholders

Corporations can raise large amounts of money, take advantage of economies of scale, and hire experts in all areas of operation. This can be summarized as ________ advantage.

size

A business that is owned and managed by one person is a(n) ____ _____?

sole Proprietorship

Ease of formation is an advantage of a(n) __________ __________.

sole porprietorship

Ease of formation is a advantage of a(n)_

sole proprietorship

Funds available to a business are limited to what one owner can gather which is disadvantage to the form of business known as a(n) _

sole proprietorship

If you start and manage a landscaping business on your own, you have likely started a:

sole proprietorship

The three major forms of business are:

sole proprietorship, partnership, corporation

Studies have indicated that partnerships are four times more likely to succeed than:

sole proprietorships

The three major forms of business most common in the United States are

sole proprietorships corporations partnerships

The large _ costs for the rights to a franchise can vary from a few thousand to millions of dollars

start-up

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

People who own and manage their own businesses rightfully have pride of ownership because they:

take the risks and provide needed goods and services

One of the big differences between corporations and S corporations is how profits are:

taxed

attributes of a master limited partnership:

taxed like a partnership, acts like a corporation, traded on the stock exchange

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

What are the advantages and disadvantages of corporations?

the advantages include more money for investment, limited liability, size perpetual life, ease of ownership change, ease of drawing talented employees, and separation of ownership from management. The disadvantages include initial cost, paperwork, size, difficulty in termination, double taxation, and possible conflict with a board of directors.

Because of the poor publicity at a fellow franchise location, you notice that sales at your location have decreased. The impact of the poor publicity on your company is referred to as

the coattail effect

The biggest disadvantage of a home-based franchise is _

the feeling of isolation

The biggest disadvantage of a home-based franchise is ___________.

the feeling of isolation

A franchise operation is still your business, but you must follow the rules of:

the franchise agreement

A sole proprietorship often grows slowly because the owner is:

the major source of funding the main source of creativity the main source of know-how

Each corporate stockholder's financial liability is typically limited to

the money he or she paid for the corporation's stock.

Ending a partnership can be difficult because of problems deciding:

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

Many franchises are expanding internationally because:

there are large new markets available

One of the most notable advantages of an online franchise is

there is no brick-and-mortar real estate cost.

The franchisor often wants to approve the new owners in the franchisee's sale of the business:

to meet the franchise's standards, to control quality

What are some attributes of a master limited partnership?

traded on the stock exchange, acts like a corporation, taxed like a partnership

Corporations pay tax on company income and shareholders pay again on any dividends received.

true

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

unlimited

The responsibility of the owner of a sole proprietorship for all the debts of the business is __________ liability

unlimited

When any debts or damages incurred by the business are your debts or damages it is called _ liability

unlimited

When each general partner is liable for the debts of the firm, no mater who was responsible for causing the debt, this is called _ 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

when any debts or damages incurred by the business are your debts or damages it is called _____ liability.

unlimited

A key disadvantage of a general partnership is:

unlimited liability

Each general partner is liable for the debts of the firm, no matter who was responsible for causing them. You are liable for your partners' mistakes as well as your own. Like sole proprietors, general partners can lose their homes, cars, and everything else they own if the business loses a lawsuit or goes bankrupt.

unlimited liability

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

In a sole proprietorship, debts of the business are considered the responsibility of the owner if the business can't pay. This is referred to as _

unlimited liability

In a sole proprietorship, debts of the business are considered the responsibility of the owner if the business can't pay. This is referred to as ___ _____?

unlimited liability

The disadvantage of sole proprietorships is that any debts or losses incurred by the business are your debts because you and the business are legally one and you have:

unlimited liability

The following is considered a disadvantage of a sole proprietorship?

unlimited liability

in a sole proprietorship, debts of the business are considered the responsibility of the owner if the business can't pay. This is referred to as__________________

unlimited liability

The disadvantages of a partnership include

unlimited liability, division of profits

What are disadvantages of sole proprietorships?

unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited lifespan

A key disadvantage of a general partnership is:

unlimited liability.

A merger between a soft drink company and an artificial sweetener maker could be considered a ___________ merger.

vertical

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

vertical

A merger that joins two companies involved in different but related levels of an industry is a(n) ______ merger.

vertical

When two firms operating in different stages of related businesses join, it is called ______ __________.

vertical merger

The joining of two companies involved in different but related levels of an industry is called a ____ merger.

verticle

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

websites e-commerce technology

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

websites technology e-commerce

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

websites, technology, and E-commerce

limited partnership

written agreement/must file certificate of limited partnership, may be hard to terminate<depends on agreement>, terminates on death/withdrawal of partner, must have other partner<s> agreement, limited to partners' capital/loans, limited liability, taxed as personal income, can't participate in management, fewer benefits/lower wages/promising employee could become partner

Advantages of international franchising include:

expanding customer base

Sole Proprietorship

A business that is owned, and usually managed, by one person. Most common form of business ownership

Franchisor

A company that develops a product concept and sells other the rights to make and sell the products

Corporation

A legal entity with authority to act and have liability apart from its owners

Partnership

A legal form of business with two or more owners

What is a master limited partnership?

A master limited partnership is a partnership that acts like a corporation but is taxed like a partnership

What is a merger?

A merger is the result of two firms forming one company, The three major types are vertical mergers, horizontal mergers, and conglomerate mergers.

General Partnership

A partnership in which all owners share in operating the business and in assuming liability for the business's debts

Limited Liability partnership (LLP)

A partnership that limits partners risk of losing their personal assets to only their own acts and omissions and to the acts and omissions of people under their supervision

Select the attributes of a corporation. __________ A. liability separate from owners B. state chartered C. unlimited liability D. legal entity

A. liability separate from owners and B. state chartered and D. legal entity

An S corporation has the liability protections of a corporation but is taxed: _________ A. like a partnership or sole proprietorship B. at corporate rates for each year C. twice D. as if it were a corporation

A. like a partnership or sole proprietorship

Leveraged Buyout (LBO)

An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing.

General Partner

An owner (partner) who has unlimited liability and is active in managing the firm.

Limited Partner

An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment

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.

Blank 1: bylaws

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

Blank 1: coattail Blank 2: effect

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

Blank 1: markets

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

Blank 1: merger

When two firms join together to form one new company, it is called a(n)

Blank 1: merger

About 30 percent of franchises are owned by African Americans, Latinos, Asians, and Native Americans. Franchisors are becoming more focused on recruiting franchisees.

Blank 1: minority or diverse

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.

Blank 1: overhead or operating

What are the advantages of the LLC form of organization

Choice of taxation Limited liability Flexible ownership rules

What are some of the disadvantages of a corporation?

Cost of forming a corporation Double taxation

If the owner of a sole proprietorship wants to incorporate, the following disadvantages must be considered:

Costs of incorporation Double taxation

Termination of a partnership is difficult without a(n) __________ agreement. __________ A. corporate B. tax C. employment D. partnership

D. partnership

A disadvantage of buying a franchisee is: __________ A. immediate strong name recognition B. lower failure rates C. marketing assistance D. paying a share of profits as royalties

D. paying a share of profits as royalties

What are advantages of sole proprietorships?

Ease of starting and ending the business, being your own boss, pride of ownership, leaving a legacy, retention of company profits, no special taxes

If you & and a friend have started a business together, you have started a Sole Proprietorship.

False

True or false: Corporations must be large in size to benefit from the advantages of incorporating

False

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

False

True or false: It is not important to know the length of time a franchisor has been in operation

False

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

False

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

False

What are some of the disadvantages of an LLC?

Fewer incentives, paperwork

McDonald's sends all new franchisees and managers to _______ _____ in Oak Brook, Illinois for intensive training.

Hamburger University

What is the major challenge to global franchises?

It is often difficult to transfer an idea or product that worked well in the United States to another culture. It is essential to adapt to the region.

Disadvantage of Franchises

Large start-up costs Shared profit Management Regulation Coattail effects Restrictions on selling Fraudulent Franchisors

Leaving a ___________ means owners can leave an ongoing business to future generations.

Legacy

When a sole proprietor leaves an ongoing business to future generations, it is said that the owner is leaving a___.

Legacy

Advantages to LLC's

Limited Liability Choice of taxation Flexible ownership rules Flexible distribution of profits and losses Operating Flexibility - LLCs do have to submit articles of organization, which are similar to articles of incorporation, but they are not required to keep minutes, file written resolutions, or hold annual meetings. An LLC also submits a written operating agreement, similar to a partnership agreement, describing how the company is to be operated.

Which is an advantage of the corporate form of business ownership

Limited liability

Which is considered an advantage of incorporating

Limited liability

_ protect(s) investors' personal assets which makes them more likely to take a risk on investing in a corporation

Limited liability

__________ protect(s) investors' personal assets which makes them more likely to take a risk on investing in a corporation.

Limited liability

What are the advantages of limited liability companies?

Limited liability companies have the advantage of limited liability with out the hassles of forming a corporation or the limitations imposed by S corporations. LLCs may choose whether to be taxed as partnerships or corporations.

What does unlimited liability mean?

Means that sole proprietors and general partners must pay all debts and damages caused by their business. They may have to sell their houses cars, or other personal possessions to pay business debts.

What are some of the advantages of franchising

Personal ownership Lower failure rate Recognized name

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

S corporation

What are the advantages of S corporations?

S corporations have the advantages of limited liability (like a corporation) and simpler taxes (like a partnership). To qualify for S corporation status, a company must have fewer than 100 stockholders (members of a family count as one shareholder), its stockholders must be individuals or estates and US citizens or permanent residents, and the company cannot derive more than 25 percent of its income from passive sources.

Rank the forms of business ownership based on ease of starting. Put the easiest form at the top

Sole proprietorship Partnership Corporation

When choosing a partnership a business owner should consider all of the following except

Stock allocation to each partner

When considering which type of business to start a sole proprietor would have to accept:

The amount of time that needs to be devoted.

Unlimited Liability

The responsibility of business owners for all of the debts of the business

Franchise

The right to use a specific business's name and sell its products or services in a given territory

What are the three key elements of a general partnership?

The three key elements of a general partnership are common ownership, shared profits and losses, and the right to participate in managing the operations of the business.

Which of the following is NOT usually stated in the articles of partnership?

The value of each partner's retirement accounts

Ending a partnership can be difficult because of problems deciding:

The worth of a retiring partner's share, how a partner can retire, and how to distribute assets.

True or false: The main advantage of a sole proprietorship is ease of start up.

True

True or false: To end a sole proprietorship, you simply stop operations

True

Why do people incorporate?

Two important reasons for incorporating are special tax advantages and limited liability

When two firms operating in different stages of related businesses join, it is called a(n)____ merge.

Vertical

___________ ___________ are the joining of two companies involved in different stages of related businesses.

Vertical mergers

A franchise owner will experience the coattail effect when:

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

multinational corporation

a firm that operates in several countries

A disadvantage of a partnership where remaining partners are unwilling to buy the share of a partner who retires can be referred to as _______________.

a frozen investment

The decrease in female franchise owners is caused by:

a lack of money to cover high start-up costs

The advantages of becoming a conventional corporation include?

access to more capital

The advantages of becoming a conventional corporation include:

access to more capital, limited liability, size, perpetual life, ease of ownership change, ease of attracting talented employees, separation of ownership from management

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

acquisition

conventional corporation

articles of incorporation, bylaws, hard/expensive to terminate, perpetual life, easy to change owners/just sell stock, more money to start/operate/may sell stocks/bonds, limited liability, corporate, double taxation, separate management from ownership, usually better benefits and wages, advancement opportunities

S corporation

articles of incorporation, bylaws/must meet criteria, hard/expensive to terminate, perpetual life, can sell stock/but with restrictions, more money to start/operate/may sell stocks/bonds, limited liability, taxed as personal income, double taxation, separate management from ownership, usually better benefits and wages, advancement opportunities

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

coattail effect

Members of democratically control cooperatives by electing a(n) _ of directors that hires professional management

board

In a leveraged buyout, employees, managers, or investors finance the purchase of the company by:

borrowing against its assests

In a leveraged buyout, employees, managers, or investors finance the purchase of the company by:

borrowing against its assets

The fastest way for a foreign firm to enter the U.S. market may be to _ the operations of a U.S. company

buy

A(n) _______ corporation is a corporation whose stock is owned by relatively few people and is not sold to the general public; while, a(n) _______ corporation is one whose stock can be bought and sold by any individual.

closed; open

In order to protect the brand name and image, the franchisor has tight has tight management _

controls standards

domestic corporation

does business in the state in which it's chartered<incorporated>

A major disadvantage of the corporate form deals with the tax situation called ___ taxation?

double

Advantages of international franchising include:

expanding customer base, less competition

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 the business

what do bylaws consist of?

how/when/where shareholders/directors meetings are held/how long directors are to serve, directors authority, duties/responsibilities of officers/length of their service, how stock is issued, employment contracts

many companies eventually ______ to avoid liability for losses.

incorporate

The __________ cost of incorporating can be expensive because of the need for accountants and lawyers to get started.

initial

disadvantages of corporations

initial cost, extensive paperwork, double taxation, two tax returns, size<too inflexible and tied down in red tape>, difficulty of termination, possible conflict with stockholders and board of directors

A sole proprietorship has a limited life span unless:

it is sold to someone else it is taken over by an heir

A sole proprietorship has a limited life span unless:

it is sold to someone else, it is taken over by an heir

When there is one or more general partners and one of more limited partners, the firm is a:

limited partnership

When there is one or more general partners and one or more limited partners, the firm is a(n):

limited partnership

The limited partners' risk of losing their personal assets in an LLP is:

limited to the outcomes of their own acts & omissions

The _ limited partnership looks much like a corporation in that it acts like a corporation and is traded on a stock exchange

master

The main types of partnerships include:

master limited limited general

Model Business Corporation Act recommends what should be added to a partnership agreement?

name of the business, names/addresses of all partners, purpose/nature of the business, location of offices/where business conducted, date partnership will start/how long will last, contributions made by each partner, management responsibilities, duties of each partner, salaries/drawing accounts of each partner, provisions for sharing profits, provision for accounting, requirements for new partners, special restrictions/rights/duties of any partner, provisions for retiring partner, provisiton for purchase of deceased or retiring partner's share, provision for grievances, provision for how to dissolve the partnership

the articles of incorporation

name, people who incorporated it, purposes, duration, number of shares that can be issues, voting rights, shareholder rights, minimum capital, address, name/address of person responsible/first directors, any other public info needed

Of the various forms of business ownership, a __________ is an easy way for two individuals to conduct business.

partnership

Termination of a partnership is difficult without a(n) _ agreement

partnership

Termination of a partnership is difficult without a(n) ______ agreement.

partnership

two people join one business together

partnership

Longer Survival

partnerships are more likely to succeed than sole proprietorships because being watched by a partner can help a businessperson become more disciplined.

what are some advantages of a corporation?

perpetual life and limited liability

All profits of a sole proprietorship are taxed as _ income of the business owner

personal

The limited liability partnership ensures that the limited partners'_ assets are not at risk

personal

Individuals who start and manage a business are concerned with risk. They may choose to incorporate to decrease:

personal liabilities

A advantage of a sole proprietorship is the business owner keeps all the _, but in a franchise, in many instances, this must be shared with the franchisor

profits

Having a partner may share the risk, but it also means sharing _, because each partner must be rewarded for their participation in the business

profits

Owners of sole proprietors not only retain all____, but also benefit from the increasing value of the firm.

profits

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

Franchises are attractive to minority populations because:

some offer financial support to aspiring business owners they provide personal ownership of a business

In order to protect the brand name and image, the franchisor has tight management _________.

standards and controls

A corporation is a _____-______ legal entity with authority to act and have liability separate from its owners.

state-chartered

A corporation allows people to own _ and share in the profits of the firm

stock

Corporations issue _ to shareholders and this allows ownership to change when it is sold

stock

It is easy to change ownership in a corporation by exchanging

stock

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

stock

As owners, these people are entitled to all profits that are left after all the corporation's other obligations have been paid

stockholders

Conflict may be present if _ elect a board of directors who disagree with management

stockholders

Statements that are accurate as related to corporate taxation:

stockholders pay income tax on the dividends they receive, double taxation occurs

Because of the poor publicity at a fellow franchise location, you notice that sales at your location have decreased. The impact of the poor publicity on your company is referred to as:

the coattail effect

In a sole proprietorship, the profits earned by the business are:

the property of the owner, except for taxes owed to the government

Sole proprietors often feel that owning a business is a way of life because they seldom have enough _ to complete all their tasks

time

A merger that joins two companies involved in different but related levels of an industry is a(n) _ merger

vertical

Funds available for a sole proprietorship are limited to:

what the owner can provide