Intro to business CH 4

Five main steps involved in starting a corporation.

1. Selecting the company's name 2. Writing the articles of incorporation and filing them with the appropriate state office, usually the secretary of state 3. Paying required fees and taxes 4. Holding an organizational meeting 5. Adopting bylaws, electing directors, and passing the first operating resolutions

Sole proprietorship

A business that is established, owned, operated, and often financed by one person.

Acquisition

A corporation or investor group finds a target company and negotiates with its board of directors to purchase it.

What is franchising?

A form of business organization based on a business arrangement between a franchisor, which supplies the product or service concept, and the franchisee, who sells the goods or services of the franchisor in a certain geographic area.

How are foreign investments affecting the U.S. Economy?

A growing trade deficit.

Advantages and Disadvantages of sole proprietorship:

Advantages: Easy and inexpensive to form, Profits all go to the owner, direct control of the business, freedom from government regulation, no special taxation, and ease of dissolution. Disadvantages: Unlimited liability, difficulty raising capital, limited managerial expertise, trouble finding qualified employees, personal time commitment, unstable business life, losses are the owner's responsibility.

A corporation has: a. limited liability b. ease of transferring ownership c. continuity of life d. ability to attract financing

All of the above

general partnership

All partners share in the management and profits. They co-own the assets, and each can act on behalf of the firm. Each partner also has unlimited liability for all the business obligations of the firm

What is a partnership?

An association of two or more individuals who agree to operate a business together for profit.

Who are stockholders?

Are the owners of a corporation, holding shares of stock that provide them with certain rights

Why should business owners care about "baby boomers" and their needs in retirement?

Boomers have transformed every life stage they've touched so far, and their demographic weight means that business opportunities are created wherever they go fitness, eldercare, home senior care..

What is the franchisee's role?

buys a package that includes a proven product or service, proven operating methods, and training in managing the business.

A disadvantage of a partnership is that any partner may have to pay all of the debts of the company regardless of who incurred the debts. true or false

true

The merger of McKesson, the leading U.S. drug wholesaler, and HBOC, a producer of health-care inventory software, is an example of a(n) _____ merger.

vertical

Are stockholders and shareholders the same? What rights to the stockholders have?

yes, can attend annual meetings, elect the board of directors, and vote on matters that affect the corporation in accordance with its charter and bylaws

Purpose of a franchise agreement?

Contract that allows the franchisee to use the franchisor's business name, trademark, and logo. Outlines rules for running the franchise, services provided by the franchisor, and financial terms. The franchisee agrees to follow the franchisor's operating rules by keeping inventory at certain levels, buying a standard equipment package, keeping up sales and service levels, taking part in franchisor promotions, and maintaining a relationship with the franchisor.

What are the disadvantage differences between a corporation, sole proprietorship and a partnership?

Double taxation of profit, cost and complexity of formation, more government restrictions.

Who owns a corporation?

Everyone who owns a share of stock in the corporation.

In a limited partnership, all of the partners have limited liability. true or false?

False

The corporation's board of directors elects the corporate officers.

False

When Whole Foods Market, the world's largest natural foods supermarket, acquired Select Fish, a fish processing company, it was an example of a conglomerate merger. true or false

False

Two basic types of partnerships.

General partnership and limited partnership.

Why would franchises be a good fit for millennials?

Growth potential and meeting a flexible, fulfilling lifestyle

What is a limited partnership?

Has two types of partners: one or more general partners, who have unlimited liability, and one or more limited partners, whose liability is limited to the amount of their investment.

Who are considered officers of the corporation?

Hired by the board, the officers of a corporation are its top management and include the president and chief executive officer (CEO), vice presidents, treasurer, and secretary, who are responsible for achieving corporate goals and policies.

North American Van Lines and Allied Van Lines combined in a _______ merger that will create the world's largest moving company. Prior to the merger, North American was the leading company in moving high-end merchandise such as computer and hospital equipment, while Allied specialized in households.

Horizontal

Three main types of mergers and how are they different?

Horizontal merger: companies at the same stage in the same industry merge to reduce costs, expand product offerings, or reduce competition Vertical merger: a company buys a firm in its same industry, often involved in an earlier or later stage of the production or sales process. Conglomerate merger brings together companies in unrelated businesses to reduce risk.

Who is the franchisor?

In a franchising arrangement, the company that supplies the product or service concept to the franchisee.

corporation

Legal entity subject to the laws of the state in which it is formed, where the right to operate as a business is issued by state charter. A corporation can own property, enter into contracts, sue and be sued, and engage in business operations under the terms of its charter

How do a general and limited partnership differ?

Limited partners agree not to take part in the day-to-day management of the firm. They help to finance the business, but the general partners maintain operational control.

What are some of the drawbacks to owning a franchise?

Loss of control, cost of franchising, restricted operating freedom.

Merger

Occurs when two or more firms combine to form one new company.

Ease of formation, flexibility, and diversity of management are advantages of the ________ form of business ownership

Partnership

Pete Yankin and Ken Lowery consider themselves to be experts on hunting in the mountains in North Carolina. As a result, the two men established a company that markets hunting expeditions. Yankin and Lowery share responsibilities for booking the trips, gathering supplies, and guiding groups of five to seven hunters into locations where they can hunt for deer and bear. Since the two will share any profit equally, this would be an example of a(n):

Partnership

Why would a person choose to be franchisee over being a sole proprietor, partner or corporation?

Recognized name, product, and operating concept, management training and assistance, financial assistance.

What are the board of director's duties?

Set major corporate goals and policies, hire corporate officers, and oversee the firm's operations and finances.

What trends affect business ownership?

Social, demographic, and economic factors.

Which is easier to set up, a corporation, sole proprietorship or partnership?

Sole proprietorship

Three important components of a corporation's organizational structure.

Stockholders, directors, and officers.

How do the advantages of a corporation differ from a sole proprietorship and a partnership? What is considered a key advantage?

Tax deductions, unlimited life, ability to attract financing. A key advantage of corporations is that they are separate legal entities that exist apart from their owners.

How is the board of directors formed?

The stockholders elect a board of directors to govern and handle the overall management of the corporation.

Corporations face many more government restrictions and regulations than sole proprietorships and partnerships. True or False

True

Which of the following is an example of a disadvantage associated with a partnership?

Unlimited liability

Before forming a partnership, what disadvantages must a prospective business owner consider?

Unlimited liability, potential for conflicts between partners, complexity of profit sharing, difficulty exiting or dissolving a partnership.

Can officers be board members and stockholders?

Yes

Is investing in foreign economies something American business owners should consider? Why or why not?

Yes. Cheap labor, resources, outsourcing functions like payroll, information technology (IT), web/ email hosting, customer relationship management (CRM), and human resources (HR) to keep costs under control and enhance profitability.

Thom Georges wants to open a store where he sells nothing but antique architectural features that he can salvage from old houses being torn down to make way for progress. He has an eye for the kind of doors, windows, mantels, and so forth that decorators want, but he does not have all the funding he needs to get started. He has invited his parents to invest $40,000 in the enterprise. He has told them that if they do invest, they would have liabilities in the firm equal to but no greater than their investment. Georges is trying to get them to form a ______ _____ with him.

limited partnership