BUS 101 Chapter 5 Questions

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

Legacy

What are some of the disadvantages of a corporation?

(1) Cost of forming a corporation (2) Double taxation

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

(1) Do not pay taxes as corporations do (2) Increase economic power

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

(1) File written resolutions (2) Keep minutes (3) Hold annual meetings

Ending a partnership can be difficult because of problems deciding:

(1) How to distribute assets (2) The worth of a retiring partner's share (3) When a partner can retire

A sole proprietorship has a limited life span unless:

(1) It is sold to someone else (2) It is taken over by an heir

What are some of the disadvantages of operating a franchise?

(1) Large start-up costs (2) Shared profit (3) Management regulation

What are the advantages of the LLC form of organization?

(1) Limited liability (2) Flexible ownership rules (3) Choice of taxation

It is easy to start and end a sole proprietorship because:

(1) Only one person is involved in the decision to dissolve the business (2) It may only require a simple permit or license to start

A corporation is defined as:

A legal entity with authority to act apart from its owners

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

Acquisition

An individual who incorporates a business must file:

An individual and a corporate tax return

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

Borrowing against its assets

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

Boss

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

Bylaws

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

Coattail effect

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

Conglomerate merger

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

Cooperative

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

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 ____________ partnership has partners who do not share in operating the business.

Limited

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

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

Limited liability

Rank the order in which members of a corporation are chosen in order to separate ownership from management. (Top of managerial hierarchy to bottom)

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

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

Partnership

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

S

Rank the forms of business ownership based on ease of starting. (Easiest to hardest)

Sole proprietorship > Partnership > Corporation

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

Sole proprietorships

Cooperatives have an advantage in the marketplace because they do not pay the same kind of ____________ corporations do.

Taxes

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:

(1) Paid health insurance (2) Paid sick or vacation leave time (3) A pension plan

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

(1) Shared profits and losses (2) Participation in operations (3) Common ownership

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

(1) The financial contribution of each partner (2) The level of participation of each partner (3) A partner's level of expertise in different areas of business

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

LLC

The right to participate in managing the ____________ of the business is a key element of general partnerships in the Uniform Partnership Act.

Operations

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

Vertical

Disadvantages of a sole propietorship:

(1) Unlimited liability (2) Limited financial resources

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

Home-based

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

Corporation

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

Entity

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

Franchise

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

Horizontal

The result of two firms joining to form one is called a(n):

Merger

____________ owned businesses are growing at more than the national rate.

Minority

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

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

Partnership

Having ____________ means that a corporation's existence will not terminate if one or more owners die.

Perpetual life

An 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

Profit

Ease of formation is an advantage of a(n) ____________

Sole proprietorship

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

Sole proprietorship

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

Unlimited

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

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