BUS 110 _ Exam (Ch. 5 & 6)

T or F: Being your own boss is a disadvantage of a sole proprietorship.

False

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

an S corporation

Rank the forms of business ownership based on ease of starting. Put the easiest form at the top. *corporation *sole proprietorship *partnership

1. Sole proprietorship 2. Partnership 3. Corporation

Select the most popular businesses for franchising:

1. gas stations with convenience stores 2. fast food 3. full service

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

Which are attributes of a master limited partnership?

Traded on the stock exchange taxed like a partnership acts like a corporation

A corporation is defined as:

a chartered legal entity with authority to act from its owners

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

partnership

The three major forms of business most common in the US are...

corporations Sole proprietorships partnerships

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

entity

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.

The three major types of partnerships are:

general, limited, and master limited

Many companies eventually ____ to avoid liability for losses.

incorporate

A limited liability partnership limits the liability of limited partners to their:

initial investment

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

is traded on the stock exchange

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

keep minutes hold annual meetings file written resolutions

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 _________________ partnership.

limited liability

An advantage of a sole proprietorship is that the owner:

retains profits

T or F: A disadvantage of a sole proprietorship is limited financial resources.

true

T or F: a business can start in one form of ownership, but does not have to stay in that form.

true

a key disadvantage of operating a sole proprietorship is:

unlimited liability

A common characteristic of most entrepreneurs is that they:

accept the risks involved in starting and managing a business

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

acquisition

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

coattail effect

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

horizontal merger

A sole proprietorship has a limited life span unless:

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

Select the attribute of a corporation.

legal entity state chartered liability separate from owners

A(n) _______ is an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing.

leveraged buyout.

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

merger

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 sick or vacation leave time a pension plan paid health insurance

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

unlimited

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

unlimited liability

Select the reasons why size is an advantage of the corporation:

1. diversity through acquisition 2. build modern facilities 3. acquire the latest equipment 4. attract experts for hire

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

cooperative

Sole proprietorships far outnumber _____ and ____, but they net far fewer sales and less income.

corporations; partnerships

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

master

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

farm

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

conglomerate merger

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

do not pay taxes as corporations do increase economic power

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

franchise agreement

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

leaving a legacy

The responsibility for a loss only up to the amount invested is ______ liability.

limited

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

partnership

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

sole proprietorship