BUSG 129 Chapter 5 quiz

List the three "basic forms" of business ownership:

1. Sole proprietorship 2. Partnership 3. Corporation

Which are considered disadvantages of incorporating?

Double taxation, initial cost, extensive paperwork.

A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business.

False

Few people today start their own business.

False

Stockholders in a corporation accept unlimited liability for the corporation's debts.

False

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

False

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

Minority

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 entity elects the board of directors for a corporation?

Stockholders.

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

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

Compared to sole proprietorship, an advantage of partnerships is their ability to obtain more financial resources.

True

Corporations represent 20% of all the businesses in the United States and earn over 80% of the total U.S. business receipts.

True

In a general partnership, all partners share in management of the business and in the liability for the firm's debts.

True

Which of following are true about the advantages and disadvantages of being a franchise owner ______.

While the upfront costs of a franchise may be steep, a franchise has a better chance of succeeding than starting a business from scratch. Having a nationally recognized name for your business in a franchise can help with marketing and awareness.

In a franchise, having management support from the franchisor is a(n) ______ whereas the coattail effect is considered a ______.

advantage; disadvantage.

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

agreement

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

an S corporation.

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

cooperative.

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

cooperative.

The attributes of a conventional corporation include that:

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

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

corporation.

The form of business ownership best suited to raising large amounts of money for expansion is the ______.

corporation.

Double taxation means:

corporations pay taxes on their profits. It they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution.

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

double

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

entity

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

file written resolutions, hold annual meetings, keep minutes.

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

franchise

A(n) ______ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

franchise agreement

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

A person who buys the right to use a business name and sell a product within a given territory is called a ______.

franchisee.

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

franchisees

Advantages of starting an online franchise are:

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

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

One difference between partnerships and sole proprietorships is that partnerships:

have a greater chance of long-term survival due to the accountability of each partner to the other.

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

liability

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

markets

A ______ is two firms combining to form one company.

merger

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

merger.

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.

overhead

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

partnership

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

partnership

One disadvantage of a limited liability company is that it:

requires members' approval to transfer ownership.

A ______ is the share of profits or percentage of sales a franchisee pays to a franchisor.

royalty

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

separate

The ______ is usually the easiest form of business to start and end.

sole proprietorship

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

sole proprietorship.

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

sole proprietorship.

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

sole proprietorship.

The easiest type of business entity to form is a ______.

sole proprietorship.

Franchises are attractive to minority populations because:

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

As owner of a corporation is known as a ______.

stockholder.

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

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

Any debts or damages incurred by a firm organized as a sole proprietorship are:

the responsibility of the owner.

Ending a partnership can be difficult because of problems deciding:

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

One of the most notable advantages of an online franchise is:

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

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.

Unlimited liability means:

when you own your own business you are responsible for all the business debts.

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