Chapter 5

partnership agreement

Can spell out the requirements of terminating a partnership

Llc's do have to submit articles of organization an 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 a business

_____ partners participate in operating the business while limited partners do not

General

Select the reasons a business might change ownership form

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

Studies have Indicated that partnership are four times more likely to succeed than

Sole proprietorship

Which is the easiest form of business to start up

Sole proprietorship

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

Sole proprietorship Corporations Partnerships

Limited liability partnership

The form of partnership that limits liability to the limited partners own acts or those of the people they supervise is a

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

financial

A sole proprietorship has a limited life span unless

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

An advantage of a sole proprietorship is

owner keeps control/independent decision making

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

personal

Funds available for a sole proprietorship are limited to

what the owner can provide

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

Leaving a legacy

disadvantage of partnership

unlimited liability Division of profit Partner disagreement

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

vertical

Ending a partnership can be difficult because of problems deciding:

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

Rank the order in which members of a corporation are chosen in order to separate ownership from management.

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

Sole Proprietorship

A business that is owned and managed by one person is

Corporation

A 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

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

Acquisition

an individual who incorporates a business must file

An individual and a corporate tax return

Select the reasons why size is an advantage of the corporation

Attract experts for hire Quite the latest equipment Build modern facilite

In a leverage buyout, employees, managers, or investors finance the purchase of the company

Borrowing against its assets

An entrepreneur could choose to buy a franchise because

It's a business brand with a proven track record It is less stressful than starting a from scratch

The actions of a fellow franchisee will affect you franchise. This is known as __

Coattail effect

The joining of firms in complete unrelated industries is an ______ merger

Conglomerate merger

Some co-ops ask _____ to work for a number of hours a month as part of their membership duties

Consumer members

When producers, consumers, or workers with similar needs pool their resources for mutual gain, they start an

Cooperative

When the corporation pay a tax on its profits and indiviso stick holders each Pat tax on dividends distributed by the corporation, it is called

Double taxation

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

Entity

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

Limited

What are the disadvantages of a sole proprietorship?

Limited financial resources Unlimited liability

The form of business ownership called____ protects the persons personal assets from the debts of the business

Limited liability

The responsibility for a loss only punto the amount invested is _______ liability

Limited liability

Which is an advantage if the corporate form of business owner ship

Limited liability

sole proprietors think of their business as a way of life because

Long hours affect their family life They often work more hours than no supervisory employees

Franchisees must follow the franchise _____, which limits the control of the operation by the franchisee through regulation and guidelines

agreements

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

unlimited

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

True ir false: if you and a friend start a business together, you have started a sole proprietorship

False

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

Farm cooperatives

Es 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

Franchises agreement

A ______ Tends to demand a large share of the profits from the franchise which is considered a disadvantage for the franchisee

Franchisor

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

General partnership

The three major types of partnerships are

General, limited, master limited

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 an ____ merger

Horizontal merger

Andy is the owner of action auto which was formed as a sole proprietorship. He would like to eliminate the risk of personal liability for the company debt. What is Andy's best course of action

Incorporate

Which are considered disadvantage of incorporating

Initial cost Double taxation Extensive paperwork

A master limited partnership looks much like a corporation because it

Is traded on the stick exchange

The attributes of a corporation include that

It is a legal entity It is a state charter Corporate liability is separate from owners

In order to qualify to become an s corporation a company must

No more than 100 shareholders Shareholders who are individual or estates

Among the reasons that disagreements can ruin a partnership are

Opposing management styles Disagreement over workload Arguments over dividing profits

Select those items considers 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 A pension plan Paid sick or vacation leave time

Select ways an LLP deals with liability for partners

Partners are not held liable for each other's action 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

Of the various forms of business ownership, a ________ is an easy way for two individuals to conducts business

Partnership

Through flexible distribution of profits and losses, local members agree on the _____ of profits/ losses to be distributed to each member

Percentage

When a corporation is separate from its owners and does not terminate with the death of one owner the corporation has

Perpetual life

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

Personal assets

Select all advantages of the partnership form of business

Pooled skills More financial resources Longer survival

The advantages of home based work include

Relief from commuting stress Low overhead expenses

The most popular business for franchising are

Restaurants

Ease of ownership means that buying or selling _____ is all that is necessary to become an owner or past owner of a corporation

Stock

Shareholders are not liable for the debts of a corporation Beyond the money they invest in it by buying company ____

Stock

Burger and Gymboree were publícalo tarred companies until a group of stock holders bought all the firms stock in order to regain control. This is referred to as

Taking a firm private

Cooperatives have an advantage in the market palace because they do not pay the same kind of ___ corporations do

Taxes

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

The level of participation of each partner A partners level of expertise in different areas of business The financial contribution of each partners

Sole Proprietorship often grows slowly because the owner is

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

Merger

The results of two firms (usually corporations ) combining to form one company is classed a

Franchise are attractive to minority populations because

They provide personal ownership of a business Some offer financial support to aspiring business owners

A key disadvantage of operating a sole proprietorship is

Unlimited liability

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

Unlimited liability

The Disadvantage of sole proprietorship 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

Which of the following is considered a disadvantage of a sole proprietorship

Unlimited liability

limited partnership

When there is one or more general partners and one or more limited partners the firm is