Chapter 5 How to Form a Business

Minority-owned businesses are growing at more than ___ times the national rate.

6

True or False: Partnerships are less likely to survive for a longer time than sole proprietorships.

False

What are some of the disadvantages of an LLC?

Fewer incentives, paperwork

The right to use a specific business's name and sell its products of services in a given territory is a(n) ____ agreement.

Franchise

The ____ is the company that develops a product concept and sells others the rights in the form of a franchise to make and sell the product.

Franchisor

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

LLC

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

Limited

What are some advantages of the LLC form of organization?

Limited Liability, Flexible ownership rules, and Choice of taxation.

A company similar to an S corporation but with the special eligibility requirements is a ____ ____ company.

Limited liability

The limited liability partnership ensures that the limited partners' ___ assets are not at risk.

Personal

choose the attributes that makes franchises successful in the United States and internationally.

Predictable levels of service, convenience, and quality

What are some disadvantages of a franchise?

Shared profits, restrictions on selling, large startup costs.

Which is the easier for of business to start up?

Sole Proprietorship

When choosing a partnership a business owner should consider all of the following except

Stock allocation to each partner

When considering which type of business to start a sole proprietor would have to accept:

The amount of time that needs to be devoted.

In obtaining a franchise an important issue to consider when evaluating the market is

The current competition that exists in your territory.

The advantage of becoming a convention corporation includes

access to more capital

Ending a partnership can be difficult because of problems deciding:

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

True or False: A comprehensive benefit plan may add up to 30 percent or more of a worker's salary.

True

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

acquisition

An advantage of the separation of ownership from management in corporations is that the company can raise money from investors but the investors:

are not involved in daily operations

The various responsibilities of each partner as well as any issues involving money should be included in the ___ of ___.

articles of partnership

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

coattail effect

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

common ownership, shared profits, and participation in operations.

The higher-costs of starting a franchise in international markets are offset by less ____ from other companies and a rapidly expanding customer base.

competition

Though start-up costs are higher in international franchising, there is less ___ because there are not as many other companies in the franchisor's industries.

competition

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

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

corporation

If an entrepreneur wants to grow quickly, accumulate capital, and become an industry leader, the best form of business ownership would be a(n)

corporation

The form of ownership that is legal entity in itself and has no restrictions on the number of stockholders is a _____.

corporation

what are some disadvantages of a corporation?

excessive paperwork and initial cost

Advantages of international franchising include:

expanding customer base, less competition

Home-based franchises have many advantages, such as:

extra time for family activities, relief from stress of commuting, and low overhead expenses.

When farmers join together to get better prices for their food products, this is a(n) ____ cooperative.

farm

The biggest disadvantage of a home-based franchise is___.

feeling of isolation

A master limited corporation 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, file written resolutions, or hold annual meetings

the start-up costs of filing for incorporation are high because:

lawyers

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

leaving a legacy

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

legacy

All of the following are considered disadvantages of a sole proprietorship except:

limited liability

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

limited liability

The main types of partnerships are:

master limited, general, and limited

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

merger

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

partnership

what are some advantages of a corporation?

perpetual life and limited liability

Owners of sole proprietors not only retain all____, but also benefit from the increasing value of the firm.

profits

It is easy to change ownership in a corporation by exchanging

stock

The franchisor often wants to approve the new owners in the franchisee's sale of the business:

to meet the franchise's standards, to control quality

The responsibility of the owner of a sole proprietorship for all of the debts of the business is _____ liability.

unlimited

when any debts or damages incurred by the business are your debts or damages it is called _____ liability.

unlimited

The disadvantages of a partnership include

unlimited liability, division of profits

The joining of two companies involved in different but related levels of an industry is called a ____ merger.

verticle

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, and E-commerce

The disadvantage of corporations is that they become too large to be ____.

flexible

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

horizontal merger

All taxes of a partnership are taxed as the ____ income of the owners.

individual