Chapter 6 Entrepreneurship

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True/False The process of buying a franchise begins with the franchise disclosure document

False

True/False a business must incorporate in a state where it is physically located

False

True/False buying an existing business eliminates the potential problem of reluctant partners

False

True/False one advantage of joining a family-owned business is that conflicting interests are rarely a problem

False

True/False the tax benefits of a partnership are similar to those of a corporation

False

A sub chapter S corporation is designed to accommodate small businesses that have

Fewer than 100 stockholders

In some states, a DBA license is known as a

Fictitious name registration

What is an advantage of a family-owned business

Flexibility

What form of business requires a charter?

A corporation

A legal document describing the purpose, place of business and other details of the corporation

Charter

What are four benefits of being a sole proprietor?

Decision making, profits, easy to start and tax benefits

Name four start-up strategies for businesses

Do your research, establish the value of the business, review the laws, get help from the professionals

The legal document that contains information a franchise must know before purchasing a franchise and must be received by the buyer 14 days before an agreement is signed is the

Franchise disclosure document

The company that sells the rights of a franchise is the

Franchisor

What does a partnership agreement specify?

How much each partner will invest, partners responsibilities, how profits are to be shared

Name 4 organizations that can provide resources on state, local, and national franchise laws

IFA, SBA, US department of commerce, FTC franchise rule compliance

Who organization regulates that franchising industry

International franchise association

Can choose any organizational structure the member agree to but it has limited life

LLC (limited liability corporation)

No managing partner and all partners have limited personal liability

LLP (limited liability partnership)

What is a disadvantage of purchasing a franchise

Low start-up costs

3 disadvantages of buying an existing business

Purchase price, reluctant partners and obsolete inventory

What start-up and ongoing costs are associated with buying a franchise

Royalty payments and grand opening fee

What are 4 things you should do before you sign a contract to buy a business

Seek legal help to finalize ownership an attorney and an accountant

A person who invests in a business but takes no part in the day-to-day operations of the business is called a

Silent partner

A for-profit business that is owned and operated by a single person is known as a

Sole proprietorship

You are considering the purchase of a franchise XYZ Snack Shops. What questions should you ask about the franchise before deciding to purchase it?

The company's tax records and information about the management, record of performance and operation and if their experience with franchisor has been satisfactory

True/False a corporation is a legal entity

True

True/False a sole proprietor is personally responsible for all business debts

True

True/False businesses that hire employees must have an employer identification number assigned by the IRS

True

True/False in a general partnership, all of the partners have unlimited liability

True

True/False most franchises have strict rules of operation that must be followed by the franchisee

True

A partnership carries the risk of

Unlimited liability


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