Business Ch. 5
Franchisee
A person who buys a franchise
Corporation
A state-charted legal entity with the authority to act and have liability separate from its owners. Stockholders by stock
A partnership _____ can out the requirements of terminating a partnership
Agreement
General Partnership
All owners are general
Limited Partnership
At least one owner is not general
Franchise
Buys the rights to use the business name and to sell its goods/services
Limited Liability
Corporate owners (stockholders) and limited partners are responsible for losses only up to the amount of money they invested. Personal possessions are not at risk
What is the major challenge for global franchises
Difficult to transfer an idea or product Will the United States to another culture
What are the advantages of a sole proprietorship?
Ease of starting and ending, own boss, pride, retention of profit, no special taxes
Disadvantages of Corporation
Initial cost, extensive paperwork, double taxation, hard to stop possible conflict between stockholders and board of directors
Vertical Merger
Joins two companies involved in different but related levels of an industry
LLC's are considered to have operational flexibility because while they must submit articles of organization, they are not required to
Keep minutes or hold annual meetings
What does retention of profit mean?
Keep the profit and benefit from increasing value as business grows
A company similar to an S corporation but without the special eligibility requirements is an
LLC
LLC
Limited Liability Company
Advantages of Corporation
Limited liability, ability to raise more money, the attraction of better employees
What is an S corporation
Looks like a corporation but it's taxed like sole proprietor
Advantages of Partnership
More financial resources, shared management and pooled/complementary skills and knowledge, longer survival, no special taxes
cooperative (co-op)
Organized by consumer members. Like a non profit
A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships is
S Corporation
Horizontal Mergers
Same playing field like McDonalds and Burger King
What is a merger
Sort of two firms forming one company
Unlimited liability
The owner is personally and fully responsible for all losses and debts of the business, May have personal possessions at risk
A franchise owner will experience the coattail effect when
a fellow franchisee does something that has an impact on growth and profitability
Conglomerate Merge
a group of diverse companies under common ownership and run as a single organization
A corporation is formally formed with Blank______.
articles of incorporation and bylaws
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
Many minority business owners prefer the _____ form of business ownership because it offers business connections and support.
franchise
An S corporation has the liability protections of a corporation but is taxed
like a partnership or sole proprietorship
Limited Partners
owners who have limited liability and are not active in the company
General Partners
owners who have unlimited liability and are active in managing the company
Why do people incorporate?
special tax advantages and limited liability
Vertical Merger
the combination of two or more firms involved in different stages of producing the same good or service. McDonalds and Beef plant
Disadvantages of Partnership
unlimited liability, division of profits, disagreements among partners, difficulty of termination
Disadvantages of Sole Proprietorship
unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span
