ch. 4
Sole Proprietorship
- one owner - individual income tax - unlimited liability - easiest way to make a business, only one person
A(n) ______ is where one company purchases the property and obligations of another. buyout acquisition vertical merger horizontal merger
acquisition
What is required to start a partnership? Statement of intent Articles of partnership Master partnership agreement Corporate charter
Articles of partnership
Which legal document sets forth the basic agreement between partners? Partnership association Partnership bylaws Operations manual Articles of partnership
Articles of partnership
_____ are legally liable for the mismanagement of the firm or for any misuse of funds. Stakeholders Investors Employees Shareholders Board members
Board members
Based on the information in the articles of incorporation, the state issues a __________ to the company.
Corporate charter
Select the three items that are usually listed in the articles of partnership. How profits will be distributed Each partner's typical domestic spending Authority and responsibility of each partner Contribution (money or assets) of each partner The value of each partner's retirement accounts
How profits will be distributed Authority and responsibility of each partner Contribution (money or assets) of each partner
The purchase of one company by another, usually by buying its stock, is a(n) __________
acquistion
A key disadvantage of the partnership form of business is ______. additional regulations additional tax liability friction between partners extensive paperwork
friction between partners
Owners in an LLC have ______ liability. unlimited limited
limited
____________ do not pay taxes when submitting the organization's tax return to the Internal Revenue Service; the tax return simply provides information about the profitability of the organization and the distribution of profits.
partnerships
____________do not pay taxes when submitting the organization's tax return to the Internal Revenue Service; the tax return simply provides information about the profitability of the organization and the distribution of profits.
Partnerships
A _____ is/are elected by the stockholders to oversee the general operation of the corporation and set its long-range objectives. board of directors chief financial officer chief executive officer firm's managers
board of directors
In a leveraged buyout, employees, managers, or investors finance the purchase of the company by ______. borrowing against its assets selling commodities selling equity using cash
borrowing against its assets
A merger of two firms that sell similar products to the same customers is a(n) ______. horizontal merger vertical merger acquisition conglomerate merger
horizontal merger
One advantage of a partnership is that ______. it is easy to create it has perpetual life there are no taxes there is unlimited liability
it is easy to create
____________ liability means that the owners of the business are responsible for its losses only up to the amount they invest.
limited
Select the two main types of partnerships. complex limited corporate subsidiary general
limited general
The result of two firms (usually corporations) combining to form one company is called a _________
merger
A limited liability company is taxed like a __________
partnership
In a sole proprietorship, any debts or damages incurred by the business that cannot be paid by the business are your personal debts and you must pay them. This disadvantage is known as ______.
unlimited liability
As a sole proprietor, Ellie enjoys many advantages. Which of the following is NOT one of them? Ease and cost of formation Limited government regulation unlimited liability Owner gets to keep the profits
unlimited liability b/c it is a disadvantage
The joining of two companies involved in different but related levels of an industry is called a(n) ___________ merger
vertical
Funds available for a sole proprietorship are limited to ______. the stock value of the firm the partners' combined funds the corporate assets what the owner can provide
what the owner can provide
In a partnership, the liability of limited partners is limited to their ______. personal portfolio initial investment personal income expenses
initial investment
It is easy to start a sole proprietorship because ______. a. the only requirement is the disclosure of the business' financial statements b. your partners do not vote or have limited voting. c. you do not have to adhere to any government regulations d. it may only require a simple permit or license to start
it may only require a simple permit or license to start
A partnership established for a specific project or for a limited time is called ______. limited liability company cooperative joint venture general partnership
joint venture
A(n) ______ is an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing. vertical merger poison pill horizontal merger leveraged buyout
leveraged buyout
As an entity, cooperatives are not set up to make ________
profits
Which form of business allows for the greatest degree of secrecy? Partnership Corporation Sole proprietorship Limited Liability Corporation
Sole proprietorship
A state chartered legal entity with authority to act and have liability separate from its owners is a ______. sole proprietorship general partnership corporation stakeholder
corporation
LLCs are flexible, simple to run, and do not require the members to hold meetings, keep minutes, or make resolutions, all of which are necessary in ____________.
corporations
partnership
- 2 or more people - individual owner's income taxed - quasi-taxable - somewhat limited liability - easy way for two people to conduct business
corporation
- any number of shareholders are the owners - corporate and shareholder taxed (double taxation) - limited liability - legal entity with shareholders or stockholders
S corporation
- can be owned by up to 100 shareholders - taxed as a partnership - limited liability - a legal entity with tax advantages for restricted number of shareholders
Limited liability Company (LLC)
- unlimited number of shareholders - taxed as a partnership - limited liability - can avoid personal lawsuits
Which of the following is considered an advantage of corporations? Ease of transfer of ownership Double taxation many employees are not stockholders of the company for which they work Corporations must make information available to their owners
Ease of transfer of ownership
Which of the following is a disadvantage of the partnership form of business? Perpetual life of the partnership Friction between general and limited partners Vast amount of regulatory controls Equal division of profits
Friction between general and limited partners
Select from the following three resources available to a sole proprietor to obtain funds. Selling bonds to investors Selling stock to investors The business owner's own personal funds Loans from a bank Money from friends and family
The business owner's own personal funds Loans from a bank Money from friends and family
Which of the following is TRUE of S corporations? They are taxed like a partnership. They do not have perpetual life. Their owners have unlimited liability. They have both individual and corporate tax liabilities.
They are taxed like a partnership.
If a chemical company merged with a textile manufacturer, it would be an example of a ______. negative merger conglomerate merger horizontal merger vertical merger
conglomerate merger
When producers, consumers, or workers with similar needs pool their resources for mutual gain, they start a(n) ______. franchise agency cooperative sole proprietorship
cooperative
A legal document that the state issues to a company based on information the company provides in the articles of incorporation is called a ______. corporate charter stock certificate corporate deed dividend certificate
corporate charter
The partnership business entity is not taxed, because each partner pays tax on the business's profits as their ______. dividends personal income personal deductions capital gains
personal income
This is a special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.
preferred
A __________ corporation is owned by just one or a few people who are closely involved in managing the business.
private
A(n) ______ is owned by just one or a few people who are closely involved in managing the business. public corporation private corporation limited corporation S corporation
private corporation
As an entity, cooperatives are not set up to make __________
profits
A ___________ corporation is one whose stock anyone may buy, sell, or trade.
public
An advantage of a sole proprietorship is that the owner ______. retains all profits has no taxable profits divides profits distributes profits to shareholders
retains all profits
Joyce works on a contract basis helping firms inventory their warehouse stock. She is not an employee of any of the companies for which she works. Joyce is a(n) Multiple Choice general partner. cooperator. corporate liaison. limited partner. sole proprietor.
sole proprietor.
In a sole proprietorship, the possibility that competitors can obtain trade secrets is minimized because _______. a. the sole proprietor does not have to discuss publicly his or her operating plans b. the fee to view the financial reports of a sole proprietor are costly c. government regulations prevent other companies from gathering competitor information d. the sole proprietor is the only employee of the business
the sole proprietor does not have to discuss publicly his or her operating plans