Chapter 3 &4 Business

franchise

The right to sell a good or service within an exclusive market

Select all attributes that make the initial cost of incorporating a disadvantage.

-High start-up costs associated with documentation -The high cost of hiring lawyers and accountants for the complex filings needed

cooperative

A business that is owned by the members it serves and is managed in their interest.

Sole proprietorship

A business that is owned, and usually managed, by one person.

corporation

A legal entity with authority to act and have liability separate from its owners.

partnership

A legal form of business with two or more owners.

franchisee

A person who buys a franchise

No special taxes

A sole proprietorship are taxed as the personal income.An result sole proprietors must report certain financial information on their personal income tax returns and make estimated quarterly tax payments to the federal government.A sole proprietorship does not pay the special state and federal income taxes that corporations pay.

General Partnership

All owners share in operating the business and in assuming liability for the business's debts.

leverage buyout (LBO)

An attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing.

merger

Combination of two or more companies into a single firm

What are some of the disadvantages of a corporation?

Cost of forming a corporation Double taxation

Limited life span

If the sole proprietor dies, is incapacitated, or retires, the business no longer exists (unless it is sold or taken over by the sole proprietor's heirs).

Which are considered disadvantages of incorporating?

Initial Cost Extensive paperwork Double Taxation

What are some of the advantages of a corporation? Multiple select question.

Limited liability Ability to raise more money for investment

Pride of Ownership

Many homeowners see the home as a sign of accomplishment

Difficult of termination

Once you have committed yourself to a partnership, it is out easy to get out.

Leaving a legacy

Owners can leave an ongoing business for future generations.

Retention of company profits

Owners not only keep the profits earned but also benefit from the increasing value as the business grows.

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

Owners/stockholders elect board of directors Board of directors hire officers of the corporation Officers hire managers of the corporation Managers hire employees.

longer survival

Partnerships are more likely to succeed than sole proprietorships because being watched by a partner can help a businessperson become more disciplined.

Which of the following are true regarding the process of forming a corporation.

The bylaws of the corporation describe how the firm is to be operated The articles of incorporation must be filed in the state in which the company will be incorporated

Unlimited liability

The owner is personally and fully responsible for all losses and debts of the business

Because owners are only responsible for losses up to the amount they have invested in a corporation, limited liability is considered:

a major advantage

Conventional (C) Corporation

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

franchise agreement

an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory

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

A corporation is formally formed with:

article's of incorporation and bylaws

Ease of starting and ending a business

buy or lease the equipment, put up announcements saying you are in business. You may have to get a permit for the government. To get out you simply just stop.

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

limited liabillity

form of business, ownership in which the owners are liable only up to the amount of their individual investmenets.

If you are your own boss, you are responsible for paying your own wages/salary and for your own

fringe benefits

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

general partnership

Being your own boss

if you are your own boss, you work for yourself

The cost of incorporating can be expensive because of the need for accountants and lawyers.

initial

An entrepreneur could choose to buy a franchise because: Multiple select question.

it is less stressful than starting a business from scratch it's a business brand with a proven track record it can be started as a sole proprietorship, partnership, or corporation

The attributes of a conventional corporation include that:

it is state chartered corporate liability is separate from owners it is a legal entity

A sole proprietorship has a limited life span unless:

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

horizontal merger

joins two firms in the same industry and allows them to diversify or expand their products

vertical merger

joins two firms operating in different stages of related businesses

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

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

leaving a legacy

Fill in the blank question. Leaving a_________means owners can leave an ongoing business for future generations.

legacy

Aqusition

ones company purchase of the property nd obligations of another company.

A key advantage of a home-based franchise is low fixedBlank ______fixed , Incorrect Unavailable costs, which can be ongoing. These are the costs associated with rent, utilities, and other fixed costs.

overhead

limited partnership

partnership in which only one partner is required to be a general partner

What are three forms of business ownership?

sole proprietorship, partnership, corporation

An advantage of partnerships is a longer rate than sole proprietorships, because they become more disciplined and the business's life is based on all the partners.

survival

limited partnership

the limited partners have limited liability

conglomerate merger

unites firms in completely unrelated industries in order to diversify business operations and investments

In a sole proprietorship, any debts or damages incurred by the business are your personal debts and you must pay them. This disadvantage is known as:

unlimited liability

The disadvantage of sole proprietorships 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

Few fringe benefits

you have no paid health insurance, no paid vacay, no paid sick leave, you lose those benefits.