Chapter 4

What is a sole proprietorship?

A business that is owned (and usually operated) by one person

________ are formed by two or more groups or businesses to form a business entity to achieve a specific goal or to operate for a specific period of time

Joint ventures

A disadvantage of a partnership where remaining partners are unwilling to buy the share of a partner who retires can be referred to as _______

a frozen investment

There are many kinds of partnerships. Which of the following best describes a general partnership?

a general partnership is a partnership in which the partners have full or shared responsibility for operating the business

The primary difference between a limited-liability partnership (LLP) and limited partnership is

a limited partnership must have at least one general partner that has unlimited liability

Under the US Uniform Partnership Act a partnership is defined as

a voluntary association of two or more persons to act as co-owners of a business for profit

There are many disadvantages to forming a sole proprietorship, such as lack of continuity and difficulty raising capital. Which of the following is not an advantage of forming a business as a sole proprietorship?

ability to pay all taxes

When are joint ventures and syndicates dissolved?

as soon as their purposes have been achieved

According to the textbook, a partnership usually has more capital available than a sole proprietorship because partners can pool their funds. This additional capital, in addition to the general partners' unlimited liability and partners working together in management skills, may encourage _________ to extend more credit or approve larger loans to a partnership than to a sole proprietor

banks and suppliers

One of the benefits of being a sole proprietorship is _________, which is evidenced by a sole proprietor being completely free to make decisions about the firm's operations, location, expansion plans, business hours, and other details

being your own boss

Project Repat is classified as a(n) ________ because only a few people own shares of its stock

closed corporation

A(n) _______ corporation is a corporation whose stock is owned by relatively few people and is not sold to the general public; while, a(n) ________ corporation is one whose stock can be bought and sold by any individual

closed; open

Partnerships operate as both an entity and as a collection of individuals. When it comes to taxes, partnerships are a(n) _______ and _______

collection of individuals; pay no income tax

The joining of firms in completely unrelated industries is a(n) ________

conglomerate merger

Which of the following is a legal document that the state issues to a company based on information the company provides in the articles of incorporation?

corporate charter

A corporation can elect to change its tax status to an S corporation. Which of the following is an advantage of electing S corporation status?

double taxation is eliminated as profits and losses pass directly to stockholders through the business and are reported on the owners' personal income tax returns

There are many ways in which corporations can merge. Which of the following describes a vertical merger?

firms that operate at different but related levels in the production and marketing of a product join together

A _______ partner has responsibility or liability for losses beyond their investment, but a _______ partner only has liability for the amount they invest

general; limited

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

horizontal merger

If Project Repat were to acquire another firm that makes or sells similar products in similar markets, it would be an example of a

horizontal merger

When the management and board of directors of a firm targeted for acquisition disapprove of a merger, this is known as a:

hostile takeover

A non-for-profit corporation

is organized for charitable purposes

A partnership established for a specific project or for a limited time (for example a US company joining with a foreign firm to enter new markets) is called a(n):

joint venture

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

lawyers and accountants are needed to do the complex filings

For a firm like Project Repat, one of the advantages of incorporation is

limited liability

Which of the following is an advantage of corporations?

limited liability

Which form of business ownership provides limited liability, as in a corporation, but is taxed like a partnership and is not restricted on the number of allowed stockholders?

limited-liability company

Which type of corporation focuses on providing a service rather than earning a profit, but is not owned by a government entity?

not-for-profit corporation

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

partnership

Which of the following is an advantage of partnerships?

pooled financial resources

Which of the following is a special type of stock whose owners cannot vote regarding the running of the company, yet have a priority claims to profits?

preferred

There are many advantages to conducting business as a corporation. Which of the following is not an advantage of conducting business as a corporation?

pressure to improve

Which of the following is an advantage of a sole proprietorship?

retention of all profits

Partnerships have both advantages and disadvantages, which of the following was not a disadvantage or advantage addressed by the authors?

retention of profits, but when the partnership retains profits, the partners are still taxed on this money

The owner of a corporation is known as the _______

stockholders

Two or more businesses or individuals may join together temporarily for many business reasons including to perform a specific task. If they join together to raise a large amount of capital for that specific task, what type of organization have they created?

syndicate

What association might be formed because no one person or firm is willing to put up the entire amount required for the undertaking of a project; for example, to underwrite a large insurance policy or investment?

syndicate

There are many disadvantages to creating a corporation and conducting business as a corporation. One of the disadvantages is double taxation. Which of the following best describes what is meant by double taxation?

taxation on profits when they are earned and taxation again as personal income of stockholders

One of the big differences between corporations and S corporations is how profits are:

taxed

Each corporate stockholder's financial liability is typically limited to

the money he or she paid for the corporation's stock

A corporation is an artificial person created by law, with most of the legal rights of a real person. Which of the following is not a legal right held by a corporation?

the right to total privacy

Which of the following is NOT usually stated in the articles of partnership?

the value of each partner's retirement accounts

Many parties take part in the operation of a corporation. Which of the following describes the duties of corporate officers?

they help make plans, carry out strategies, hire employees, and manage day-to-day business activities

A key disadvantage of a general partnership is:

unlimited liability

________ is a legal concept that holds a business owner personally responsible for all the debts of the business

unlimited liability

Mergers and acquisitions have existed for a very long time; however, the reasons behind mergers and acquisitions has changed. Historically mergers and acquisitions

were made by companies desiring to expand their business by using the processes of the acquired companies to improve the acquiring company

Project Repat has a corporate charter. Which of the following would NOT likely be found in a corporate charter?

what each partners' duties will be