Chapter 4 SmartBook

A form of business ownership that provides limited liability, as in a corporation, but is taxed like a partnership is a(n) ________ ________ company.

limited (or s) liability (or corporation)

Which are considered disadvantages of incorporating? Extensive paperwork Double Taxation Initial Cost Limited Liability

Extensive paperwork Double Taxation Initial Cost

True or false: If producers, consumers, or workers with similar needs pool their resources for mutual gain, they have created a franchise.

False

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 process is very inexpensive in all states The filing process for the articles of incorporation are very consistent from state to state The articles of incorporation are usually filed in the state in which the company will be incorporated

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

A franchise owner will experience the coattail effect when ______. management assistance becomes a burden to the franchise owners a fellow franchisee buys out another franchise a fellow franchisee does something that has an impact on growth and profitability they are required to pay a large share of their profits as a royalty

a fellow franchisee does something that has an impact on growth and profitability

A vertical merger refers to Blank______. a merger between firms operating at different stages of related businesses a merger between firms in the same industry a merger between firms in different industries

a merger between firms operating at different stages of related businesses

A(n) ______ is where one company purchases the property and obligations of another. vertical merger acquisition horizontal merger buyout

acquisition

Many people do not like working for someone, so being your own ________ is an advantage of sole proprietorships.

boss

Many minority business owners prefer the _____ form of business ownership because it offers business connections and support. franchise merger sole proprietorship acquisition

franchise

Low overhead costs are an advantage of which type of business? home-bases businesses sole proprietor retail store restaurant franchises large corporations

home-bases businesses

Which are attributes of a conventional corporation? (Check all that apply) it is a legal entity. It has unlimited liability. Corporate liability is separate from owners. it is state chartered.

it is a legal entity. Corporate liability is separate from owners. it is state chartered.

Don wanted to incorporate his business and liked the attributes of an S-corporation, however, he did not feel the eligibility requirements would work for his purposes. He is likely to choose to form a(n) _________ _________ company.

limited liability

Home-based franchises have many advantages, such as: feeling more isolated ease of obtaining financing low overhead expenses relief from the stress of commuting

low overhead expenses relief from the stress of commuting

The result of two firms (usually corporations) combining to form one company is called a ________.

merger

An LLC submits a written operating agreement, similar to a(n) _______ agreement, describing how the company is to be operated.

partnership

Termination of a partnership is difficult without a(n) ______ agreement. corporate tax employment partnership

partnership

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 mandates a constitution a charter

bylaws

What two items are delineated in a franchise agreement? the right to sell a business' products in a given territory the right to use a specific business' name the royalty fee to be paid for each item sold the right to place one's logo on another business' product

the right to sell a business' products in a given territory the right to use a specific business' name

Many franchises are expanding internationally because ______. Cultural barriers are not significant it is expensive to adapt products there are large new markets available there is much more competition

there are large new markets available

Which country is the most popular target for U.S.-based franchises to enter the global market? Mexico Japan China Canada

Canada

What are two of the disadvantages of a corporation? Limited financing Cost of forming a corporation Double taxation Limited life

Cost of forming a corporation Double taxation

True or false: If you and a friend start a business together, you have started a sole proprietorship.

False

True or false: Partnerships are less likely to survive than sole proprietorships.

False

What are three advantages of franchising? Financial advice Large up-front costs Lower failure rate Shared profits Recognized name

Financial advice Lower failure rate Recognized name

True or false: The main advantage of a sole proprietorship is ease of start up.

True

Because of the difficulty in ending a partnership, decisions regarding which two areas should be spelled out in a partnership agreement? When a partner can retire How to distribute assets Whether to pay the taxes The marketing plan

When a partner can retire How to distribute assets

One company's purchase of the property and obligations of another is called a(n) ______. acquisition merger LLC partnership

acquisition

What two features characterize a general partnership? it looks like a corporation in that it is traded on the stock exchanges all partners assume liability for the business's debts all partners share the responsibility for operating the business the partners' risk of losing their personal assets is in relation to their own negligence.

all partners assume liability for the business's debts all partners share the responsibility for operating the business

A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships is ______. a sole proprietorship an S corporation an unlimited liability company a partnership

an S corporation

An advantage of the separation of ownership from management in corporations is that the company can raise money from investors but the investors ______. do not usually receive stock are not involved in daily operations control daily operations of the board must receive dividends

are not involved in daily operations

A business owned and controlled through pooled resources by the people who use it is a(n) ______. S corporation cooperative limited liability company limited partnership

cooperative

A state-chartered legal entity with authority to act and have liability separate from its owners is a ______. corporation stakeholder sole proprietorship general partnership

corporation

An agreement that gives a business the right to use a business's name and sell a product or service in a given area is a(n) ______. franchise merger acquisition limited partnership

franchise

Financial advice and a nationally recognized name are both benefits of owning a(n) _______.

franchise

Many minority business owners prefer the ______ form of business ownership because it offers business connections and support. acquisition sole proprietorship franchise merger

franchise

An advantage of starting an online franchise is that: franchisees pay only a set monthly fee no upfront fee may be required online franchisees can compete in world markets online franchisees pay large startup fees and royalties to do business

franchisees pay only a set monthly fee no upfront fee may be required online franchisees can compete in world markets

A partnership where all owners share in operating the business and in assuming unlimited liability for the business's debts is a ______. general partnership limited partnership master limited partnership cooperative

general partnership

LLC's are considered to have operational flexibility because while they must submit articles of organization, they are not required to _____. provide employee benefits or pay taxes distribute profits or keep meeting minutes keep minutes or hold annual meetings pay taxes or hold annual meetings

keep minutes or hold annual meetings

An S corporation has the liability protections of a corporation but is taxed ______. twice as if it were a corporation like a partnership or sole proprietorship at corporate rates for each year

like a partnership or sole proprietorship

When two firms join together to form one new company, it is called a _______.

merger

legal form of business with two or more owners is a(n) ______. estate multiple proprietorship sole proprietorship partnership

partnership

Unlimited liability as it relates to sole proprietorships is the risk of loss of _________ assets beyond the assets of the business.

personal

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

Gathering leads on a company website, selling products and keeping up to date on news via email, and chat rooms all serve as examples of using ________ to assist franchisees and customers.

technology

Because of the poor publicity at a fellow franchise location, you notice that sales at your location have decreased. The impact of the poor publicity on your company is referred to as unlimited liability the coattail effect changes to the franchise agreement reinforcement of the franchise agreement

the coattail effect

One of the most notable advantages of an online franchise is that: franchisees have exclusive territories there is no monthly fee. there is a lot of training that is specific to the business. there is no brick-and-mortar real estate cost.

there is no brick-and-mortar real estate cost.

One of the most notable advantages of an online franchise is that: there is a lot of training that is specific to the business. franchisees have exclusive territories there is no brick-and-mortar real estate cost. there is no monthly fee.

there is no brick-and-mortar real estate cost.

What are two reasons that franchises are attractive to minority populations? they provide personal ownership of a business they have a higher failure rate they are often unknown beyond a local area some offer financial support to aspiring business owners

they provide personal ownership of a business some offer financial support to aspiring business owners

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 ______. responsibility limited liability taxation unlimited liability

unlimited liability

A merger between a soft drink company and an artificial sweetener maker could be considered a(n) ______ merger.

vertical

Many brick and mortar franchisees are using ______ to expand their businesses online to lower costs and better meet the needs of their customers. (Check all that apply) websites personal sales mall kiosks technology

websites technology