Chapter 5 How to Form a Business

Select the attributes of a corporation.

State Chartered Liability separate from owners legal entity

A ????? is where one company purchases the property and obligations of another

acquisition

Select the disadvantages of a sole proprietorship

limited financial resources unlimited liability large time commitment

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

merger

The responsibility for a loss only up to the amount invested is________________ liability

limited

True or false: A business can start in one form of ownership, but does not have to stay in that form.

True

When two firms operating in different stages of related businessess join, it is called a ______________ merger.

vertical

Ending a partnership can be difficult because of problems deciding:

when a partner can retire the worth of a retiring partner's share how to distribute assets

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

general partnership

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

horizontal merger

True or False: If you and a friend start a business together you have started a sol proprietorship.

False

Rank the order in which members of a corporation are chosen in order to separate ownership from management. Start at the top of the managerial hierarcy.

Owners/Stockholders elect board of directors Board of directors hire officers of the corporation officers hire managers of the corporation managers hire employees

Of the various forms of business ownership, a ????? is an easy way for two individuals to conduct business

Partnership

When two or more people legally agree to become co owners of a business, the organization is called a

Partnership

Select those items considered fringe benefits that people working for a company are likely to receive, but a sole proprietor has to develop on his own.

a pension plan paid sick or vacation leave time paid health insurance

A legal entity with authority to act and have liability apart from its owners is a

corporation

The right to use a specific business' name and sell its products or services in a given territory is a _____________________ agreement

franchise

LLCs do have to submit articles of organization and an operating agreement, but do not have to:

hold annual meetings keep minutes file written resolutions

A sole proprietorship has a limited life span unless:

it is sold or taken over by the sole proprietor's heirs

When a sole proprietor leaves an ongoing business to future generations, it is said that the owner is leaving a

legacy

A_________________is and attempt by employess, management, or a group of investors to purchase an organization primarily through borrowing.

leveraged buyout (LBO)

When there is one or more general partners and one more limited partners the firm is a

limited partnership

The Limited partners' risk of losing their personal assets in an LLP is:

limited to the amount of their investment

A sole proprietorship is owned by how many people?

one

Amoung the reasons that disagreements can ruin a partner ship are

opposing management styles arguing over profits disagreement over workload

Ease of formation is an advantage of a

sole proprietorship

Studies have indicated that partnerships are four times more likely to succeed than

sole proprietorships

The three major forms of business most common in the United States are

sole proprietorships partnerships corporations