Intro-Into-Business: Ch. 5 Learn Smart: Practice

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 hierarchy. 1. Managers hire employees 2. Board of Directors hire officers of the corporation 3. Officers hire managers of the corporation 4. Owners/stockholders elect board of directors

4. Owners/stockholders elect board of directors 2. Board of Directors hire officers of the corporation 3. Officers hire managers of the corporation 1. Managers hire employees

Termination of a partnership is difficult without a(n) __________ agreement. __________ A. corporate B. tax C. employment D. partnership

D. partnership

T/F: If you and a friend start a business together, you have started a sole proprietorship.

False

T/F: In a limited partnership, the liability of the limited partners is unlimited and personal assets are at risk.

False

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

boss

If a software company and a snack food company merged, it would be called a(n) __________ merger.

conglomerate

A major factor to consider in forming a partnership is the ability of partners to provide additional __________ resources.

financial

Long hours and a feeling of isolation are two disadvantages of __________-__________ franchises.

home-based

The joining of two films in the same industry is a(n) __________ merger.

horizontal

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

legacy

A __________ __________ can be initiated by employees, managers, or investors who borrow necessary funds to purchase all shares of a firm's stock.

leveraged buyout

Although members may choose to reconstitute an LLC after it dissolves, limited ___________ __________ is considered a disadvantage of this form of business.

life span

Bob and Dan are doctors in a medical practice. Dan is being sued for malpractice, but it will not affect Bob's assets because they formed a(n) __________ __________ partnership.

limited liability

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

merger

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

partnership

Ease of formation is an advantage of a(n) __________ __________.

sole porprietorship

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

The responsibility of the owner of a sole proprietorship for all the debts of the business is __________ liability

unlimited

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

vertical

Rank the forms of business ownership based on ease of starting. Put the easiest form at the top. __________ 1. Sole proprietorship 2. Corporation 3. Partnership

1. Sole proprietorship 3. Partnership 2. Corporation

What are some of the disadvantages of operating a franchise? __________ A. Management regulation B. Recognized name C. Shared profit D. Large start-up costs

A. Management regulation and C. Shared profit and D. Large start-up costs

The owner of a sole proprietorship must pay which of these taxes? __________ A. Social Security and Medicare B. Estimated income tax payments C. Personal income tax D. Life insurance coverage

A. Social Security and Medicare and B. Estimated income tax payments and C. Personal income tax

One company's purchase of the property and obligations of another is called a(n) __________ A. acquisition B. merger C. LLC D. partnership

A. acquisition

Which are considered disadvantages of incorporating? A. Limited Liability B. Double Taxation C. Initial Cost D. Extensive paperwork

B. Double Taxation and C. Initial Cost and D. Extensive paperwork

A corporation is defined as: __________ A. an unchartered entity with authority to act directly with its owners B. a chartered legal entity with authority to act apart from its owners C. an unchartered entity with authority to act apart from its owners D. a chartered legal entity with authority to act directly with its owners

B. a chartered legal entity with authority to act apart from its owners

LLCs do have to submit articles of organization and an operating agreement, but do not have to: __________ A. pay self-employment taxes B. hold annual meetings C. keep minutes D. file written resolutions

B. hold annual meetings and C. keep minutes and D. file written resolutions

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

C. general partnership

A disadvantage of buying a franchisee is: __________ A. immediate strong name recognition B. lower failure rates C. marketing assistance D. paying a share of profits as royalties

D. paying a share of profits as royalties

If you start and manage a landscaping business on your own, you have likely started a: __________ A. partnership B. corporation C. franchise D. sole proprietorship

D. sole proprietorship

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 __________ A. changes to the franchise agreement B. reinforcement of the franchise agreement C. unlimited liability D. the coattail effect

D. the coattail effect

The __________ cost of incorporating can be expensive because of the need for accountants and lawyers to get started.

initial

When the corporation pays a tax on its profits and individual stockholders each pay tax on dividends distributed by the corporation, it is called: __________ A. double taxation B. return taxes C. a stock option D. splitting the stock

A. double taxation

A sole proprietorship has a limited life span unless: __________ A. it is taken over by an heir B. one of the partners buys remaining shares C. it is sold to someone else D. there is a leveraged buyout

A. it is taken over by an heir and C. it is sold to someone else

Select the attributes of a corporation. __________ A. liability separate from owners B. state chartered C. unlimited liability D. legal entity

A. liability separate from owners and B. state chartered and D. legal entity

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

A. like a partnership or sole proprietorship

Ed has decided to purchase and follow a business format by becoming a franchise. The ___________ ___________ he will sign gives him the right to use the business name and sell the products of the firm.

franchise agreement

Among the reasons that disagreements can ruin a partnership are: __________ A. disagreement over workload B. the ability to borrow more money C. opposing management styles D. arguing over profits

A. disagreement over workload and C. opposing management styles and D. arguing over profits

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. paid sick or vacation leave time B. paid health insurance C. a pension plan D. freedom to make your own hours

A. paid sick or vacation leave time and B. paid health insurance and C. a pension plan

Advantages of home-based work include: __________ A. relief from commuting stress B. shorter work hours C. less feeling of isolation from the company D. low overhead expenses

A. relief from commuting stress and D. low overhead expenses

Ending a partnership can be difficult because of problems deciding: __________ A. the worth of a retiring partner's share B. when a partner can retire C. whether to pay the taxes D. how to distribute assets

A. the worth of a retiring partner's share and B. when a partner can retire and D. how to distribute assets

When there is one or more general partners and one or more limited partners, the firm is a(n): __________ A. general partnership B. limited partnership C. master limited partnership D. unlimited partnership

B. limited partnership

Select the disadvantages of a sole proprietorship: __________ A. unlimited growth B. management difficulties C. unlimited liability D. limited financial resources

B. management difficulties and C. unlimited liability and D. limited financial resources

Home-based franchises have many advantages such as: __________ A. ease of obtaining financing B. relief from the stress of commuting C. feeling more isolated D. low overhead expenses

B. relief from the stress of commuting and D. low overhead expenses

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: __________ A. responsibility B. taxation C. limited liability D. unlimited liability

D. unlimited liability