BLAW 3430- Chapter 27

Federal statutes define a(n) _______ as an arrangement of a continuing commercial relationship for the right to operate a business with a particular trade name or sell the seller's branded goods.

franchise

The simplicity of the _______ makes this entity a top choice for start-up businesses with relatively low annual revenues and expenses.

sole proprietorship

_______ have no oversight committees (such as a board of directors), do not require any agreements among principals, and may be converted to another form of entity.

sole proprietorships

Most _______ are relatively small in terms of assets and revenues, and are not restricted in terms of the number of _______ and can operate in as many locations as the principal desires. Multiple select question.

sole proprietorships employees

A franchise agreement that covers _______ rights usually provides the franchisee with an exclusive geographic area.

territory

A franchise agreement generally covers the following: _______.

territory rights term of the agreement franchise fees

If Joan Gates wishes to "do business as" Gates Consulting, she would create a(n) _______ or DBA with a local or state office.

trade name fictitious name

line of credit

Form of commercial loan that allows the borrower to draw against a predetermined credit limit, as needed, instead of receiving the full loan amount at one time.

The _______ is the federal regulatory authority that oversees the regulation of franchisors.

federal trade commission (FTC)

In some states, if Joan Gates does business as "Gates Consulting" she would file for a certificate of _________ with a local or state office.

fictitious name

A(n) _______ should be thought of as a method of conducting business that centers on a contractual relationship rather than as a business entity.

franchise

collateral

The assets a borrower has pledged to secure a loan.

successor liability

Doctrine that allows a creditor to seek recovery from the purchaser of assets even when the purchaser did not expressly assume such liabilities as part of the purchase.

Sole proprietorships are limited in their options for raising money. These options include which of the following?

Financing using the proprietor's personal resources Financing the business through debt

commercial loan

Money loaned by a commercial source (e.g., a bank) whereby the debtor agrees to pay back the loan over a certain period of time at a certain rate.

private loan

Money loaned by a private source (e.g., an individual) whereby the debtor agrees to pay back the loan over a certain period of time at a certain rate.

trade name

Name used by a sole proprietor for a business instead of the proprietor's actual name.

sole proprietorship

One-person business entity with minimal filing requirements. One-person entity in which the debts and liabilities of the business are also personal debts and liabilities of the principal.

principals

Owners of a business entity.

A sole proprietorship is terminated either by _______ or by _______ in the case of the death or personal bankruptcy of the proprietor.

an express act of principals operation of law

When choosing a business entity, principals should consider the following factors: _______

ease of formation taxation liability

A proprietors ownership interest in a sole proprietorship _______ to her heirs through a gift or an estate.

cannot pass

A(n) _______ loan is usually collateralized by an asset of equivalent value typically consisting of the proprietor's personal assets to get a lower interest rate. Multiple choice question.

commercial

Sole proprietors may raise money through _______ loans which is a more formal process from a lender such as a bank.

commercial

A sole proprietorship is generally not subject to _______ income taxation, and no tax return is filed on behalf of the business.

corporate

The Federal Trade Commission regulations focus on mandatory _______ regarding the financial condition of the franchise, success rates, and other important information used by potential franchisees faced with making the decision to invest in the franchise.

disclosures

A franchise involves the two parties: the _________ who is a business entity that has a proven track record of success, who sells to a(n) _______ the right to operate the business and use the business's trade secrets, trademarks, and products. Multiple choice question.

franchisor, franchisee

The principal of a sole proprietorship reports business income and expenses on her own _______ and pays taxes on business income (or deducts business losses) based on the applicable _______.

individual tax return, individual tax rate

A close cousin to a commercial loan is a commercial ______ which allows a proprietor to draw against a predetermined credit limit.

line of credit

When choosing a business entity, principals should carefully consider the extent of _______ for debts and contracts.

personal liability

Each form of business entity has its attendant advantages, drawbacks, and legal consequences for the owners, known as _______, of the business

principals

In the context of business entities, ________ is a generic word for individuals who are entitled to the profits of a business based on their percentage of ownership.

principals

_______ loans are typically through individuals who negotiate such items as interest rate directly with the proprietor.

private

The best choice of business entity is driven primarily by the following factors: _______

risk tax operational objectives

The biggest advantage of a(n) _______, which is typically secured by collateral, is that the borrower only pays interest on the funds actually drawn instead of the full amount of a loan.

secured line of credit

Businesses that are _______ and have a relatively low potential for liability usually do not require the protection and flexibility offered by more complex forms of business entities.

self-funded

Most states recognize at least _______ forms of business entities.

six

In a sole proprietorship, all debts and liabilities of the business are also personal debts and liabilities of the __________

sole proprietor principal owner

The chief drawback to the _______ as a form of entity is the owner's complete lack of protection for unpaid debts and liabilities of the business. Multiple choice question.

sole proprietorship

The easiest single-person ownership entity to form and maintain is a(n) _______.

sole proprietorship