Business Ch. 5

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Franchisee

A person who buys a franchise

Corporation

A state-charted legal entity with the authority to act and have liability separate from its owners. Stockholders by stock

A partnership _____ can out the requirements of terminating a partnership

Agreement

General Partnership

All owners are general

Limited Partnership

At least one owner is not general

Franchise

Buys the rights to use the business name and to sell its goods/services

Limited Liability

Corporate owners (stockholders) and limited partners are responsible for losses only up to the amount of money they invested. Personal possessions are not at risk

What is the major challenge for global franchises

Difficult to transfer an idea or product Will the United States to another culture

What are the advantages of a sole proprietorship?

Ease of starting and ending, own boss, pride, retention of profit, no special taxes

Disadvantages of Corporation

Initial cost, extensive paperwork, double taxation, hard to stop possible conflict between stockholders and board of directors

Vertical Merger

Joins two companies involved in different but related levels of an industry

LLC's are considered to have operational flexibility because while they must submit articles of organization, they are not required to

Keep minutes or hold annual meetings

What does retention of profit mean?

Keep the profit and benefit from increasing value as business grows

A company similar to an S corporation but without the special eligibility requirements is an

LLC

LLC

Limited Liability Company

Advantages of Corporation

Limited liability, ability to raise more money, the attraction of better employees

What is an S corporation

Looks like a corporation but it's taxed like sole proprietor

Advantages of Partnership

More financial resources, shared management and pooled/complementary skills and knowledge, longer survival, no special taxes

cooperative (co-op)

Organized by consumer members. Like a non profit

A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships is

S Corporation

Horizontal Mergers

Same playing field like McDonalds and Burger King

What is a merger

Sort of two firms forming one company

Unlimited liability

The owner is personally and fully responsible for all losses and debts of the business, May have personal possessions at risk

A franchise owner will experience the coattail effect when

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

Conglomerate Merge

a group of diverse companies under common ownership and run as a single organization

A corporation is formally formed with Blank______.

articles of incorporation and bylaws

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

Many minority business owners prefer the _____ form of business ownership because it offers business connections and support.

franchise

An S corporation has the liability protections of a corporation but is taxed

like a partnership or sole proprietorship

Limited Partners

owners who have limited liability and are not active in the company

General Partners

owners who have unlimited liability and are active in managing the company

Why do people incorporate?

special tax advantages and limited liability

Vertical Merger

the combination of two or more firms involved in different stages of producing the same good or service. McDonalds and Beef plant

Disadvantages of Partnership

unlimited liability, division of profits, disagreements among partners, difficulty of termination

Disadvantages of Sole Proprietorship

unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span


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