Business Ch 6

franchisee

the party in a franchise relationship that pays for the right to use resources supplied by the franchisor

franchise

a licensing arrangement under which a franchisor allows franchisees to use its name, trademark, products, business methods and other property in exchange for monetary payments and other considerations

genera partnership

a partnership in which al partners can take an active role in managing the business and having unlimited liability for any claims against the firm

divestiture

the transfer of total or partial ownership of some of a firm's operations to investors or to another company

acquisitions

a corporate restructuring in which one firm buys another

S corporation

a form of corporation that avoids double taxation by having its income taxed as if it were a partnership

limited liability

When owners are not personally liable for claims against their firm. Owners with limited liability may lose their investment in the company, but their other personal assets are protected.

business format franchise

a broad franchise agreement in which the franchisee pays for the right to use the name, trademark and business and production methods of the franchisor

vertical merger

a combination of firms at different stages in the production of a good or service

conglomerate merger

a combination of two firms that are in different industries

horizontal merger

a combination of two firms that are in the same industry

merger

a corporate restructuring that occurs when two formerly independent business entities combine to form a new organization

nonprofit corporation

a corporation that does not seek to earn a profit and differs in several fundamental respects from C corporations

corporation

a form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners

limited liability company (LLC)

a form of business ownership that offers both limited liability to its owners and flexible tax treatment

sole proprietorship

a form of business ownership with a single owner who usually actively manages the company

limited liability partnership (LLP)

a form of partnership in which all partners have the right to participate in management and have limited liability for company debts

limited partnership

a partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability

distributorship

a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it

partnership

a voluntary agreement in which two or more people act as co-owners of a business for profit

Advantages of general partnerships

ability to pool resources, ability to share responsibilities and capitalize on complementary skills, ease of formation, possible tax advantages

institutional investor

an investor that pools contributions from investors, clients or depositors and uses these funds to buy stocks and other securities

stockholder

an owner of a corporation

corporate bylaws

basic rules governing how a corporation is organized and how it conducts its business

statutory close corporation (or closed)

corporation with a limited number of owners that operates under simpler, less formal rules than a C corporation

Disadvantages of franchising

costs, lack of control, negative halo effect, growth challenges, restrictions on sale, poor execution

Advantages of sole proprietorships

ease of formation, retention of control, pride of ownership, retention of profits, possible tax advantage

Disadvantages of C corporations

expense and complexity of formation and operation, complications when operating in more than one state, double taxation of earnings and additional taxes, more paperwork, more regulation, more secrecy, possible conflicts of interest

Advantages of franchising

less risk, training and support, brand recognition, easier access to funding

Disadvantages of sole proprietorships

limited financial resources, unlimited liability, limited liability to attract and maintain talented employees, heavy workload and responsibilities, lack of performance

Advantages of C corporations

limited liability, permanence, ease of transfer of ownership, ability to raise large amounts of financial capital, ability to make use of specialized management

franchisor

the business entity in a franchise relationship that allows others to operate its business using resources it supplies in exchange for money and other considerations

articles of cooperation

the document filed with a state government to establish the existence of a new corporation

board of directors

the individuals who are elected by stockholders of a corporation to represent their interest

C corporation

the most common type of corporation, which is a legal business entity that offers limited liability to all of its owners who are called stockholders

Disadvantages of general partnerships

unlimited liability, potential for disagreements, lack of continuity, difficulty in withdrawing from a partnership