Business Chapter 5 Test Review

Sole Proprietorship

A business that is owned by one person is a(n) ____________________.

Alien Corporation

A corporation incorporated in another country that does business in the United States is called a(n) __________________________

Foreign Corporation

A corporation that has been incorporated in a state other than the one in which it is operating in is known as a(n) _________________________.

Domestic Corporation

A corporation that operates in the state in which it was chartered is considered a ____________________ in that state.

What is a joint venture? Discuss the trend of establishing joint ventures between for-profit companies and not-for-profit organizations. How can this type of joint venture be beneficial? Provide an example.

A joint venture is a partnership between companies formed for a specific undertaking. Sometimes a company enters into a joint venture with a local firm, sharing the operation's costs, risks, management, and profits with its local partner. This is particularly common when a firm wants to enter into business in a foreign market. DreamWorks Animation recently entered a joint venture with three Chinese firms. The four companies will invest $330 million in a new company, Oriental DreamWorks. Based in Shanghai, the new venture will specialize in family films.67 Joint ventures between for-profit firms and not-for-profit organizations are becoming more and more common. These partnerships provide great benefits for both parties. Not-for-profit organizations receive the funding, marketing exposure, and sometimes manpower they might not otherwise generate. City Year, mentioned earlier, enjoys these benefits from partnerships with Timberland, Pepsi, and Comcast along with other firms such as Starbucks and Sears. Recently, Starbucks partnered with City Year Miami and Rebuilding Together Miami Dade to repair a veteran's home in appreciation for his military service. The effort was made possible as part of Sears' Operation Rebuild for Heroes at Home program.

Joint Venture

A partnership between companies formed for a specific undertaking is called a(n) _________________________.

Corporation

A(n) ____________________ is a legal organization whose assets and liabilities are separate from those of its owner(s).

Conglomerate Merger

A(n) ____________________ is merger between firms whose businesses are unrelated.

Acquisition

A(n) ____________________ occurs when one company buys the assets and assumes the liabilities of another firm.

Small Business Investment Company (SBIC)

A(n) _________________________ is a federally licensed investment group that makes loans to small firms.

Business Plan

A(n) _________________________ is a written document that provides an orderly statement of a company's goals, the methods by which it intends to achieve those goals, and the standards by which it will measure achievements.

Business Incubator

A(n) _________________________ is an organization that provides low-cost common facilities and services to small, start-up businesses.

Cooperative

A(n) ____________________________ is an organization in which the owners operate collectively.

Not for Profit

An organization whose goals do not include pursuing a profit is known as a(n) __________________________.

Discuss the difference between business incubators and venture capital.

Business incubators are programs provided by community agencies that provide low-cost, shares facilities to small start-up ventures. Venture capital is money invested in the small business by another business firm or group of individuals in exchange for an ownership share.

Horizontal Merger

In a(n) ____________________, one firm combines with another firm in the same industry.

Stockholders

Owners of a corporation due to their purchase of stock in the corporation are known as _______________________.

What advantages do small businesses brings to the U.S. economy? What disadvantages must successful small businesses overcome?

Small business brings greater competition to the U.S. economy. It also creates new jobs, is a source of innovation, and fills isolated market nitches. Small businesses often operate at lower costs than larger businesses because of lower overhead and staffing costs. Lower overhead is often the benefit of opening a business from the home. Lower staffing costs can occur when entrepreneurs and their families work without insisting on being paid for every hour contributed. Small business is a major contributor to the success of the U.S. free enterprise system. Still, small business faces many difficulties which must be overcome. First, it is often difficult to raise adequate capital for a small business enterprise. Also, many small businesses suffer from lack of management skill. And government paperwork and red tape are a particular burden to small businesses with their small staffs.

Name and define the three legal structures of business ownership, citing their respective advantages and disadvantages.

Sole Proprietorship is a business owned and operated by one person. Advantages include flexibility, retention of all after-tax profits, and ease of formation and Partnership is a business owned by two or more people who each have unlimited financial liability. Joint ventures are partnerships that are formed for a specific business purpose and then disbanded. The advantages of partnerships include ease of formation, greater financial ability, and complimentary management skills. Disadvantages include unlimited financial liability, potential conflict with partners, difficulty of dissolution and lack of continuity. Corporation: a form of business ownership, created by statute, in which the firm acts and is liable separately from its owners. The advantages include limited financial liability, expanded financial ability, and in large corporations, the benefits of professional management and economies of scale. The disadvantages include cost and difficulty in formation and dissolution, legal restrictions, and double taxation. The last disadvantage can be avoided by small corporations, who meet the requirements to be treated as S corporations, and are thereby taxed as partnerships.  Dissolution. Disadvantages include unlimited financial liability, lack of skill and financing, and lack of continuity.

Describe a business incubator. How are they operated? Who generally establishes them? Provide an example of a successful business incubator.

Some community agencies interested in encouraging business development have implemented a concept called a business incubator to provide low-cost shared business facilities to small start-up ventures. A typical incubator might section off space in an abandoned plant and rent it to various small firms. Tenants often share clerical staff, computers, and other business services. The objective is that, after a few months or years, the fledgling business will be ready to move out and operate on its own. More than 1,400 business incubator programs operate in the United States, with about 7,000 worldwide. Ninety-four percent are run by not-for-profit organizations focused on economic development. Nearly half of all incubators focus on new technology businesses, and more than half operate in urban areas. Turning Technologies, founded in Youngstown, Ohio, has enjoyed breathtaking growth and brought dozens of new jobs to a city with 18 percent unemployment that is haunted by the decline of its old steel mills.

Small Business

____________________ is generally defined as any firm that is independently owned and operated, that is not dominant in its market, and that meets a variety of size standards for income and number of employees.

Discuss reasons why women often become owners of small businesses.

Some have a unique business idea that they want to bring to life. Others decide to strike out on their own when they lose their jobs or become frustrated with the bureaucracies in large companies. In other cases, women leave large corporations when they feel blocked from opportunities for advancement. Sometimes this occurs because they hit the so-called glass ceiling. Because women are more likely than men to be the primary caregivers in their families, some may seek self-employment as a way to achieve flexible working hours so they can spend more time with their families.

Small Business Administration (SBA)

The ____________________ is the principal federal government agency that aids, counsels, and assists small businesses.

Home-based Business

The ____________________, operated from the residence of the business owner, is a widely used and low cost option for new firms.

Board of Directors

The governing authority of a corporation, elected by the common stockholders, is called the __________________________.

Franchisee

The purchaser of a franchise is known as the ____________________.

Partnership

Two or more persons who operate a business as co-owners form a(n) _______________.

Limited Liability Company (LLC)

Under the company form known as a(n) ____________________, the firm is governed under an operating agreement resembling a partnership, except that each partner's liability for the actions of the other owners is limited.

Vertical Merger

When firms at different levels in the production and/or marketing process decide to combine into one company, a __________________________ has occurred.

Merger

When two or more firms combine to make one company, a _______________________ has occurred.

Franchisor

____________________ are companies that sell franchises to independent business people.

Preferred Stockholders

____________________ are shares that give the owners limited voting rights, and the right to receive dividends or assets before the owners of common stock.

Common Stockholders

____________________ are shares that give the owners voting rights but only residual claims on the firm's assets and income distribution.

Micro loans

____________________ are small-business loans often used to buy equipment or operate a business.

Employee Ownership

____________________ is a type of business ownership in which workers buy shares of stock in the company that employs them.

S Corporations

__________________________ can elect to be taxed as partnership while maintaining the advantages of corporations.

Franchising

__________________________ is a contractual business agreement between a manufacturer or supplier and a dealer.

Venture Capital

__________________________ is money invested in a business by another business firm or group of individuals in exchange for an ownership share.

Public Ownership

__________________________ means an organization is owned and operated by a government unit.