Chapter 5

Many firms incorporate in the states of __ or __ because those states' laws make the process easier

delaware, nevada

Advantages of a sole prop

ease of starting and ending business, being your own boss, pride of ownership, leaving a legacy, retention of company profits, no special taxes

a franchisee must know how much __ is needed to purchase the franchise and operate it

equity capital

LLCs do have to submit articles of organization and an operating agreement, but do not have to..

file written resolutions, hold annual meetings, or keep minutes.

Co-ops

formed by producers, consumers, or workers with similar needs pool their resources for mutual gain. to give members more economic power as a group, don't pay the same kind of taxes corporations pay.

Franchisees can begin to feel burdened if the __ creates too many managerial orders, directives or limitations

franchisor

Things to consider when starting a franchise

how to terminate the franchise, capital needed to purchase, financial strength of the franchisor

unlike sole proprietorships and partnerships, corporations must file a tax return and pay any corporate __ tax owned on profits

income

Advantages of a farm co-op for their members is that they:

increase economic power and do not pay taxes as corporations do

Questions to ask before franchising internationally

intellectual property protects, support global partners, adapt to other countries regulations

Sole proprietorship has a limited life span unless

it is sold to someone else or is taken over by an heir

sole proprietorship has a limited life span unless

it is taken over by an heir or it is sold to someone else

It is easy to start and end a sole proprietorship because:

it may only require a simple permit or license to start and its only one person

horizontal merger

joins two firms in the same industry and allows them to diversify or expand their products. ex soft drink and mineral water

vertical merger

joins two firms operating in different stages of related businesses. ex soft drink and artificial sweetener

disadvantages of a sole proprietorship

large time commitment, limited financial resources, and unlimited liability.

corporation

legal entity with authority to act and have liability apart from its owners

Advantages of the LLC

limited liability, choice of taxation, flexible ownership rules

When there is one or more general partnership and one or more limited partners, the firm is a(n)

limited partnership

Disadvantage of LLC

more paperwork and ownership is nontransferable

A disadvantage of limited liability company

no stock

advantages of starting an online franchise is

only paying set monthly fee, maybe no upfront fee, can compete in world market

The owner of an LLC can be a

person, partner, or corporation

Flexible distribution of profits and losses is considered an advantage of an LLC because:

profit/losses do not have to be distributed in proportion to the money each person invests

advantages of limited liability form of corporate business

raise larger sums of money from investors, borrow larger sums of money

Disadvantages of a franchise

shared profit, large start-up costs, restrictions on selling

3 major forms of business ownership

sole proprietorship, partnership, and corporation

Easiest to most difficult forms of business ownership

sole proprietorship, partnership, corporation

In order to protect the brand name and image, the franchisor has tight management __

standards and control

Corporation

state-chartered legal entity with authority to act and have liability separate from its owners. `

Burger King and Gymboree were publicly traded companies until a group of stock holders regained all the firms' stock in order to regain control thru ____

taking a firm private

Attributes of a master limited partnership

taxed like a partnership, acts like a corporation, traded on the stock exchange

merger

the result of two firms joining to form one company

S corporation

unique government creation that looks like a corporation but is taxed like sole proprietorships/partnerships. Have shareholders, directors, and employees and the benefit of limited liability, but the profits are taxed only as the personal income of the shareholders.

conglomerate merger

unites firms completely unrelated industries in order to diversify business operations and investments. ex soft drink and snack food

Disadvantage of partnership

unlimited liability

acquisition

where one company purchases the property and obligations of another

Double taxation

Corporate income is taxed twice. First the corporation pays tax on its income before it can distribute any, as dividend, to stockholders. Then stockholders pay income tax on the dividends they receive.

Partnership

When two or more people legally agree to become co-owners of a business

conventional corporation

a state-chartered legal entity with authority to act and have liability separate from its owners-its stockholders. Stockholders are not liable for the debts or other problems of the corporation beyond the money they invest in it by buying ownership shares (stock)

leveraged buyout (LBO)

an attempt by employees, management, or a group of private investors to buy out the stockholders in a company, primarily by borrowing the necessary funds. These people now become the owners of the firm.

farm cooperative

an example of a coop formed to give members more economic power as a group than they have as an individuals.

limited partner

an owner who invests money in the business but does not have any management responsibility for losses beyond his/her investment. Has limited liability meaning personal assets are not at risk

fringe benefits

benefits not given to soloeproprietors including no paid health insurance, no paid disability insurance, no pension plan, no sick leave, and no vacation pay. 30% or more of a worker's compensation

In a leveraged buyout, employees, managers, or investors finance the purchase of the company by

borrowing against its assets

Fastest way for a foreign firm to enter the U.S. market may be to __ the operations of the US company

buy

corporation

chartered legal entity with authority to act apart from its owners

Having members work a certain number of hours or electing a board of directors that hires professional management are two was a __ is managed

co-op

As a legal entity a __ can enter into contracts without as much difficulty as a partnership

corporation

5 forms of business ownership

corporation, sole proprietorship, partnership, franchise, and co-op

Sole proprietorship

A business owned and usually managed by one person; most common form of business ownership.

agreement

A partnership __ can spell out the requirements of terminating a partnership

coattail effects

Actions of others franchises have an impact on other franchises future growth and profitability

Why is size an advantage of the corporation?

Diversify thru acquisition, acquire the latest equipment, attract experts, build modern facilities

No stock, limited life span, and fewer incentives are disadvantages of

LLC

Elements such as more financial resources, shared management, and longer survival are those used to define the:

Uniform Partnership Act

master limited partnership

acts like a corporation and is traded on the stock exchanges, but is taxed like a partnership thus avoiding the corporate income tax.

franchise agreement

an arrangement whereby someone with a good idea for a business name and sell a product or service to others in a given territory