Foundations of business ch 5
A corporation is formally formed with: Multiple choice question. bylaws and union formation very little paperwork or cost articles of incorporation and bylaws a partnership agreement
C
True or false: The owner of a sole proprietorship is responsible for developing any fringe benefits they have.
True
One company's purchase of the property and obligations of another company is a(n) _________
acquisition
A business person concerned about startup costs of a business opportunity should consider a venture other than a(n) ___________ which has this disadvantage.
franchise
An entrepreneur would buy a ____________ if they are uncomfortable starting their business from scratch.
franchise
Financial advice and a nationally recognized name are both benefits of owning a(n) _______________ .
franchise
The right to use a specific business' name and sell its products or services in a given territory is a(n) __________ agreement.
franchise
The __________ cost of incorporating can be expensive because of the need for accountants and lawyers.
initial
When a sole proprietor leaves an ongoing business to future generations, it is said that the owner is leaving a _________ .
legacy
Stockholders are ______________ from the managers and employees of the firm because they are not actively involved in the operations of the firm.
separate
A business that is owned and managed by one person is a(n) __________ ___________ .
sole proprietorship
A corporation can sell ________ to anyone who is interested to raise more money for investment.
stocks
For a business to grow, prosper, and create economic opportunity, many people have to be willing to invest money in it. An advantage of a corporation is its ability to raise money through the sale of _______ .
stocks
A merger between a soft drink company and an artificial sweetener maker could be considered a(n) __________ merger.
vertical
When the continued operation of the business is dependent on the life of the business owner, it is referred to as: Multiple choice question. limited financial resources limited life span management difficulties limited growth
B
LLCs can be taxed as ____________ or __________ , which allows the business owners to choose their method of taxation.
partnerships or corporation
Through flexible distribution of profits and losses, LLC members agree on the _______ of profits/losses to be distributed to each member.
percentage
A state-chartered legal entity with authority to act and have liability separate from its owners is a: Multiple choice question. sole proprietorship stakeholder corporation general partnership
C
An advantage of the separation of ownership from management in corporations is that the company can raise money from investors but the investors: Multiple choice question. control daily operations of the board must receive dividends are not involved in daily operations do not usually receive stock
C
Corporations can raise large amounts of money, take advantage of economies of scale, and hire experts in all areas of operation. This can be summarized as ______ advantage. Multiple choice question. liability separation size stock
C
One company's purchase of the property and obligations of another is called a(n): Multiple choice question. merger LLC acquisition partnership
C
The easiest type of business entity to form is a Multiple choice question. corporation partnership sole proprietorship
C
A(n) ______ is where one company purchases the property and obligations of another. Multiple choice question. acquisition horizontal merger buyout vertical merger
A
Many firms incorporate in the state of __________ or ________ because those states' laws make the process easier than in other states.
Delaware or Nevada
The result of two firms (usually corporations) combining to form one company is called a ____________.
merger
Limited liability, choice of taxation, flexible ownership rules, and operating flexibility are all advantages of a(n) _______ _______company.
limited liability
A corporation is a legal _____________ with authority to act and have liability separate from its owners.
entity
Ed has decided to purchase and follow a business format by becoming a franchisee. The _________ _________ he will sign gives him the right to use the business name and sell the products of the firm.
franchise agreement
A merger of two firms in the same industry that allows the companies to diversify or expand their products is a(n): Multiple choice question. horizontal merger acquisition vertical merger conglomerate merger
A
If you start and manage a landscaping business on your own, you have likely started a: Multiple choice question. sole proprietorship corporation franchise partnership
A
In a sole proprietorship, any debts or damages incurred by the business are your personal debts and you must pay them. This disadvantage is known as: Multiple choice question. unlimited liability responsibility taxation limited liability
A
LLC's are considered to have operational flexibility because while they must submit articles of organization, they are not required to: Multiple choice question. keep minutes or hold annual meetings provide employee benefits or pay taxes pay taxes or hold annual meetings distribute profits or keep meeting minutes
A
Sole proprietors can leave their business to their heirs. This is called: Multiple choice question. leaving a legacy sharing management pride of ownership being your own boss
A
When the continued operation of the business is dependent on the life of the business owner, it is referred to as: Multiple choice question. limited life span limited financial resources limited growth management difficulties
A
When the continued operation of the business is dependent on the life of the business owner, it is referred to as: Multiple choice question. limited life span limited financial resources management difficulties limited growth
A
Termination of a partnership is difficult without a(n) ______ agreement. Multiple choice question. employment partnership corporate tax
B
Select all that apply What are some of the disadvantages of a corporation? Multiple select question. Limited life Limited financing Cost of forming a corporation Double taxation
CD
A(n) ______ is an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing. Multiple choice question. merger horizontal merger acquisition leveraged buyout
D
Amy wants to start a business but is concerned with starting from scratch without much business experience. To alleviate her concern Amy could Multiple choice question. start a sole proprietorship get a large bank loan to start incorporate obtain a franchise
D
The joining of two firms in the same industry is a(n) ______ merger.
Horizontal
A unique government creation that looks like a corporation but is taxed like a sole proprietorship or partnership is called a(n) __________ corporation.
S
The paperwork needed to start a corporation is extensive and a corporation must also keep detailed _________ records documenting all financial transactions in detail.
accounting
The actions of a fellow franchisee will affect your franchise. This is known as the ____________ ___________ .
coattail effect
If a software company and a snack food company merged, it would be called a(n) ___________ merger.
conglomerate
The joining of firms in completely unrelated industries is a(n) __________ merger.
conglomerate
A __________ partnership has partners who do not share in operating the business.
limited
A _____________ partnership has partners who do not share in operating the business.
limited
Taryn and Eilysh have decided to form a partnership. Taryn will not have management responsibility, but will invest money in the business. Taryn will be considered a(n) ________ partner.
limited
An advantage of an LLC is flexible distribution of profits and losses, which means profits/losses do not have to be distributed in __________ to the money each person invests.
proportion
An advantage of partnerships is a longer _________ rate than sole proprietorships, because they become more disciplined and the business's life is based on all the partners.
survival
Flexible distribution of profits and losses is considered an advantage of an LLC because: Multiple choice question. profits/losses do not have to be distributed in proportion to the money each person invests most people want to share equally in profit/losses regardless of what they have invested distribution of profits/losses can change on a daily basis profit and loss calculations can be ignored annually
A
Select all that apply A sole proprietorship has a limited life span unless: Multiple select question. it is sold to someone else it is taken over by an heir there is a leveraged buyout one of the partners buys remaining shares
AB
Select all that apply Which are considered disadvantages of incorporating? Multiple select question. Initial Cost Limited Liability Double Taxation Extensive paperwork
ACD
Limited liability is considered an advantage of forming an LLC because: Multiple choice question. number of shareholders is protected personal assets are protected classes of stock are limited to one methods of operation are strictly followed
B
Select all that apply Select those items considered fringe benefits that people working for a company are likely to receive, but a sole proprietor has to develop on his own: Multiple select question. freedom to make your own hours paid sick or vacation leave time a pension plan paid health insurance
BCD
When the actions of others with the same franchise as yours have an impact on your future growth and profitability, this is an example of __________ effects.
Coattail
An advantage of the corporate form of business is that limited liability allows it to: Multiple choice question. borrow unlimited sums of money pay higher taxes conflict with stockholders and boards of directors limit individual responsibility for losses
D
In a franchise, having management support from the franchisor is a(n) _____________ whereas the coattail effect is considered a ___________ .
advantage, disadvantage
A partnership _______________ can spell out the requirements of terminating a partnership.
agreement
Many people do not like working for someone, so being your own _____________ is an advantage of sole proprietorships.
boss
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
The limited partners' risk of losing their personal assets in an LLP is: Multiple choice question. limited to the master's share unlimited and includes all of the liability limited to the outcomes of their own acts and omissions limited to the general partner's share
c
If the sole proprietor dies, is incapacitated, or retires, the business no longer exists. This disadvantage of a sole proprietorship is called ________ life span.
limited
If the sole proprietor dies, is incapacitated, or retires, the business no longer exists. This disadvantage of a sole proprietorship is called ____________ life span.
limited
A form of business ownership that provides limited liability, as in a corporation, but is taxed like a partnership is a(n) _______ ______company.
limited liabilities
Bob and Dan are doctors in a medical practice. Dan is being sued for malpractice, but it will not affect Bob's assets because they formed a(n) __________ __________ partnership.
limited liability
Shareholders are not liable for the debts of a corporation beyond the money they invest in it by buying company __________ .
stocks
If your company's debts or damages are solely your responsibility you could be experiencing the disadvantage associated with owning a sole proprietorship called __________ _________ .
unlimited liability
Don wanted to incorporate his business and liked the attributes of an S-corporation, however, he did not feel the eligibility requirements would work for his purposes. He is likely to choose to form a(n) __________ _________ company.
limited liability
A key advantage of a home-based franchise is low _________ cost , which can be ongoing. These are the costs associated with rent, utilities, and other fixed costs.
overhead
An LLC submits a written operating agreement, similar to a(n) _____________ agreement, describing how the company is to be operated.
partnership
Having __________ _____________ means that a corporation's existence will not terminate if one or more owners die.
perpetual life
Unlimited liability as it relates to sole proprietorships is the risk of loss of __________ assets beyond the assets of the business.
personal
When a soft drink company and a mineral water company merge and then are able to supply a variety of drinking products they have formed a(n) ___________ merger.
horizontal
Select all that apply LLCs do have to submit articles of organization and an operating agreement, but do not have to: Multiple select question. keep minutes hold annual meetings pay self-employment taxes file written resolutions
ABD
Select all that apply What are the advantages of the LLC form of organization? Multiple select question. Choice of taxation No stock Flexible ownership rules Limited liability Double taxation
ACD
One of the most important advantages of the sole proprietor form of ownership is that a business owner: Multiple choice question. has many financing options does not need a tax accountant does not need an attorney finds it easier to start and end the business
D
Stockholders' liability for losses only up to the amount they invest is called ______________. Multiple choice question. unlimited liability personal liability complete liability limited liability
D
Studies have indicated that partnerships are four times more likely to succeed than: Multiple choice question. MLP's S-Corporations LLC's sole proprietorships
D
The disadvantage of sole proprietorships is that any debts or losses incurred by the business are your debts because you and the business are legally one and you have: Multiple choice question. no responsibility for the debts legal protection from debt limited liability unlimited liability
D
Perpetual life for a corporation means that the death of one owner does not __________ the corporation.
terminate
True or false: The main advantage of a sole proprietorship is ease of start up.
true
When you own a sole proprietorship you and the business are considered one, so you have _________ liability for financial obligations such as debt.
unlimited
Select all that apply Select all attributes that make the initial cost of incorporating a disadvantage. Multiple select question. The high cost of hiring lawyers and accountants for the complex filings needed High start-up costs associated with documentation The ease of transfer of ownership from one investor to another Ensuring perpetual life of the corporation
AB
Select all that apply Which of the following are true regarding the process of forming a corporation. Multiple select question. The articles of incorporation must be filed in the state in which the company will be incorporated The bylaws of the corporation describe how the firm is to be operated The filing process for the articles of incorporation are very consistent from state to state
AB
An entrepreneur could choose to buy a franchise because: Multiple select question. it is less stressful than starting a business from scratch it's a business brand with a proven track record the franchisee has very few restrictions after paying startup costs it can be started as a sole proprietorship, partnership, or corporation
ABD
What are some of the advantages of a corporation? No special taxes Limited liability Ability to raise more money for investment Easy to start and end
BC
Select all that apply What are some of the advantages of franchising? Multiple select question. Shared profits Financial advice Recognized name Lower failure rate Large up-front costs
BCD
When a corporation is separate from its owners and does not terminate with the death of one owner, the corporation has: Multiple choice question. perceptual life limited life perpetual life unlimited value
CF
In a leveraged buyout, employees, managers, or investors finance the purchase of the company by: Multiple choice question. selling equity using cash selling commodities borrowing against its assets
D
A(n) _________ is a state-chartered entity that exists in the eyes of the law and controls risk to the owners of the firm.
corporation
A major disadvantage of the corporate form deals with the tax situation called _________ taxation.
double
If you are your own boss, you are responsible for paying your own wages/salary and for your own ____________ ____________ .
fringe benefits
In a general partnership, all partners share the responsibility for operating the business and assume _________ for the business's debts.
liability
A LLC has the choice of taxation and can be taxed as a(n) ___________ or as a corporation.
partnership
The share of profits or sales revenue paid to the franchisor is called a(n) _____________
royalty
Mark, Cal and Aidan have decided to form a business where all owners will share in operating the business and in assuming liability for the business debts. They are most likely forming a(n) __________ partnership.
general
When two firms operating in different stages of related businesses join, it is called a(n) _____________ merger.
vertical
