B LAW UNIT 3
The chief drawback to the _______ as a form of entity is the owner's complete lack of protection for unpaid debts and liabilities of the business.
sole proprietorship
The easiest single-person ownership entity to form and maintain is a(n) _______.
sole proprietorship
The simplicity of the _______ makes this entity a top choice for start-up businesses with relatively low annual revenues and expenses.
sole proprietorship
If Joan Gates wishes to "do business as" Gates Consulting, she would create a(n) _______ or DBA with a local or state office. (Choose all correct answers)
trade name fictitious name
Most states recognize at least _______ forms of business entities.
6
Sole proprietorships are limited in their options for raising money. These options include which of the following? (Choose ALL correct answers).
Financing using the proprietor's personal resources. Financing the business through debt.
_______ loans come from family members and friends and are paid back according to their individual agreement.
Private
In the absence of a partnership agreement, the _______ is likely to govern a general partnership.
RUPA
A sole proprietorship is terminated either by _______ or by _______ in the case of the death or personal bankruptcy of the proprietor. (Choose two correct answers)
an express act of the principals operation of law
A proprietors ownership interest in a sole proprietorship _______ to her heirs through a gift or an estate.
cannot pass
A(n) _______ loan is usually collateralized by an asset of equivalent value typically consisting of the proprietor's personal assets to get a lower interest rate.
commercial
A sole proprietorship is generally not subject to _______ income taxation, and no tax return is filed on behalf of the business.
corporate
The Federal Trade Commission regulations focus on mandatory _______ regarding the financial condition of the franchise, success rates, and other important
disclosures
In some states, if Joan Gates does business as "Gates Consulting" she would file for a certificate of _________ with a local or state office.
fictitious name
A(n) _______ distributes its products to a broader market without the overhead costs of retail space, equipment, and employees.
franchise
A(n) _______ partnership is legally defined as: (1) an association of two or more people (2) who are co-owners and co-managers of the business and (3) who share in the profits of their ongoing business.
general
When choosing a business entity, principals should consider the following factors: _______. (Choose all the correct answers)
liability ease of formation taxation
In a sole proprietorship, all debts and liabilities of the business are also personal debts and liabilities of the __________. (Choose all the correct answers)
owner principal sole proprietor
When choosing a business entity, principals should carefully consider the extent of _______ for debts and contracts.
personal liability
In the context of business entities, ________ is a generic word for individuals who are entitled to the profits of a business based on their (Choose all correct answers)
principal
Each form of business entity has its attendant advantages, drawbacks, and legal consequences for the owners, known as _______, of the business. (Choose all correct answers)
principals
_______ loans are typically through individuals who negotiate such items as interest rate directly with the proprietor.
private
The best choice of business entity is driven primarily by the following factors: _______. (Choose all the correct answers)
risk tax operational objectives
The biggest advantage of a(n) _______, which is typically secured by collateral, is that the borrower only pays interest on the funds actually drawn instead of the full amount of a loan.
secured line of credit
Businesses that are _______ and have a relatively low potential for liability usually do not require the protection and flexibility offered by more complex forms of business entities.
self-funded
Most _______ are relatively small in terms of assets and revenues, and are not restricted in terms of the number of _______ and can operate in as many locations as the principal desires.
sole proprietorships employees
A franchise agreement that covers _______ rights usually provides the franchisee with an exclusive geographic area.
territory
Sole proprietors may raise money through _______ loans which is a more formal process from a lender such as a bank.
commercial
The principal of a sole proprietorship reports business income and expenses on her own _______ and pays taxes on business income (or deducts business losses) based on the applicable _______.
corporate tax return, individual tax return individual tax return, individual tax rate
A(n) _______ should be thought of as a method of conducting business that centers on a contractual relationship rather than as a business entity.
franchise
Federal statutes define a(n) _______ as an arrangement of a continuing commercial relationship for the right to operate a business with a particular trade name or sell the seller's branded goods.
franchise
A franchise agreement generally covers the following: _______. (Choose all the correct answers)
franchise fees territory rights term of the agreement
A franchise involves the two parties: the _________ who is a business entity that has a proven track record of success, who sells to a(n) _______ the right to operate the business and use the business's trade secrets, trademarks, and products.
franchisor, franchisee
A close cousin to a commercial loan is a commercial ______ which allows a proprietor to draw against a predetermined credit limit.
line of credit
Partnership and agency law governs the relationship between the partnership and outside third parties and cannot be altered by a(n) _______ agreement.
partnership