BA Chapter 4

Select the three items that are usually listed in the articles of partnership.

-Contribution (money or assets) of each partner -Authority and responsibility of each partner -How profits will be distributed

A sole proprietor needs skills in which of the following? (select all that apply)

-Marketing -finance -personal management

Select the two main types of partnerships.

-general -limited

The purchase of one company by another, usually by buying its stock, is a(n) ______________.

acquiaition

The right to vote for the board of directors is given to ______ stockholders.

common

As an entity, cooperatives are not set up to make _____________.

profits

Funds available for a sole proprietorship are limited to ______.

what the owner can provide

An advantage of having one or more partners is that ______. (select all that apply)

-more skills and knowledge are available -more financial resources are available

Having carefully chosen partners with different skills and knowledge can help a partnership succeed because ______. (select all that apply)

-no one person has all of the skills needed -it allows people to specialize in a particular area

In a partnership, why is shared business responsibility considered a disadvantage?

A bad business decision by one partner can jeopardize the personal resources of the other partner.

Vertical merger

A merger between companies operating at different but related levels of an industry

Horizontal merger

A merger between firms that make and sell similar products to the same customers

Conglomerate merger

A merger between two firms in unrelated industries

Which of the following is a disadvantage of being in a partnership?

All partners are responsible for the business actions of all other partners.

Corporation

Any number of shareholders

What is required to start a partnership?

Articles of partnership

_____ are legally liable for the mismanagement of the firm or for any misuse of funds.

Board members

The situation known as "double taxation" only occurs with which form of business ownership?

Corporation

_____ must make information available to their owners, usually through an annual report to shareholders.

Corporations

Which of the following is considered an advantage of corporations?

Ease of transfer of ownership

True or false: There is a set formula for all partnerships to divide profits.

False

Which of the following is a disadvantage of the partnership form of business?

Friction between general and limited partners

Sole proprietorship

Individual income is taxed.

partnership

Individual owners' income is taxed.

Which of the following is an advantage of the corporate form of business ownership?

Limited liability

Sole proprietorship

One owner

How is taxation handled in partnerships?

Partners pay taxes at the income tax rate for individuals.

This is a corporation whose stock anyone may buy, sell, or trade.

Public corporation

______ corporations are owned and operated by the federal, state, or local government.

Quasi-public

Of the following forms of business ownership, which is relatively easy and inexpensive to form?

Sole proprietorship

Which form of business allows for the greatest degree of secrecy?

Sole proprietorship

______ are businesses owned and operated by one individual, and are the most common form of business organization in the United States.

Sole proprietorships

______ have fewer financial resources since they are limited to what the owner is able to borrow.

Sole proprietorships

corperation

The business and shareholders are taxed.

Which of the following is an advantage of a sole proprietorship?

The business can easily be dissolved.

Camille and Rosa have decided to open a business together. Which of the following is true for their business?

The pooled financial resources and talents of the partners will be an advantage to the business.

How are the members of a board of directors selected?

They are elected by the stockholders of the corporation.

Which of the following is TRUE of S corporations?

They are taxed like a partnership.

Partnership

Two or more owners

S Corporation

Up to 100 shareholders

A(n) ______ is where one company purchases the property and obligations of another.

acquisition

The only legal condition to dissolving a sole proprietorship is that ______.

all financial obligations must be paid or resolve

A form of business ownership that looks like a corporation but is taxed as though it were a partnership with restrictions on the number of shareholders is ______.

an S corporation

The selling of a corporation's stock on public markets for the first time is known as ______.

an initial public offering

Which legal document sets forth the basic agreement between partners?

articles of partnership

A _____ is/are elected by the stockholders to oversee the general operation of the corporation and set its long-range objectives.

board of directors

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

borrowing against its assets

Although owners of ___________ stock do not get any preferential treatment with regard to dividends, they do get some say in the operation of the corporation.

common

Although owners of ____________ stock do not get any preferential treatment with regard to dividends, they do get some say in the operation of the corporation.

common

If a chemical company merged with a textile manufacturer, it would be an example of a ______.

conglomerate merger

The joining of firms in completely unrelated industries is a(n) _______.

conglomerate merger

When producers, consumers, or workers with similar needs pool their resources for mutual gain, they start a(n) ______.

cooperative

The formation of a ____________ can be costly. A charter must be obtained, and this usually requires the services of an attorney and payment of legal fees.

corperation

The formation of a ______________ can be costly. A charter must be obtained, and this usually requires the services of an attorney and payment of legal fees.

corperation

LLCs are flexible, simple to run, and do not require the members to hold meetings, keep minutes, or make resolutions, all of which are necessary in _______________.

corperations

A legal document that the state issues to a company based on information the company provides in the articles of incorporation is called a ______.

corporate charter

Based on the information in the articles of incorporation, the state issues a ___________ ______________ to the company.

corporate charter

The company (or individual) that wants to acquire or take over another company is known as a(n) __________ _____________.

corporate raider

What is a company (or individual) called that wants to acquire or take over another company?

corporate raider

As a legal entity, _______ have many of the rights, duties, and powers of a person, such as the right to receive, own, and transfer property.

corporation

When the corporation pays a tax on its profits and individual stockholders each pay tax on dividends distributed by the corporation, it is called ______.

double taxation

True or false: An advantage of partnerships is that all the partners are responsible for the business actions of all the other partners.

false

A key disadvantage of the partnership form of business is ______.

friction between partners

A ___________ partnership is a partnership that involves a complete sharing in both the management and the unlimited liability of the debts of the business.

general

The two major types of partnerships are ______.

general and limited

A partnership where all owners share in operating the business and in assuming unlimited liability for the business's debts is a(n) ______.

general partnership

If two companies that both make water valves for plumbing contractors merge, it would be an example of a ______ merger.

horizantal

A merger of two firms that sell similar products to the same customers is a(n) ______.

horizontal merger

The three types of mergers are differentiated by analyzing whether the companies merging are in the same, related, or different ___________ .

industries

The three types of mergers are differentiated by analyzing whether the companies merging are in the same, related, or different ____________ .

industries

In a partnership, the liability of limited partners is limited to their ______.

initial investment

A private corporation that needs more money to expand or to take advantage of opportunities may have to obtain financing by "going public" through a(n) _______, that is, becoming a public corporation by selling stock so that it can be traded in public markets.

initial public offering

A disadvantage of a sole proprietorship is that ______.

it is directly linked to the owner's ability to work

One advantage of a partnership is that ______.

it is easy to create

It is easy to start a sole proprietorship because ______.

it may only require a simple permit or license to start

A partnership established for a specific project or for a limited time is called a _________ venture.

joint

A partnership established for a specific project or for a limited time is called ______.

joint venture

The term of the business being dependent on the life of the business owner is referred to as ______.

lack of continuity

The startup costs of filing for incorporation are high because ______.

lawyers and accountants are needed to do the complex filings

A(n) ______ is an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing.

leveraged buyout

Perpetual _________ for a corporation means that the death of one owner does not end the corporation

life

Owners in an LLC have ______ liability.

limited

Stockholders' liability for losses only up to the amount they invest is called ______ liability.

limited

___________ liability means that the owners of the business are responsible for its losses only up to the amount they invest.

limited

The result of two firms (usually corporations) combining to form one company is called a __________

merge

When two firms join together to form one new company, it is called a(n) _________________.

merge

All profits from a sole proprietorship belong exclusively to the ______.

owner

A legal form of business with two or more owners is a(n) ______.

partnership

An association of two or more persons who carry on as co-owners of a business for profit is the definition of a(n)

partnership

All of the following are advantages of partnerships, EXCEPT ______.

partnerships have unlimited liabilities for the debts incurred by the business

When a corporation is separate from its owners and does not terminate with the death of one owner, the corporation has ______.

perpetual life

The partnership business entity is not taxed, because each partner pays tax on the business's profits as their ______.

personal income

Of the two types of stock, owners of ______________ stock receive preferential treatment regarding dividends.

preferred

This is a special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.

preferred

A ___________ corporation is owned by just one or a few people who are closely involved in managing the business.

private

A(n) ______ is owned by just one or a few people who are closely involved in managing the business.

private corporation

Having a partner may share the risk, but it also means sharing _______________, because each partner must be rewarded for their participation in the business.

profit

An advantage of a sole proprietorship is that the owner ______.

retains all profits

After working for years at one of the big accounting firms, Nadine has decided to go into business for herself. She has opened up her own accounting and tax preparation firm. While she is the only accountant right now, Nadine hopes to hire more people in the future. Nadine's business can be defined as a ______.

sole proprietorship

The owner of a _______ has complete control over the business and can make decisions on the spot without anyone else's approval.

sole proprietorship

Corporations issue shares of ____________ to shareholders and they can sell or trade them to other people without causing the termination of the corporation.

stock

Public corporations must file reports with ______, the government regulatory agency that regulates securities such as stocks and bonds.

the Securities and Exchange Commission

In a sole proprietorship, the possibility that competitors can obtain trade secrets is minimized because _______.

the sole proprietor does not have to discuss publicly his or her operating plans

Corporations have all the rights and privileges listed below EXCEPT ______.

their owners have unlimited liability

True or false: Specialized professionals in fields like accounting are often hired by sole proprietors who lack knowledge in that area.

true

When each general partner is liable for the debts of the firm, no matter who was responsible for causing the debt, this is called ______ liability.

unlimited

As a sole proprietor, Ellie enjoys many advantages. Which of the following is NOT one of them?

unlimited liability

In a sole proprietorship, any debts or damages incurred by the business that cannot be paid by the business are your personal debts and you must pay them. This disadvantage is known as ______.

unlimited liability

A merger that joins two companies involved in different but related levels of an industry is a(n) ______ merger

vertical

A merger that joins two companies involved in different but related levels of an industry is a(n) ______ merger.

vertical

The joining of two companies involved in different but related levels of an industry is called a(n) _________ merger.

verticle

A key advantage of a sole proprietorship is that ______.

you have flexibility and control over the business