BUS 101 Chapter 5 Questions
When a sole proprietor leaves an ongoing business to future generations, it is said that the owner is leaving a ____________
Legacy
What are some of the disadvantages of a corporation?
(1) Cost of forming a corporation (2) Double taxation
Among the advantages of farm cooperatives for their members is that they:
(1) Do not pay taxes as corporations do (2) Increase economic power
LLCs do have to submit articles of organization and an operating agreement, but do not have to:
(1) File written resolutions (2) Keep minutes (3) Hold annual meetings
Ending a partnership can be difficult because of problems deciding:
(1) How to distribute assets (2) The worth of a retiring partner's share (3) When a partner can retire
A sole proprietorship has a limited life span unless:
(1) It is sold to someone else (2) It is taken over by an heir
What are some of the disadvantages of operating a franchise?
(1) Large start-up costs (2) Shared profit (3) Management regulation
What are the advantages of the LLC form of organization?
(1) Limited liability (2) Flexible ownership rules (3) Choice of taxation
It is easy to start and end a sole proprietorship because:
(1) Only one person is involved in the decision to dissolve the business (2) It may only require a simple permit or license to start
A corporation is defined as:
A legal entity with authority to act apart from its owners
One company's purchase of the property and obligations of another is called a(n):
Acquisition
An individual who incorporates a business must file:
An individual and a corporate tax return
In a leveraged buyout, employees, managers, or investors finance the purchase of the company by:
Borrowing against its assets
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 actions of a fellow franchisee will affect your franchise. This is known as the ____________
Coattail effect
A merger that joins firms in completely unrelated industries is a:
Conglomerate merger
When producers, consumers, or workers with similar needs pool their resources for mutual gain, they start a(n):
Cooperative
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
A ____________ partner has responsibility or liability for losses beyond their investment, but a ____________ partner only has liability to the amount they invest.
General; limited
A ____________ partnership has partners who do not share in operating the business.
Limited
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
Stockholders' liability for losses only up to the amount they invest is called ____________
Limited liability
Rank the order in which members of a corporation are chosen in order to separate ownership from management. (Top of managerial hierarchy to bottom)
Owners/stockholders elect board of directors > Board of Directors hire officers of the corporation > Officers hire managers of the corporation > Managers hire employees
A legal form of business with two or more owners is a(n):
Partnership
A unique government creation that looks like a corporation but is taxed like a sole proprietorship or partnership is called a(n) ____________ corporation.
S
Rank the forms of business ownership based on ease of starting. (Easiest to hardest)
Sole proprietorship > Partnership > Corporation
Studies have indicated that partnerships are four times more likely to succeed than:
Sole proprietorships
Cooperatives have an advantage in the marketplace because they do not pay the same kind of ____________ corporations do.
Taxes
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:
(1) Paid health insurance (2) Paid sick or vacation leave time (3) A pension plan
The Uniform Partnership Act defines the three key elements of a general partnership as:
(1) Shared profits and losses (2) Participation in operations (3) Common ownership
When choosing to form a partnership, a business owner should consider all of the following:
(1) The financial contribution of each partner (2) The level of participation of each partner (3) A partner's level of expertise in different areas of business
Which form of ownership is nontransferable because there is no stock?
LLC
The right to participate in managing the ____________ of the business is a key element of general partnerships in the Uniform Partnership Act.
Operations
When two firms operating in different stages of related businesses join, it is called a(n) ____________ merger.
Vertical
Disadvantages of a sole propietorship:
(1) Unlimited liability (2) Limited financial resources
Long hours and a feeling of isolation are two disadvantages of ____________ franchises.
Home-based
Selling shares of stock to anyone allows a ____________ to raise more money to grow.
Corporation
A corporation is a legal ____________ with authority to act and have liability separate from its owners.
Entity
The right to use a specific business' name and sell its products or services in a given territory is a(n) ____________ agreement
Franchise
The joining of two firms in the same industry is a(n) ____________ merger.
Horizontal
The result of two firms joining to form one is called a(n):
Merger
____________ owned businesses are growing at more than the national rate.
Minority
The various responsibilities of each partner, especially any issues involving ____________, should be agreed to in discussions and put in writing before agreeing to a partnership.
Money
Termination of a partnership is difficult without a(n) ____________ agreement.
Partnership
Having ____________ means that a corporation's existence will not terminate if one or more owners die.
Perpetual life
An advantage of a sole proprietorship is the business owner keeps all the ____________, but in a franchise, in many instances, this must be shared with the franchisor
Profit
Ease of formation is an advantage of a(n) ____________
Sole proprietorship
If you start and manage a landscaping business on your own, you have likely started a:
Sole proprietorship
When any debts or damages incurred by the business are your debts or damages it is called ____________ liability.
Unlimited
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:
Unlimited liability
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:
Unlimited liability