Chapter 4 Intro to Business

Rank the forms of business ownership based on ease of starting. Put the easiest form at the top.

1. Sole proprietorship 2. Partnership 3. Corporation

What are the advantages of the LLC form of organization? A. Choice of taxation B. No stock C. Limited liability D. Flexible ownership rules E. Double taxation

A. Choice of taxation C. Limited liability D. Flexible ownership rules

What are three advantages of franchising? A. Recognized name B. Shared profits C. Large up-front costs D. Lower failure rate E. Financial advice

A. Recognized name D. Lower failure rate E. Financial advice

A business owned and controlled through pooled resources by the people who use it is a(n) ______. A. cooperative B. limited liability company C. limited partnership D. S corporation

A. cooperative

When analyzing which type of merger a firm uses to grow, we can classify them by whether they are: A. different industries B. privately owned and operated C. in the same industry D. different levels of an industry

A. different industries C. in the same industry D. different levels of an industry

Many brick and mortar franchisees are using Blank______ to expand their businesses online to lower costs and better meet the needs of their customers. (Check all that apply) A. technology B. personal sales C. mall kiosks D. websites

A. technology D. websites

A corporation is defined as ______. A. an unchartered entity with authority to act directly with its owners B. a legal entity with authority to act apart from its owners C. a chartered legal entity with authority to act directly with its owners D. an unchartered entity with authority to act apart from its owners

B. a legal entity with authority to act apart from its owners

Because owners are only responsible for losses up to the amount they have invested in a corporation, limited liability is considered: A. an incidental benefit B. a major advantage C. illegal under contract law D. unethical in the eyes of investors

B. a major advantage

When producers, consumers, or workers with similar needs pool their resources for mutual gain, they start a(n) ______. A. credit company B. cooperative C. franchise D. bank

B. cooperative

Usually, how many individuals operate a sole proprietorship? A. 3 or more B. one C. as many as are needed D. two

B. one

What are two of the disadvantages of a corporation? A. Limited financing B. Limited life C. Double taxation D. Cost of forming a corporation

C. Double taxation D. Cost of forming a corporation

One company's purchase of the property and obligations of another is called a(n) ______. A. merger B. LLC C. partnership D. acquisition

D. acquisition

One of the most important advantages of the sole proprietor form of ownership is that a business owner ______. A. does not need an attorney B. does not need a tax accountant C. has many financing options D. finds it easier to start and end the business

D. finds it easier to start and end the business

The result of two firms joining to form one is called a(n) ______. A. acquisition B. partnership C. LLC D. merger

D. merger

True or false: If you and a friend start a business together, you have started a sole proprietorship.

False

True or false: The main advantage of a sole proprietorship is ease of start up.

True

True or false: The person who buys the right to use a business's name and sell its products, or services in a given territory in exchange for a fee and royalties is a franchisee.

True

One company's purchase of the property and obligations of another company is a(n) _______.

acquisition

A(n) ________ is a chartered legal entity with authority to act and have liability separate from its owners.

corporation

Sole proprietorships far outnumber _______ and ______, but they net far fewer sales and less income.

corporations partnerships

A major disadvantage of the corporate form deals with the tax situation called _______ taxation.

double

A business person concerned about startup costs of a business opportunity should consider a venture other than a(n) _______ which has this disadvantage.

franchise

A _______ is a company that sells others the right to use their name to make and sell their products.

franchisor

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

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

industries

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

The responsibility for a loss only up to the amount invested is _______ liability.

limited

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

Limited liability, choice of taxation, flexible ownership rules, and operating flexibility are all advantages of a(n)_______ _______ company.

limited liability

A form of business ownership that provides limited liability, as in a corporation, but is taxed like a partnership is a(n) _______ _______ company.

limited liability or s corporation

Franchises are expanding internationally to access additional _______ that have new customers and to increase their profit potential.

markets or consumers

When two firms join together to form one new company, it is called a _______.

merger

Of the various forms of business ownership, a _______ is an easy way for two individuals to conduct business.

partnership

When two or more people legally agree to become co-owners of a business, the organization is called a(n) ______.

partnership

Unlimited liability as it relates to sole proprietorships is the risk of loss of _______ assets beyond the assets of the business.

personal

The share of profits or sales revenue paid to the franchisor are called _______.

royalty

Gathering leads on a company website, selling products and keeping up to date on news via email, and chat rooms all serve as examples of using _______ to assist franchisees and customers.

technology

Because of the difficulty in ending a partnership, decisions regarding which two areas should be spelled out in a partnership agreement? A. The marketing plan B. Whether to pay the taxes C. How to distribute assets D. When a partner can retire

C. How to distribute assets D. When a partner can retire

The form of partnership that limits liability to the limited partner's own acts or those of the people they supervise is a ______. A. limited liability partnership B. master partnership C. master limited partnership D. general partnership

A. limited liability partnership

What two items are delineated in a franchise agreement? A. the royalty fee to be paid for each item sold B. the right to place one's logo on another business' product C. the right to sell a business' products in a given territory D. the right to use a specific business' name

C. the right to sell a business' products in a given territory D. the right to use a specific business' name

Many franchises are expanding internationally because ______. A. there is much more competition B. Cultural barriers are not significant C. there are large new markets available D. it is expensive to adapt products

C. there are large new markets available

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 ______. A. taxation B. limited liability C. unlimited liability D. responsibility

C. unlimited liability

A partnership where all owners share in operating the business and in assuming unlimited liability for the business's debts is a ______. A. general partnership B. master limited partnership C. cooperative D. limited partnership

A. general partnership

The attributes of a conventional corporation include that: A. it is state chartered B. it is a legal entity C. corporate liability is separate from owners D. that it has unlimited liability

A. it is state chartered B. it is a legal entity C. corporate liability is separate from owners

The limited partners' risk of losing their personal assets in an LLP is ______. A. limited to the outcomes of their own acts and omissions B. limited to the master's share C. limited to the general partner's share D. unlimited and includes all of the liability

A. limited to the outcomes of their own acts and omissions

An S corporation has the liability protections of a corporation but is taxed ______. A. like a partnership or sole proprietorship B. twice C. at corporate rates for each year D. as if it were a corporation

A. like a partnership or sole proprietorship

An advantage of starting an online franchise is that: A. online franchisees can compete in world markets B. franchisees pay only a set monthly fee C. online franchisees pay large startup fees and royalties to do business D. no upfront fee may be required

A. online franchisees can compete in world markets B. franchisees pay only a set monthly fee D. no upfront fee may be required

Termination of a partnership is difficult without a(n) ______ agreement. A. corporate B. tax C. employment D. partnership

D. partnership

A state-chartered legal entity with authority to act and have liability separate from its owners is a ______. A. general partnership B. corporation C. sole proprietorship D. stakeholder

B. corporation

An agreement that gives a business the right to use a business's name and sell a product or service in a given area is a(n) ______. A. merger B. franchise C. limited partnership D. acquisition

B. franchise

Many minority business owners prefer the ______ form of business ownership because it offers business connections and support. A. acquisition B. franchise C. merger D. sole proprietorship

B. franchise

An advantage of the corporate form of business is that limited liability allows it to ______. A. conflict with stockholders and boards of directors B. limit individual responsibility for losses C. borrow unlimited sums of money D. pay higher taxes

B. limit individual responsibility for losses

Home-based franchises have many advantages, such as: A. feeling more isolated B. relief from the stress of commuting C. low overhead expenses D. ease of obtaining financing

B. relief from the stress of commuting C. low overhead expenses

The three major forms of business most common in the United States are ______. A. foreign corporations. B. sole proprietorships. C. partnerships. D. corporations.

B. sole proprietorships. C. partnerships. D. corporations.

One of the most notable advantages of an online franchise is that: A. franchisees have exclusive territories B. there is no brick-and-mortar real estate cost. C. there is no monthly fee. D. there is a lot of training that is specific to the business.

B. there is no brick-and-mortar real estate cost.

What are two reasons that franchises are attractive to minority populations? A. they have a higher failure rate B. they provide personal ownership of a business C. some offer financial support to aspiring business owners D. they are often unknown beyond a local area

B. they provide personal ownership of a business C. some offer financial support to aspiring business owners

A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships is ______. A. an unlimited liability company B. a sole proprietorship C. an S corporation D. a partnership

C. an S corporation

A corporation is formally formed with ______. A. a partnership agreement B. bylaws and union formation C. articles of incorporation and bylaws D. very little paperwork or cost

C. articles of incorporation and bylaws

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. A. a charter B. a constitution C. bylaws D. mandates

C. bylaws

Low overhead costs are an advantage of which type of business? A. sole proprietor retail store B. restaurant franchises C. home-bases businesses D. large corporations

C. home-bases businesses

Stockholders' liability for losses only up to the amount they invest is called ______. A. personal liability B. unlimited liability C. complete liability D. limited liability

D. limited liability

When there is one or more general partners and one or more limited partners, the firm is a(n) ______. A. master limited partnership B. unlimited partnership C. general partnership D. limited partnership

D. limited partnership

Franchises offer those starting a business the advantage of a recognized name, management assistance, and ______. A. large territories without competition B. a lot of regulations C. no royalties or fees D. lower failure rates

D. lower failure rates

If you start and manage a landscaping business on your own, you have likely started a ______. A. franchise B. partnership C. corporation D. sole proprietorship

D. sole proprietorship