Chapter 4 SB
Corporation
Any number of shareholders
Which of the following is considered an advantage of corporations?
Ease of transfer of ownership
True or false: An advantage of partnerships is that all the partners are responsible for the business actions of all the other partners.
False
True or false: There is a set formula for all partnerships to divide profits.
False
A sole proprietor needs skills in which of the following? (select all that apply)
Finance Personnel management Marketing
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
What are two advantages to the partnership form of ownership?
More skills and knowledge are available More financial resources are available
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
Which form of business ownership is directly linked to the life of its owner and his or her ability to work?
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
Corporation
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.
True or false: An advantage for a sole proprietor is the ability to respond quickly to competitive business conditions or to changes in the economy without anyone else's approval.
True
True or false: Specialized professionals in fields like accounting are often hired by sole proprietors who lack knowledge in that area.
True
S corporaton
Up to 100 shareholders
A(n) ______ is where one company purchases the property and obligations of another.
acquisition
The purchase of one company by another, usually by buying its stock, is a(n) _____
acquisition, aquisition, or acquasition
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
The right to vote for the board of directors is given to ______ stockholders.
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
A business owned and controlled through pooled resources by the people who use it is a(n) ______.
cooperative
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
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
_____ liability means that the owners of the business are responsible for its losses only up to the amount they invest.
limited
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
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
Partnership
two or more owners
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.
Corporations have all the rights and privileges listed below EXCEPT ______.
their owners have unlimited liability
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
What is required to start a partnership?
Articles of partnership
Which legal document sets forth the basic agreement between partners?
Articles of partnership
_____ are legally liable for the mismanagement of the firm or for any misuse of funds.
Board members
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
The situation known as "double taxation" only occurs with which form of business ownership?
Corporations
_____ must make information available to their owners, usually through an annual report to shareholders.
Corporations
The only legal condition to dissolving a sole proprietorship is that ______.
all financial obligations must be paid or resolved
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
In a leveraged buyout, employees, managers, or investors finance the purchase of the company by ______.
borrowing against its assets
When producers, consumers, or workers with similar needs pool their resources for mutual gain, they start a(n) ______.
cooperative
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
A state chartered legal entity with authority to act and have liability separate from its owners is a ______.
corporation
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.
corporation
LCs 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 _____
corporations
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.
corporations or 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
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
Select the two main types of partnerships.
general limited
The two major types of partnerships are ______.
general and limited
If two companies that both make water valves for plumbing contractors merge, it would be an example of a ______ merger.
horizontal
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
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
This type of corporation is owned and operated by the federal, state, or local government.
quasi-public corporation
Having carefully chosen partners with different skills and knowledge can help a partnership succeed because ______. (select all that apply)
it allows people to specialize in a particular area no one person has all of the skills needed
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 result of two firms (usually corporations) combining to form one company is called a _____
merger or merge
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
All profits from a sole proprietorship belong exclusively to the ______.
owner
_____ do not pay taxes when submitting the organization's tax return to the Internal Revenue Service; the tax return simply provides information about the profitability of the organization and the distribution of profits.
partners
A legal form of business with two or more owners is a(n) ______.
partnership
A limited liability company is taxed like a _____
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
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
As an entity, cooperatives are not set up to make _____
profits or money
Having a partner may share the risk, but it also means sharing _____ , because each partner must be rewarded for their participation in the business.
profits, rewards, or profit
A _____ corporation is one whose stock anyone may buy, sell, or trade.
public
An advantage of a sole proprietorship is that the owner ______.
retains all profits
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
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
The joining of two companies involved in different but related levels of an industry is called a(n) _____ merger.
vertical
Funds available for a sole proprietorship are limited to ______.
what the owner can provide
A key advantage of a sole proprietorship is that ______.
you have flexibility and control over the business
