Chapter 5 How to Form a Business
Select the attributes of a corporation.
State Chartered Liability separate from owners legal entity
A ????? is where one company purchases the property and obligations of another
acquisition
Select the disadvantages of a sole proprietorship
limited financial resources unlimited liability large time commitment
When two firms join together to form one new company, it is called a
merger
The responsibility for a loss only up to the amount invested is________________ liability
limited
True or false: A business can start in one form of ownership, but does not have to stay in that form.
True
When two firms operating in different stages of related businessess join, it is called a ______________ merger.
vertical
Ending a partnership can be difficult because of problems deciding:
when a partner can retire the worth of a retiring partner's share how to distribute assets
A partnership where all owners share in operating the business and in assuming unlimited liability for the business's debts is a:
general partnership
A merger of two firms in the same industry that allows the companies to diversify or expand their products is a
horizontal merger
True or False: If you and a friend start a business together you have started a sol proprietorship.
False
Rank the order in which members of a corporation are chosen in order to separate ownership from management. Start at the top of the managerial hierarcy.
Owners/Stockholders elect board of directors Board of directors hire officers of the corporation officers hire managers of the corporation managers hire employees
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
Partnership
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.
a pension plan paid sick or vacation leave time paid health insurance
A legal entity with authority to act and have liability apart from its owners is a
corporation
The right to use a specific business' name and sell its products or services in a given territory is a _____________________ agreement
franchise
LLCs do have to submit articles of organization and an operating agreement, but do not have to:
hold annual meetings keep minutes file written resolutions
A sole proprietorship has a limited life span unless:
it is sold or taken over by the sole proprietor's heirs
When a sole proprietor leaves an ongoing business to future generations, it is said that the owner is leaving a
legacy
A_________________is and attempt by employess, management, or a group of investors to purchase an organization primarily through borrowing.
leveraged buyout (LBO)
When there is one or more general partners and one more limited partners the firm is a
limited partnership
The Limited partners' risk of losing their personal assets in an LLP is:
limited to the amount of their investment
A sole proprietorship is owned by how many people?
one
Amoung the reasons that disagreements can ruin a partner ship are
opposing management styles arguing over profits disagreement over workload
Ease of formation is an advantage of a
sole proprietorship
Studies have indicated that partnerships are four times more likely to succeed than
sole proprietorships
The three major forms of business most common in the United States are
sole proprietorships partnerships corporations