Chpt 4 How to form a Business

Which of the following are true regarding the process of forming a corporation?

The articles of incorporation are usually filed in the state in which the company will be incorporated The bylaws of the corporation describe how the firm is to be operated

A franchise owner will experience the coattail effect when

a fellow franchisee does something that has an impact on growth and profitability

A vertical merger refers to

a merger between firms operating at different stages of related businesses

An advantage of the separation of ownership from management in corporations is that the company can raise money from investors but the investors

are not involved in daily operations

A corporation is formally formed with

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.

bylaws

Partnerships are less likely to survive than sole proprietorships.

false

One of the most important advantages of the sole proprietor form of ownership is that a business owner

finds it easier to start and end the business

Many minority business owners prefer the ________ form of business ownership because it offers business connections and support.

franchise

In terms of operating flexibility, what are three things that LLCs are not required to do?

hold annual meetings file written resolutions keep minutes

Low overhead costs are an advantage of which type of business?

home-bases businesses

An S corporation has the liability protections of a corporation but is taxed

like a partnership or sole proprietorship

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

merge

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

partnership

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

partnership

Home-based franchises have many advantages, such as:

relief from the stress of commuting low overhead expenses

Studies have indicated that partnerships are four times more likely to succeed than:

sole proprietorships

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

What two items are delineated in a franchise agreement?

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

why do partnerships have a longer survival rate than sole proprietorship.

because they become more disciplined, and the businesses life is based on all the partners'

Conventional corporation

is a state chartered legal entity with authority to act and have liability seperate from its owners- its stockholders

unlimited liability

the risk of personal losses any debts incurred by the business are your debts and you must do whatever you have to do to pay them

Many franchises are expanding internationally because

there are large new markets available

General Partnership

All owners share in operating the business and in assuming liability for the business's debts.

Which country is the most popular target for U.S.-based franchises to enter the global market?

Canada

Which are attributes of a conventional corporation?

Corporate liability is separate from owners. it is a legal entity. it is state chartered.

What are two of the disadvantages of a corporation?

Cost of forming a corporation Double taxation

Because of the difficulty in ending a partnership, decisions regarding which two areas should be spelled out in a partnership agreement?

How to distribute assets When a partner can retire

A company similar to an S corporation but without the special eligibility requirements is an

LLC (Limited Liability Company)

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

Limited Liability Company

What are three advantages of franchising?

Lower failure rate Recognized name Financial advice

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

acquisition

A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships is Blank

an S corporation

A business owned and controlled through pooled resources by the people who use it is a(n) Blank

cooperative

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

cooperative

A state-chartered legal entity with authority to act and have liability separate from its owners is a

corporation

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

double taxation

Financial advice and a nationally recognized name are both benefits of owning a(n)

franchise

A partnership where all owners share in operating the business and in assuming unlimited liability for the business's debts is a Blank

general partnership

LLC's are considered to have operational flexibility because while they must submit articles of organization, they are not required to Blank______.

keep minutes or hold annual meetings

Franchises offer those starting a business the advantage of a recognized name, management assistance, and

lower failure rates

What are three advantages of starting an online franchise?

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

Termination of a partnership is difficult without a(n)

partnership agreement

limited partnership

partnership in which only one partner is required to be a general partner

Unlimited liability as it relates to sole proprietorships is the risk of loss of

personal assets beyond the assets of the business.

the owners of a corporation are called

stockholders

An advantage of partnerships is a longer _______ rate than sole proprietorships, because they become more disciplined and the business's life is based on all the partners.

survival rate

Many brick and mortar franchisees are using ______ to expand their businesses online to lower costs and better meet the needs of their customers.

technology websites

Because of the poor publicity at a fellow franchise location, you notice that sales at your location have decreased. The impact of the poor publicity on your company is referred to as

the coattail effect

One of the most notable advantages of an online franchise is that:

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

What are two reasons that franchises are attractive to minority populations?

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

If your company's debts or damages are solely your responsibility you could be experiencing the disadvantage associated with owning a sole proprietorship called

unlimited liability

A merger between a soft drink company and an artificial sweetener maker could be considered a(n)

vertical merger