Introduction to Business

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.

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

franchise

When a business chooses to ______________________, it enables many people to share in the ownership and profits of a business without working there or having other commitments to it

incorporate

The biggest disadvantage of a home-based franchise is?

less time for work

A key advantage of LLCs is _________________ liability where personal assets are protected

limited

If the sole proprietor dies, is incapacitated, or retires, the business no longer exists. This disadvantage of a sole proprietorship is called ___________________ life span

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

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

lower failure rates

Amy wants to start a business but is concerned with starting from scratch. To alleviate her concern Amy could?

obtain a franchise

Jane wants to start a new Subway franchise in her town. In the initial stage of investigating, Jane must consider which of the following?

-The financial strength of the franchisor -How to terminate the franchise -How much capital is needed to purchase the franchise

A sole proprietorship often grows slowly because the owner is?

-The main source of creativity -The major source of funding -The main source of know-how

Franchises are attractive to minority populations because?

-They provide personal ownership of a business -Some offer financial support for aspiring business owners

Which are attributes of a master limited partnership?

-Traded on the stock exchange -taxed like a partnership -acts like a corporation

Select the disadvantages of a partnership

-Unlimited liability -Partner disagreements -Division of profit

Select the disadvantages of a sole proprietorship.

-Unlimited liability -limited financial resources

Members of cooperatives often participate by?

-Working in the cooperative for a period of time each month -electing a board of directors to hire managers

Among the reasons the disagreements can ruin a partnership are?

-arguments over dividing profits -disagreement over workload -opposing management styles

Select the reasons why size is an advantage of the corporation

-attract experts for hire -acquire the latest equipment -build modern facilities

Among the advantages of farm cooperatives for their members is that they?

-increase economic power -do not pay taxes as corporations do

The main types of partnerships include?

-limited -master limited -general

Home-based franchises have many advantages, such as?

-low overhead expenses -relief from the stress of commuting

What are some of the disadvantages of an LLC?

-self-employment taxes -more paperwork than sole proprietors

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

-technology -e-commerce -websites

A(n) ________________ is an attempt by employees, management, or a group of investors to purchase an organization primarily through borrowing

Leveraged buyout

In a general partnership, all partners share the responsibility for operating the business and assume __________________ for the business's debts

Liability

Bob and Dan are doctors in a medical practice. Dan is being sued for malpractice, but it will not affect Bob's assets they formed a(n) ____________________ ____________________ partnership

Limited liability

Stockholders' liability for losses only up to the amount they invest is called?

Limited liability

When there is one or more general partners and one or more limited partners, the firm is a(n)?

Limited partnership

The result of two firms (usually corporations) combining to form one company is called a?

Merger

A sole proprietorship is owned by how many people?

One

__________________ 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

An LLC admits a written operating agreement, similar to a(n) __________________ agreement, describing how the company is to be operated

Partnership

An LLC submits a written operating agreement, similar to a(n) ___________________ agreement, describing how the company is to be operated

Partnership

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

A disadvantage of buying a franchise is?

Paying a share of profits as royalties

An advantage of a sole proprietorship is that the owner?

Retains profits

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

S corporation

Having no more than 100 shareholders and one class of stock is characteristic of a(n)?

S corporation

A corporation allows people to own _____________ and share in the profits of the firms

Stock

Conflict may be present if ___________________ elect a board of directors who disagree with management

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

Perpetual life for a corporation means that the death of one owner does not _________________ the corporation

Terminate

Sole proprietorships far outnumber _____________ and _________________, but they net far fewer sales and less income

corporations; partnerships

Leaving a ______________ means owners can leave an ongoing business for future generations

Legacy

What are some of the disadvantages of a corporation?

-Ability to raise more money for investment -limited liability

The Uniform Partnership Act defines the three key elements of a general partnership as?

-Common ownership -Shared profits and losses -Participation in operations

Select the reasons a business might change ownership form

-Dropping a partner from the firm -Adding a partner to the firm -Seeking limited liability

Which are considered disadvantages of incorporating?

-Extensive paperwork -Double Taxation -Initial cost

Select the most popular businesses for franchising?

-Full service restaurants -Fast food restaurants -Gas stations with convivence stores

Select all attributes that make the initial cost of incorporating a disadvantage?

-High start-up costs associated with documentation -The high cost of hiring lawyers and accountants for the complex filings needed

Ending a partnership can be difficult because of problems deciding?

-How to distribute assets -When a partner can retire -The worth of a retiring partner's share

The attributes of a corporation include that?

-It is a legal entity -It is state chartered -Corporate liability is separate from owners

It is easy to start and end a sole proprietorship because?

-It may only require a simple permit or license to start -Only one person is involved in the decision to dissolve the business

Select all of the advantages of the partnership form of business

-Longer survival -Pooled skills -More financial resources

Select those items considered fringe benefits that people working for a company are likely to receive, but a sole proprietor has to develop on its own?

-Paid sick or vacation leave time -A pension plan -Paid health insurance

What are some of the disadvantages of operating a franchise?

-Shared profit -Large start-up costs -Management regulation

In order to qualify to become an S corporation, a company must have?

-Shareholders who are individuals or estates -No more than 100 shareholders

The owner of a sole proprietorship must pay which of these taxes?

-Social Security and Medicare -Personal Income tax

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 hierarchy.

1. Owners/stockholders elect board of directors 2. Board of Directors hire officers of the corporation 3. Officers hire managers of the corporation 4. Managers hire employees

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

Bruce is meeting with his accountant to choose whether his LLC is to be taxed as a partnership or a corporation. This advantage of forming an LLC is called?

Choice of taxation

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 Mergers

A key advantage of a sole proprietorship is that?

Controlling your own business is exciting

A legal entity with authority to act and have flexibility apart from its owners is a?

Corporation

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

Corporation

Selling shares of stock to anyone allows a _______________ to raise more money to grow

Corporation

LLCs can be taxed as _________________ or _________________, which allows the business owners to choose their method of taxation

Corporations; Partnerships

Sharing risk means sharing rewards in a partnership. A partner expects to be rewarded for putting time and money into a firm through?

Division of profits

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

Franchises are important to the ________________ because of the number of new businesses started and jobs created

Economy

Historically, the _______________ rate for franchises has been lower than that of other business ventures

Failure

Bruce owns his own company, but is having trouble working alone because he feels he needs additional expertise, management help, and an influx of money to stay afloat. Bruce should consider?

Forming a partnership

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)?

Franchise

Drew and Owen are business partners. Drew invested money and manages the business while Owen invested his money, but does not participate in the business management. Drew is considered a ____________________ partner while Owen is considered a _______________ partner

General; limited

When a soft drink company and a mineral water company merge and then are able to supply a variety of drinking products they have formed a(n) _______________ merger

Horizontal

A limited liability partnership limits the liability of limited partners to their?

Initial investment

Which form of ownership is nontransferable because there is no stock?

LLC

It is often more difficult for sole proprietorships to attract and retain good employees because?

They cannot offer competitive pay and benefits

Sole proprietors often feel that owning a business is a way of life because they seldom have enough _______________ to complete all their tasks

Time

When any debts or damages incurred by the business are your debts or damages it is called ______________ liability

Unlimited

______________ liability means partners can lose everything they own if the business losses a lawsuit

Unlimited

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

A merger that joins two companies involved in different but related levels of an industry is a(n)?

Vertical

Funds available for a sole proprietorship are limited to?

What the owner can provide

Franchisees must follow the franchise _________________, which limits the control of the operation by the franchisee through regulations and guidelines

agreement

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

cooperative

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

cooperative

Some people dislike the notion of owners, managers, workers, and buyers being separate individuals with separate goals. To meet their needs, they have formed?

cooperatives

Taking a firm ________________ is when a corporation decides to maintain, or in some cases regain, control of a firm internally by obtaining all of the stock

private

Flexible distribution of profits and losses is considered an advantage of an LLC because?

profit/losses do not have to be distributed in proportion to the money each person invests

In developing a partnership agreement, it is recommended that you?

seek legal advice

Ease of formation is an advantage of a(n)?

sole proprietorship

Corporations issue ______________ to shareholders and this allows ownership to change when it is sold

stock

Cooperatives have an advantage in the marketplace because they do not pay the same kind of ______________________ corporations do

taxes

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

unlimited liability