Busi 1301 ch. 4 terms and questions

What are the types of corporations?

- charter corporation (C-Corp) - sub chapter S corporation (S-Corp) - limited liability corporation (LLC)

advantages of a franchises

-increased ability for franchisor to expand -recognized name, product, and operating concept -management training and assistance -financial assistance

How does partnership differ from a sole proprietorship?

The difference is that with a Sole Proprietorship, only one person takes the bulk of all the debts of the company while in Partnerships, all of the partners share the liability.

Partnerships

an association of two or more individuals who agree to operate a business together for profit.

General partners

who have unlimited liability

Sole Proprietorship

A business that is established, owned, operated, and often financed by one person.

C Corporation

A conventional or basic form of corporate organization.

Limited Liability Company (LLC)

A hybrid organization that offers the same liability protection as a corporation but may be taxed as either a partnership or a corporation.

Limited liability limited partnership LLLP

A limited partnership with addition of limited liability, hence protecting the general partner from the debt and liabilities of the partnership.

what other options for business organization does a company have in addition to sole proprietorships, partnerships and corporations?

Cooperatives and joint ventures

Which of the following statements about cooperatives is true?

Cooperatives increase their members buying power.

what are the disadvantages of corporations?

Double taxation of profits Cost and complexity of formation more government restrictions

What are the advantages of operating as a partnership?

Ease of formation Availability of capital Diversity of skills and expertise Flexibility No Special taxes Relative freedom from Government control

What are the advantages sole proprietorship form of business organization?

Easy and inexpensive to form Profit all go to the owner Direct control of the business freedom from government regulations no special taxation Ease of dissolution

Limited partners

Partners whose liability is limited to the amount of money they invested in the partnership and who generally aren't involved in running the business

Which of the following statements about the taxation of partnerships is true?

Partnerships file tax returns but pass profits and losses on to partners who report them on their tax returns.

What are the benefits of joint ventures?

Shared technology and risk. Shared marketing and management expertise. Entry into markets where foreign companies are often not allowed unless goods are produced locally.

what are 3 important components of organizational structures?

Stockholders, directors, and officers

joint venture

Two or more companies that form an alliance to pursue a specific project, usually for a specified time period.

A term that means that business damages and/or debts can also be attached to the personal assets of the owners is ______ liability.

Unlimited

What are the disadvantages of partnerships?

Unlimited Liability potential for conflicts between partners Complexity of profit sharing Difficulty exiting or dissolving a partnership

What are the disadvantages of a sole proprietorship?

Unlimited liability Difficulty raising capital limited managerial expertise Trouble finding qualifies employees Personal time commitment unstable business life Losses are the owners responsibility

franchise agreement

a contract that allows the franchisee to use the franchisor's business name, trademark, and logo

board of directors

a group of persons elected by the stockholders to manage a corporation

IBM purchased MRO Software Inc. for $740 million. MRO was a niche provider of software and services to help customers including nuclear power plants and oil companies. IBM, plans to fold MRO into its software unit. This is an example of a(n):

acquisition

General Partnership

all partners are responsible for the management and financial obligations of the business, and profits.

Franchisee

an individual or company selling the goods or services in a certain geographic area.

Leveraged Buyout (LBO)

are corporate takeovers financed by large amounts of borrowed money- as much as 90% of the purchase price. Can be started by outside investors or the corporations' management.

conglomerate merger

brings together companies in unrelated businesses to reduce risk. Combining companies whose products have different seasonal patterns or respond differently to business cycles can result in more stable sales.

Buyer cooperatives

combine members' purchasing power

horizontal merger

companies at the same stage in the same industry merge to reduce costs, expand product offerings, or reduce competition.

vertical merger

company buys a firm in its same industry, often involved in an earlier or later stage of the production or sales process.

franchise growth

distribution of merch, goods and services. Expansion of established franchise.

Double taxation in a corporation means:

earnings of the corporation and dividends of the shareholders both are taxed

If the sole proprietorship acquires a legal business name, the owner then has limited liability.

false

Types of Partnerships

general and limited

Types of Mergers

horizontal, vertical, conglomerate

Franchising

is a form of business organization that involves a franchisor, the company supplying the product or service concepts, and the franchisee.

S corporation

is a hybrid entity, allowing smaller corporations to avoid double taxation of corporate profits as long as they meet certain size and ownership requirements.

Corporation

is a legal entity subject to the laws of the state in which it is formed, where the right to operate as a business is issued by state charter.

cooperatives

is a legal entity with several corporate features, such as limited liability, an unlimited life span, an elected board of directors, and an administrative staff.

why are mergers and acquisitions important to a company's overall growth?

it means greater financial strength for both companies involved in the transaction. Having greater economic power can lead to higher market share, more influence over customers, and reduced competitive threat. In most cases, bigger companies are harder to compete against.

Hard Rock Cafe International and Sol Melia Hotels and Resorts have allied to develop a multimillion-dollar hotel. This relationship is a _____ because their alliance will end as soon as the hotel is completed.

joint venture

what are the two types of cooperatives?

Buyers and sellers

Which of the following statements about the partnership as a form of business ownership is true?

Formation of the partnership is simple.

What makes franchising an appropriate form of organization for some types of business and why does it continue to grow?

Franchising allows bigger businesses to branch out and grow while giving people the opportunity to run their own business with the help and support of a larger company that has a proven formula for success.

limited partnership has two types

General partners and limited partners.

seller cooperative

Individual producers who join together to compete more effectively with large producers.

what is a financially motivated type of merger?

Leveraged buyout (LBO)

What are the advantages of corporations?

Limited Liability Ease of transferring ownership unlimited life tax deductions Ability to attract financing

Disadvantage of franchises

Loss of control Cost of franchising restricted operating freedom

Although they may vary slightly from state to state, all articles of incorporation include the following key items:

Name of corporation Company's goals Types of stock and number of shares of each type to issue Life of the corporation (usually "perpetual," meaning with no time limit) Minimum investment by owners Methods for transferring shares of stock Address of the corporate office Names and addresses of the first board of directors

merger

occurs when two or more firms combine to form one new company

stockholders/shareholders

owners of a corporation, holding shares of stock that provide them with certain rights.

what are the benefits of buyer cooperatives?

pooling buying power buying volume increases purchasing power efficiency=lower prices members get shares of the profit based on how much they bought

Which of the following is a disadvantage for the fast-food franchisee?

royalty fees

The first step to incorporating a company is to

selecting a company name

Limited liability partnerships (LLP)

similar to a general partnership except that partners are not held responsible for business debt and liabilities

acquisition

the purchase of a target company by another corporation or by an investor group typically negotiated with the target company board of directors

Merger Motives

to improve overall performance of the merged firms through cost savings, elimination of overlapping operations, improved purchasing power, increased market share, or reduced competition.

Taco bell is a what?

type of franchised business