Business Chapter 5
What is a merger
the result of two firms jointing to form one company
Approximately how many businesses are started each year in the USA
400,000
What is an S corporation?
A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships
Two or more people legally agree to become co owners of a business, it is called
a partnership
A legal entity with authority to act and have liability apart from its owners
Corporation
Disadvantages of Corporations
Initial cost, Extensive paperwork, Double taxation, Two tax returns, Size, Difficulty of termination, Possible conflict with stockholders and board of directors
Advantages of corporations
Limited liability, Ability to raise more money for investment, Size, Perpetual life, Ease of ownership change, Ease of attracting talented employees, Separation of ownership from management
Advantages of LLCs
Limited liability, Choice of taxation, Flexible ownership rules, Flexible distribution of profits and losses, Operating flexibility
Limited Liability partnership (LLP)
Limits partners' risk of losing their personal assets to the outcomes of only their own acts and omissions and those of people under their supervision.
Advantages of partnerships
More financial resources, Shared management and pooled/complementary skills and knowledge, Longer survival, No special taxes
Disadvantages of LLCs
No stock, Fewer incentives, Taxes, Paperwork
What is an acquisition
One company's purchase of the property and obligations of another company.
What is true regarding the process of forming a corporation?
The bylaws of the corporation describe how the firm is to be operated, The articles of incorporation are usually filed in the state in which the company will be incorporated
What are the three types of corporate mergers?
Vertical, horizontal, and conglomerate
Conventional (C) Corporation is
a state chartered legal entity with authority to act and have liability separate from its owners - its stockholders
In a general partnership,
all owners share in operating the business and in assuming liability for the businesses debts
what is a franchise agreement
an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory
What is a leveraged buyout (LBO)
an attempt by employees, management, or a group of private investors to buy out the stockholders in a company, primarily by borrowing the necessary funds
What is a cooperative (co-op)
an organization owned and controlled by the people who use it -producers, consumers, or workers with similar needs who pool their resources for mutual gain
What is a limited partner
an owner who invest money in the business but does not have any management responsibility or liability for losses beyond his or her investment
What is a general partner
an owner/partner who has unlimited liability and is active in managing the firm
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
The actions of a fellow franchisee will affect your franchise. This is known as the
coattail effects
A business owned and controlled through pooled resources by the people who use it is a(n) ______.
cooperative
Many brick and mortar franchisees are using Blank______ to expand their businesses online to lower costs and better meet the needs of their customers. Multiple select question.
e-commerce, technology, websites
What are the two special forms of business ownership
franchises and cooperatives
Types of partnerships
general, limited, master limited
A limited partnership,
has one or more general partners and one or more limited partners
Relief from the stress of commuting, extra time for family activities, and low overhead expenses are all advantages of _____ _____ franchinses
home based
Because of the difficulty in ending a partnership, decisions regarding what two areas should be spelled out in a partnership agreement?
how to distribute assets and when a partner can retire
Limited Liability Company (LLC)
is similar to an S corporation but without the special eligibility requirements.
Horizontal merger
joints two firms in the same industry and allows them to diversify or expand their products
Vertical merger
joints two firms operating in different stages of related businesses
LLC's are considered to have operational flexibility because while they must submit articles of organization, they are not required to:
keep minutes or hold annual meetings
Master Limited Partnership (MLP),
looks much like a corporation in that it acts like a corporation and is traded on the stock exchanges like a corporation, but is taxed like a partnership and thus avoids the corporate income tax
Master limited partnerships are limited to
oil, real estate, and gas industries
A business owned, and usually managed by one person
sole proprietorship
What are the three major forms of business ownership
sole proprietorships, partnerships, and corporations
Many franchises are expanding internationally because:
there are large new markets available
Conglomerate merger
unites firms in completely unrelated industries in order to diversity business operations and investments
Disadvantages of Partnerships
unlimited liability, division of profits, disagreements among partners, difficulty of termination
