CH. 5 Smartbook

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

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

-When a partner can retire -How to distribute assets

The attributes of a conventional corporation include that:

-it is state chartered -it is a legal entity -corporate liability is separate from owners

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

acquisition or buyout

In a franchise, having management support from the franchisor is a(n) ______ whereas the coattail effect is considered a

advantage, disadvantage

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

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

general partnership

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

keep minutes, hold annual meetings, and file written resolutions

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)

limited liability company (LLC)

The result of two firms joining to form one is called a(n)

merger

A key advantage of a home-based franchise is low ______ costs, which can be ongoing. These are the costs associated with rent, utilities, and other fixed costs.

overhead

If you start and manage a landscaping business on your own, you have likely started a

sole proprietorship

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

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

Many franchises are expanding internationally because

there are large new markets available

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

vertical merger

What are two advantages of the corporate form of business?

-Ability to raise more money for investment -Limited liability

Which are considered disadvantages of incorporating?

-Initial Cost -Double Taxation -Extensive paperwork

Home-based franchises have many advantages, such as:

-relief from the stress of commuting -low overhead expenses

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

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

What two items are delineated in a franchise agreement?

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

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

A partnership ______ can spell out the requirements of terminating a partnership

agreement

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

an S corporation

Many people do not like working for someone, so being your own ______ is an advantage of sole proprietorships.

boss

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

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

cooperative

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

double taxation

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

True or false: Partnerships are less likely to survive than sole proprietorships.

False

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

LLC