Chapter 5 business

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

an S corporation

What are the advantages of the LLC form of organization?

Flexible ownership rules Limited liability Choice of taxation

Which are considered disadvantages of incorporating?

Initial Cost Double Taxation Extensive paperwork

Because owners are only responsible for losses up to the amount they have invested in a corporation, limited liability is considered:

a major advantage

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

acquisition

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

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

cooperative

The attributes of a conventional corporation include that:

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

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

corporation

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

e-commerce websites technology

Franchisors often use technology to meet the needs of both their customers and their _______ because technology makes communication faster and more widspread

employees, suppliers, franchisees, investors,

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

false

Mark, Cal and Aidan have decided to form a business where all owners will share in operating the business and in assuming liability for the business debts. They are most likely forming a(n) _______ partnership

general

Mark, Cal and Aidan have decided to form a business where all owners will share in operating the business and in assuming liability for the business debts. They are most likely forming a(n) ___________ partnership.

general

Advantages of starting an online franchise are:

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

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

paid health insurance paid sick or vacation leave time a pension plan

Unlimited liability as it relates to sole proprietorships is the risk of loss of ________ assets beyond the assets of the business

personal

Limited liability is considered an advantage of forming an LLC because:

personal assets are protected

Home-based franchises have many advantages, such as:

relief from the stress of commuting low overhead expenses

Stockholders are _______from the managers and employees of the firm because they are not actively involved in the operations of the firm.

seperate or independent

Franchises are attractive to minority populations because:

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

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

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

Ending a partnership can be difficult because of problems deciding:

the worth of a retiring partner's share how to distribute assets when a partner can retire

One of the most notable advantages of an online franchise is

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

True or false: The owner of a sole proprietorship is responsible for developing any fringe benefits they have.

true

When you own a sole proprietorship you and the business are considered one, so you have _________ liability for financial obligations such as debt.

unlimited

Which of these are advantages of a limited liability companies?

Choice of taxation Flexible ownership rules Limited liability

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. (Fig. 5.4)

Owners/stockholders elect board of directors Board of Directors hire officers of the corporation Officers hire managers of the corporation Managers hire employees

A unique government creation that looks like a corporation but is taxed like a sole proprietorship or partnership is called a(n) ____ corporation

S corporation

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

acquisition

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 ___________ taxation

double taxation

A corporation is a legal _______ with authority to act and have liability separate from its owners.

entity

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

Many minority business owners prefer a(n) _______ because it offers a businesses connections and supports

franchise

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

the _______ cost of incorporating can be expensive because of the need for accountants and lawyers.

initial

In a general partnership, all partners share the responsibility for operating the business and assume _______ for the businesses debt

liability

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

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

merger

A LLC has the choice of taxation and can be taxed as a(n) ________ or as a corporation

partnership

Termination of a partnership is difficult without a(n) ______ agreement.

partnership agreement

For a business to grow, prosper, and create economic opportunity, many people have to be willing to invest money in it. An advantage of a corporation is its ability to raise money through the sale of _________

stock, bonds, share, equity, or shares

In a sole proprietorship, any debts or damages incurred by the business are your personal debts and you must pay them. This disadvantage is known as:

unlimited liability

Which of following are true about the advantages and disadvantages of being a franchise owner:

Having a nationally recognized name for your business in a franchise can help with marketing and awareness While the upfront costs of a franchise may be steep, a franchise has a better chance of succeeding than starting a business from scratch

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

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

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

advantage / disadvantage

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

Taryn and Eilysh have decided to form a partnership. Taryn will not have management responsibility, but will invest money in the business. Taryn will be considered a(n)__________ partner.

limited

A corporation can sell ___________to anyone who is interested to raise more money for investment.

stocks

Shareholders are not liable for the debts of a corporation beyond the money they invest in it by buying company _________

stocks

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

vertical

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

vertical

About 30 percent of franchises are owned by African Americans, Latinos, Asians, and Native Americans. Franchisors are becoming more focused on recruiting __________ franchisees

minority / diverse

When the actions of others with the same franchise as yours have an impact on your future growth and profitability, this is an example of ___________ effects

coattail

The joining of firms in completely unrelated industries is a(n) _______ merger

conglomerate

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

Ed has decided to purchase and follow a business format by becoming a franchisee. The ________ _____________ he will sign gives him the right to use the business name and sell the products of the firm

franchise agreement

LLCs do have to submit articles of organization and an operating agreement, but do not have to:

hold annual meetings file written resolutions keep minutes

The start-up costs of filing for incorporation are high because:

lawyers and accountants are needed to do the complex filings

A _____________ partnership has partners who do not share in operating the business.

limited

The responsibility for a loss only up to the amount invested is __________ liability

limited

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

limited liability

Franchises are expanding internationally to access additional _______ Blank 1Blank 1 markets , Correct Unavailable that have new customers and to increase their profit potential.

markets

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

partnership

A business that is owned and managed by one person is a(n)

sole proprietorship