Intro to Business Chapter 5

Corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution.

"Double taxation" means:

franchise agreement

A ___________ is an arrangement whereby someone with proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

merger

A ____________ is two firms combining to form one company.

vertical

A ______________ merger unites firms at different stages of related businesses.

As a corporation, partnership or sole proprietorship.

A franchise can be formed:

Avoid the problem of double taxation associated with conventional corporations.

A major advantage of S corporations is that they:

Vertical merger.

A merger involving a commercial bakery and a grocery retailer would be an example of a:

Limited partner

A partner (owner) who invests money in a business, does not take an active role in managing the operation, and is only subject to losing the funds he/she invested.

Franchisee

A person who buys the right to use a business name and sell a product within a given territory is called a:

acquisition

A(n) _________ occurs when one company buys the property and obligations of another company.

franchisor

A(n) _____________ is a company that has a proven business model and is willing to sell the rights to use the business model to others so that they can sell the same product or service within a given territory.

conventional corporation

A(n) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

Leveraged buyout.

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

Stockholder.

An owner of a corporation is known as a(n):

Cannot participate in the management of the partnership

Finley is a limited partner in Gettout & Associates. Heywood U. Gettout, one of the general partners in the company, must temporarily leave the company to attend to some personal matters. Heywood has asked Finley to perform his managerial duties while he is gone. As a limited partner, Finley:

General

In a partnership, a(n) __________ partner (owner) actively manages the company and has unlimited liability for claims against the firm.

Lose their personal assets as the result of their company's financial problems.

Jamie and Maria invested all their savings in a small pizzeria they opened outside the University of Western Kentucky. They operated the business as a general partnership. After 11 months, the business went broke and Jamie and Maria were left with outstanding bills of $37,500, which was more than their initial investment in the company. Jamie and Maria can:

Ceases to exist unless sold or taken over by Joe's heirs

Joe Jackson operates a sole proprietorship, but he is in poor health and may be unable to continue running the business. If Joe becomes incapacitated, his business:

Unlimited liability the owner has for the debts of the firm.

One of the major disadvantages of a sole proprietorship is the:

A nationally recognized name and product.

One reason franchises have become so popular is that this arrangement provides the franchisee with:

Limited Liability Partnership

One way to eliminate some of the risk of your partners making costly mistakes that could jeopardize your personal assets is to set-up a:

High initial costs and fees

Sierra is interested in becoming a franchise owner, by opening and operating one of 50 Cactus Katie's Grills, a very successful fast food chain specializing in food dishes from the American southwest. Which of the following problems is Sierra most likely to encounter if she agrees to become a franchisee?

Sole Proprietorship

The __________ is the most common form of business ownership.

Stockholders.

The board of directors for a corporation is elected by its:

Corporation

The form of business ownership best suited to raising large amounts of money for expansion is the:

to protect his/her other assets with limited liability.

The reason a professional such as a lawyer or doctor would incorporate his/her business is

Horizontal merger.

Trans Globe Airlines is in talks with Royal Blue Airlines, a financially troubled rival. The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations. This proposed merger is an example of a:

Closed corporation.

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

Conglomerate merger.

When two companies in completely unrelated industries agree to become one firm, the result is called a:

conglomerate

When two firms who do not participate in the same industries, for example a software company and a fast food restaurant company decide to merge, the result is called a ____________ merger.

Shared management and pooled skills

Which of the following is an advantage of a partnership?

Limited liability of owners

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Double taxation of earnings.

Which of the following is normally considered a disadvantage of the corporate form of business?

Pays taxes on the profits of the business, at the owner's personal tax rate

With respect to taxes, the sole proprietorship:

Limited liability companies

_____________ are companies that are similar to S Corporations but are not restricted with similar eligibility requirements.