Quiz Five CEC Business (Key Terms)

Why would unlimited liability be considered a major drawback to sole proprietorships?

Because any debts or damages incurred by the business are your debts and you must pay them even if it meals liquidating personal assets.

What is a cooperative?

Cooperatives are organizations owned by members/customers. Some people form cooperatives to acquire more economic power than they would have as individuals. Small businesses often form cooperatives to gain more purchasing marketing or product development strength.

What is the difference between a limited partner and a general partner?

General partners are owners who have unlimited liability and are active in managing the company. limited partners are owners who have limited liability and are not active in the company.

What opportunities are available for starting a global franchise?

It is often difficult to transfer an idea or product that worked well in the united states into another culture. It is essential to adapt to the region.

Why are so many new businesses choosing a limited liability company (LLC) form of ownership?

Limited liability companies have the advantage of limited liability without the hassles of forming a corporation or the limitations imposed by S corp. LLC's may choose whether to be taxed as partnerships or corporations.

If you buy stock in a corporation and someone gets injured by one of the corporation's products can you be sued? Why or why not?

No, because it is a limited liability corporation.

What are some of the advantages and disadvantages of partnerships?

The advantages include more financial resources, shared management and pooled knowledge, and longer survival. The disadvantages include unlimited liability, division of profits, disagreements among partners, and difficulty of termination.

Most people who start business in the United States are sole proprietors. What are the advantages and disadvantages of sole proprietorships?

The advantages of sole proprietorships include ease of starting and ending ability to be your own boss, pride of ownership, retention of profit, and no special taxes. The disadvantages include unlimited liability, limited financial resources, difficulty in management, overwhelming time commitment, few fringe benefits, limited growth, and limited life span.

What are some of the factors to consider before buying a franchise?

The benefits include getting a nationally recognized name and reputation, a proven management system, promotional assistance, and pride of ownership. Drawbacks include high franchise fees, managerial regulation, shared profits, and transfer of adverse effects if other franchisees fail.

What are the major advantages and disadvantages of incorporating a business?

Two important reasons for incorporating are special tax advantages and limited liability.