question

An _____ is by the definition one who initiates and assumes the financial risks of a new enterprise and undertakes to provide or control its management.

answer

entrepreneur

question

The simplest form of business organization, in which the owner is the business.

answer

Sole Proprietorship

question

Thus, anyone who does business without creating a separate business organization, such as a partnership or corporation, has a _____.

answer

sole proprietorship

question

More than ___ of all U.S. businesses are sole proprietorships. They are usually small enterprises with revenues of less than __ per year.

answer

two-thirds /$1 million

question

Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright in the selling of goods or services.

answer

Franchise

question

One receiving a license to use another's (the franchisors) trademark, trade name, or copyright in the sale of goods and services.

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Franchisee

question

One licensing another (the franchisee) to use the owners trademark, trade name, or copyright in the selling of goods and services.

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Franchisor

question

A _____ arises when a manufacturing concern (franchisor) licenses a dealer (franchisee) to sell its product. Example: car dealership

answer

Distributorship

question

In ____, such as a burger king restaurant or Hilton hotel, a franchise operates under a franchisors trade name and is identified as a member of a select group of dealers that engage in the franchisor's business.

answer

Chain-style business operation

question

In a ______ , the franchisor transmits to the franchisee the essential ingredients or formula to make a particular product.

answer

Manufacturing or processing plant arrangement

question

The ___ ___ specifies the terms and conditions of the franchise and spells out the rights and duties of the franchisor and the franchisee.

answer

franchise contract

question

The franchisee ordinarily pays an __ or __ price for the franchise license. This fee is separate from the various products that the franchisee purchases from or through the franchisor.

answer

initial / lump-sum

question

The franchise agreement may specifiywhether the premises for the business must be leased or purchased outright.

answer

Business Premises

question

Typically, the franchisor will determine the territory to be served. Some franchise contracts give the franchisee exclusive rights, or "territorial rights" to a certain geographic area.

answer

Location of the Franchise

question

Although the day-to-day operations of the franchise is normally left to the franchisee, the franchise agreement may provide for the amount of supervision and control agreed on by the parties.

answer

Quality Control by the Franchisor

question

Usually, the franchise agreement will specify that the termination must be "for cause," such as death or disability of the franchisee, insolvency of the franchisee or breach of the franchise agreement. Most franchise contracts provide that notice of termination must be given. If no set time for termination is specified, then a reasonable time, with notice, will be implied.

answer

Termination of the Franchise

question

Because a franchisors termination of a franchise often has adverse consequences for the franchisee, much franchise litigation involves claims of ___.

answer

Wrongful Termination

question

Federal and state laws protect franchisees from the arbitrary or unfair termination of their franchises by the franchisors.

answer

Good Faith and Fair Dealing

question

Traditionally, partnerships have been classified as either ____ or ____.

answer

general partnerships/ limited partnerships

question

___ is designed for professionals who normally do business as partners in a partnership.

answer

Limited liability partnership

question

An agreement by two or more persons to carry on, as co owners, a business for profit.

answer

Partnership

question

A ____ arises from an agreement, express or implied, between two or more persons to carry on a business for profit.

answer

general partnership

question

1. A sharing of profits and losses. 2. A joint ownership of the business. 3. An equal right in the management of the business.

answer

3 essential elements to a partnership

question

No particular form of partnership agreement is necessary for the creation of a partnership, but for practical reasons, the partnership agreement should be in ____.

answer

writing

question

A written agreement that sets forth each partners rights in, and obligations to, the partnership.

answer

Articles of Partnership

question

A key advantage of the partnership is that the firm itself does not _____.

answer

pay federal income taxes

question

The main disadvantage of the partnership is that the partners are subject to ____ liability for partnership obligations.

answer

personal

question

A doctrine under which a plaintiff may sue, and collect judgement from, any of several jointly liable defendants.

answer

Joint and Several Liability

question

Additionally, a partner who commits a tort that results in a judgement against the partnership may be required to repay the firm for any damages it pays.

answer

...

question

A relationship founded on trust and confidence

answer

Fiduciary Relationship

question

1. A partners duty of loyalty has two aspects. A partner must account to the partnership for any profit or benefit from the firm's business or the use of its property. A partner must also refrain from dealing with the firm as an adverse party or competing with it. 2. A partners duty of care is limited to refraining from negligent or reckless conduct, intentional misconduct, and violations of the law.

answer

Fiduciary Duties

question

A partnership consisting of one or more general partners and one or more limited partners.

answer

Limited Partnership

question

A limited partnership is a creature of statute, because it does not come into existence until a _____ is filed with the appropriate state office.

answer

certificate of limited partnership

question

A partner who assumes responsibilty for the management of the partnership and liability for its debts.

answer

General Partner

question

A partner who contributes capital to the partnership but has no right to participate in the management or operation of the business and assumes no liability for partnership beyond the capital contributed.

answer

Limited Partner

question

One of the major benefits of becoming a limited partner is this ______.

answer

limitation on liability

question

A form of partnership that allows professionals to enjoy tax benefits of a partnership while limiting their personal liability for the malpractice of other partners.

answer

Limited Liability Partnership (LLP)

question

The major advantage of the LLP is that it allows a partnership to continue as a ____ for tax purposes, but limits the liability of partners.

answer

pass-through entity

question

A major disadvantage of the general partnership is the _____ of its owner-partners.

answer

unlimited personal liability

question

A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership.

answer

Limited Liability Company (LLC)

question

This business form is governed by the state ____.

answer

LLC statutes

question

A person who has an ownership interest in a limited liability company.

answer

Member

question

The document filed with a designated state official by which a limited liability company is formed.

answer

Articles of Organization

question

To form an LLC, articles of organization must be filed with a ____ agency --- usually the _____ office.

answer

State/ secretary of state's

question

The business's name must include the words "Limited Liability Company" or the initials "LLC"

answer

...

question

A key advantage of the LLC is that the liability of members is limited to the amount of their ____.

answer

investments

question

An LLC that has _____ can choose to be taxed either as a partnership or as a corporation.

answer

two or more members

question

In a limited liability company, an agreement in which the members set forth the details of how the business will be managed and operated.

answer

Operating Agreement

question

There are two options for managing an LLC:

answer

member-managed/manager-managed

question

A legal business form that complies with statutory requirements.

answer

Corporation

question

Corporations are owned by:

answer

Shareholders

question

The corporations existence as a legal entity, which can be perpetual, depends generally on ____.

answer

state law

question

One of the key advantages of the corporate form of business is that the liability of its owners (shareholders) is limited to their ___.

answer

investments

question

The corporate entity pays taxes on the firms ____, and when income is distributed to shareholders, the shareholders again pay taxes on that income.

answer

income

question

A business corporation that qualifies for special income tax treatment.

answer

S Corporation

question

As in a partnership, the income is taxed only ___.

answer

once

question

The document filed with the appropriate governmental agency, usually the secretary of state, when a business is incorporated.

answer

Articles of Incorporation

question

A set of governing rules adopted by a corporation or other association

answer

Bylaws

question

Corporations can do one of two things with corporate profits: retain them or pass them on to shareholders in the form of ____.

answer

dividends

question

A distribution to corporate shareholders of corporate profits or income, disbursed in proportion to number shares held.

answer

Dividend

question

Another import aspect of corporate taxation is that corporate profits can be subject to ____.

answer

double taxation

question

The proportion of a corporations profits that has not been paid out as dividends to shareholders.

answer

Retained Earnings

question

It also has the right of due process before denial of life, liberty, or property, as well as freedom from unreasonable searches and seizures and from double jeopardy.

answer

Constitutional Rights of Corporations

question

One of the hallmarks of the corporate organizations is that shareholders are not personally liable for the debts of the corporation.

answer

Liabilities of Shareholders

question

Bonus: To disregard the corporate entity and hold the shareholders personally liable for a corporate obligation.

answer

Pierce the Corporate Veil

Chapter 10: Business Organizations – Flashcards

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