Chapter 10: Business Organizations – Flashcards

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