Chapter 5 How to Form a Business – Flashcards
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If the sole proprietor dies, is incapacitated, or retires, the business no longer exists. This disadvantage of a sole proprietorship is called ____ life span.
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Limited
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All of the following are considered disadvantages of a sole proprietorship except:
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limited liability
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The responsibility of the owner of a sole proprietorship for all of the debts of the business is _____ liability.
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unlimited
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True or False: A comprehensive benefit plan may add up to 30 percent or more of a worker's salary.
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True
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Ending a partnership can be difficult because of problems deciding:
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The worth of a retiring partner's share, how a partner can retire, and how to distribute assets.
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The right to use a specific business's name and sell its products of services in a given territory is a(n) ____ agreement.
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Franchise
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The ____ is the company that develops a product concept and sells others the rights in the form of a franchise to make and sell the product.
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Franchisor
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When producers, consumers, or workers with similar needs pool their resources for mutual gain, they start a(n):
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cooperative
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When farmers join together to get better prices for their food products, this is a(n) ____ cooperative.
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farm
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An advantage of the separation of ownership from management in corporations is that the company can raise money from investors but the investors:
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are not involved in daily operations
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It is easy to change ownership in a corporation by exchanging
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stock
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LLCs do have to submit articles of organization and an operating agreement, but do not have to
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keep minutes, file written resolutions, or hold annual meetings
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A company similar to an S corporation but with the special eligibility requirements is a ____ ____ company.
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Limited liability
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A state-chartered legal entity with authority to act and have liability separate from its owners is a:
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corporation
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Leaving a ____ means owners can leave an ongoing business for future generations.
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legacy
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True or False: Partnerships are less likely to survive for a longer time than sole proprietorships.
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False
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The actions of a fellow franchisee will affect your franchise. This is known as the ____ ____.
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coattail effect
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The franchisor often wants to approve the new owners in the franchisee's sale of the business:
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to meet the franchise's standards, to control quality
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The advantage of becoming a convention corporation includes
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access to more capital
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A legal form of business with two or more owners is a(n) ____.
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partnership
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When considering which type of business to start a sole proprietor would have to accept:
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The amount of time that needs to be devoted.
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Advantages of international franchising include:
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expanding customer base, less competition
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Sole proprietors can leave their business to their heirs. This is called:
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leaving a legacy
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Owners of sole proprietors not only retain all____, but also benefit from the increasing value of the firm.
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profits
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The form of ownership that is legal entity in itself and has no restrictions on the number of stockholders is a _____.
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corporation
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Home-based franchises have many advantages, such as:
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extra time for family activities, relief from stress of commuting, and low overhead expenses.
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The biggest disadvantage of a home-based franchise is___.
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feeling of isolation
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The disadvantage of corporations is that they become too large to be ____.
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flexible
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the start-up costs of filing for incorporation are high because:
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lawyers
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Many brick and mortar franchisees are using ____ to expand their businesses online to lower costs and better meet the needs of their customers.
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websites, technology, and E-commerce
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Though start-up costs are higher in international franchising, there is less ___ because there are not as many other companies in the franchisor's industries.
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competition
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The higher-costs of starting a franchise in international markets are offset by less ____ from other companies and a rapidly expanding customer base.
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competition
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If an entrepreneur wants to grow quickly, accumulate capital, and become an industry leader, the best form of business ownership would be a(n)
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corporation
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Minority-owned businesses are growing at more than ___ times the national rate.
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6
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The disadvantages of a partnership include
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unlimited liability, division of profits
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The various responsibilities of each partner as well as any issues involving money should be included in the ___ of ___.
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articles of partnership
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Stockholders' liability for losses only up to the amount they invest is called ____.
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limited liability
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The main types of partnerships are:
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master limited, general, and limited
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The limited liability partnership ensures that the limited partners' ___ assets are not at risk.
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Personal
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The Uniform Partnership Act define three key elements of a general partnership as:
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common ownership, shared profits, and participation in operations.
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A master limited corporation looks much like a corporation because it:
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is traded on the stock exchange
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A merger of two firms in the same industry that allows the companies to diversify or expand their products is a
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horizontal merger
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One company's purchase of the property and obligations of another company is a(n)
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acquisition
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The joining of two companies involved in different but related levels of an industry is called a ____ merger.
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verticle
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A merger that joins firms in completely unrelated industries is a:
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conglomerate merger
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The result of two firms (usually corporations combining to form one company is called a ____.
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merger
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choose the attributes that makes franchises successful in the United States and internationally.
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Predictable levels of service, convenience, and quality
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what are some advantages of a corporation?
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perpetual life and limited liability
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what are some disadvantages of a corporation?
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excessive paperwork and initial cost
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When choosing a partnership a business owner should consider all of the following except
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Stock allocation to each partner
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All taxes of a partnership are taxed as the ____ income of the owners.
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individual
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What are some of the disadvantages of an LLC?
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Fewer incentives, paperwork
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Which is the easier for of business to start up?
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Sole Proprietorship
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when any debts or damages incurred by the business are your debts or damages it is called _____ liability.
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unlimited
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What are some advantages of the LLC form of organization?
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Limited Liability, Flexible ownership rules, and Choice of taxation.
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which form of ownership is nontransferable because there is no stock?
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LLC
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What are some disadvantages of a franchise?
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Shared profits, restrictions on selling, large startup costs.
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In obtaining a franchise an important issue to consider when evaluating the market is
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The current competition that exists in your territory.
