Intro to Business Ch. 5 and 6 – Flashcards
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TF The corporation is the most common form of business ownership.
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F
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TF The profits of a sole proprietorship are taxed as the personal income of the owner.
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T
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TF A difficulty that sole proprietors try to overcome is the fact that they have trouble competing with large firms for expert talent. Large firms can usually pay better and offer fringe benefits that are unaffordable to the sole proprietor.
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TF A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested.
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TF Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge.
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TF Connie is a general partner in a retail cookie store. Her personal assets are legally protected from the debts of the business.
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TF To change ownership in a corporation you simply sell your stock to someone else.
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TF When two firms join together to form one company, it is called a merger.
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Starting a new business as a sole proprietorship: Requires retaining the services of an attorney. Is simple, but the proprietorship fee is very expensive in some states. Is usually simpler and less expensive than starting other forms of ownership. Is very similar to starting a business as a corporation.
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Is usually simpler and less expensive than starting other forms of ownership.
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Any debts or damages incurred by a firm organized as a sole proprietorship are: The responsibility of the owner. Limited to the amount the owner has invested in the firm. Paid for out of a reserve contingency fund that sole proprietors are required by law to set up. Normally covered by liability insurance.
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The responsibility of the owner.
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A(n) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners. limited partnership conventional corporation unlimited partnership nonprofit organization
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conventional corporation
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The board of directors for a corporation is elected by its: Creditors. Stockholders. Managers. Employees.
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stockholders
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Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships? Ease of formation Lower taxes Simplified paperwork Limited liability of owners
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limited liability of owners
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A major advantage of S corporations is that they: Can have more stockholders than a C corporation. Can operate in foreign nations as if they were domestic corporations. Require less paperwork to set up than a C corporation does. Avoid the problem of double taxation associated with conventional corporations.
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Avoid the problem of double taxation associated with conventional corporations.
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The reason a professional such as a lawyer or doctor would incorporate his/her business is to be assured that another professional firm would not take over and make decisions - similar to a hostile takeover. to comply with the law because insurance companies require that they be corporations. to protect his/her other assets with limited liability. to protect his/her assets with unlimited liability.
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to protect his/her other assets with limited liability.
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Maria recently purchased 100 shares of stock in Idle Time Gaming, Inc. Maria is a(n) ______________ of this company. owner manager creditor partner
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owner
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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. vertical horizontal linear conglomerate
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conglomerate
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A ____________ is the share of profits or percentage of sales a franchisee pays to a franchisor. royalty dividend premium co-pay
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royalty
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TF Entrepreneurship involves accepting the risk of starting and running a business.
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TF Most entrepreneurs prefer working for someone else.
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TF An intrapreneur is the creative person who starts and manages a nonprofit organization.
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TF Enterprise zones offer lower tax rates and government assistance to attract private business investment.
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TF To be classified as a small business, a firm must have no more than 100 employees.
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TF Small businesses can often provide more personalized customer service than bigger rivals.
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TF Business plans are necessarily a bit vague since these are prepared prior to the beginning of business operations.
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TF State and local governments often act as venture capitalists.
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TF As opposed to venture capitalists, angel investors prefer to target their investments in new firms requiring large sums of money.
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Which of the following best describes entrepreneurial personality traits? Tolerant of uncertainty and highly energetic. Risk averse and self-nurturing. Appreciate direction from others and risk averse. Prefer to work less hours and prefer to give directions and let others do the foot work.
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Tolerant of uncertainty and highly energetic.
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Successful entrepreneurial teams: quickly organize themselves like large corporations. assign only one person to new product innovation. bring a variety of talent to the business venture. outsource most of the details of innovation.
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bring a variety of talent to the business venture.
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According to SBA guidelines, a manufacturing firm with 1,000 employees: would be classified as a large firm in the industrial sector. may be classified as a small business depending upon the size of other firms in the industry. is too small to achieve the efficiencies of large scale production. is classified as an S corporation.
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may be classified as a small business depending upon the size of other firms in the industry.
