Which of the following statements about the operation of a corporation is correct?
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A corporation receives its charter from a state government.
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Which of the following is normally considered a disadvantage of the corporate form of business?
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Double taxation of earnings.
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Which of the following people would be most interested in participating in a business organized as a cooperative?
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Joe is intrigued by the idea of combining his time and resources with many other people to operate a business providing a good or service that they all will use.
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The __________ is usually the easiest form of business to start and end.
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sole proprietorship
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Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products. In a franchise arrangement, Midas would be the ________, and the buyer of the franchise is the ________.
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franchisor; franchisee
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The organizational structure of a corporation permits:
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stockholders to elect the Board of Directors.
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Earnings of C corporations can be:
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taxed twice if they are distributed as dividends to stockholders.
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Halle wants to start a business. She has two goals. First, given her limited personal wealth and eagerness to get started, she wants to get her business up and running with the least possible hassle and expense. Second, she wants to minimize her personal risk in the event that her company experiences difficulties. If Halle chooses a sole proprietorship, she would:
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meet her first goal since sole proprietorships are easy and inexpensive to form. However, she would expose herself to personal risk because owners of sole proprietorships have unlimited liability
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An evaluation of franchising would conclude that this type of arrangement:
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appeals to people who want to own a business, but are not comfortable starting a company from scratch.
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One disadvantage of a limited liability company is that it:
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has a limited life span.
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One result of taking a firm private is:
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the firm's stock is no longer available for purchase on the open market.
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Joe Jackson operates a sole proprietorship, but he is in poor health and may be unable to continue running the business. If Joe becomes incapacitated, his business:
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ceases to exist unless sold or taken over by Joe's heirs.
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Three types of corporate mergers are:
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vertical, horizontal, and conglomerate.
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Which of the following statements best summarizes the experience of American franchisors in foreign countries?
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Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality.
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In a partnership, a(n) __________ partner (owner) actively manages the company and has unlimited liability for claims against the firm.
answer
general
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Randy and Mandy plan to pool their money and musical talents to form a general partnership and begin booking weekend gigs. One of the first things Randy and Mandy should do is:
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consult an attorney and put their agreement in writing.
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In a leveraged buyout, the managers of a firm, its employees, or other investors:
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borrow funds to buy out the firm's stockholders.
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Which of the following statements about partnerships is most accurate?
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A major drawback of a partnership is that it is difficult to terminate.
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Some __________ ask members/customers to work at the organization for a number of hours a month as part of their duties.
answer
cooperatives
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A(n) _________ occurs when one company buys the property and obligations of another company.
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acquisition
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The reason a professional such as a lawyer or doctor would incorporate his/her business is:
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to protect his/her other assets with limited liability.
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Which of the following is an advantage of a partnership?
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Shared management and pooled skills
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A ____________ is the share of profits or percentage of sales a franchisee pays to a franchisor.
answer
royalty
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A few years back, your three U.S. born friends that live in the State of Wyoming inherited a dude ranch that they plan to turn into a retirement haven for race horses. Peaceful Pastures wants to open its doors by spring of 2018. After attending several small business seminars, the three friends are certain they need limited liability. The high-risk, labor-intensive business will require a sizeable investment including an air-conditioned barn, several fenced-in pastures and loads of animal feed. You recently heard that one form of business ownership requires owners to pay self-employment taxes on the entire amount of earnings. You are fairly certain this is one tax liability your friends would like to avoid. You recommend:
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S corporation
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The most popular type of business for franchising is:
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restaurants
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General Partner
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An owner (partner) who has unlimited liability and is active in managing the firm.
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Limited Partner
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An owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment.
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Limited Liability
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The responsibility of a business's owners for losses only up to the amount they invest; limited partners and shareholders (stockholders) have limited liability.
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Master Limited Partnership(MLP)
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A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax.
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Limited Liability Partnership (LLP)
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A partnership that limits partners' risk of losing their personal assets to only their own acts.
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Sole proprietorships
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A business owned and managed by one person.
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Partnerships
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When 2 or more people legally agree to become co-owners of a business.
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Corporations
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A business that is separate and distinct from the owners. A legal entity with authority to act and have liability apart from its owners.
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