Intro to Business Chapter 5

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The __________ is usually the easiest form of business to start and end.

sole proprietorship

When a sole proprietor dies:

The sole proprietor’s heirs have the option of taking over the business

Unlimited liability means:

When you own your own business you are responsible for all the business debts.

One of the major disadvantages of a sole proprietorship is the:

Unlimited liability the owner has for the debts of the firm. Possibility of disagreements between owners.

Franchised businesses are successful (both domestically and internationally) because:

Customers like the predictability of the product and/or service.

An owner of a corporation is known as a(n):


One reason franchises have become so popular is that this arrangement provides the franchisee with:

A nationally recognized name and product.

Which of the following statements is the most accurate? A foreign corporation:

Does business in one or more states, but is chartered in another state.

A major advantage of S corporations is that they:

Avoid the problem of double taxation associated with conventional corporations.

In a leveraged buyout, the managers of a firm, its employees, or other investors:

Borrow funds to buy out the firm’s stockholders.

If a group of stockholders or management obtain all the stock of a previously publicly traded firm for themselves, this is referred to as:

Taking the firm private

The most popular type of business for franchising is:


One reason limited liability companies have become so popular is that they:

Can be taxed either as a corporation or as a partnership, so owners can choose the tax treatment that is most advantageous for their situation.

The form of business ownership that usually requires the most detailed record keeping is the:


A(n) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

conventional corporation

In a partnership, a(n) __________ partner (owner) actively manages the company and has unlimited liability for claims against the firm.


Which of the following is not a disclosure that should be part of a partnership agreement?

The list of personal assets of each partner.

A person who buys the right to use a business name and sell a product within a given territory is called a:


One result of taking a firm private is:

The firm’s stock is no longer available for purchase on the open market.

A(n) _____________ is a company that has a proven business model and is willing to sell the rights to use the business model to others so that they can sell the same product or service within a given territory.


_____________ is by far the most popular target for American franchisors seeking to establish franchises in other countries.


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.


A ______________ merger unites firms at different stages of related businesses.


A significant disadvantage of owning a sole proprietorship is the:

Overwhelming time commitment often required of the owner.

Any debts or damages incurred by a firm organized as a sole proprietorship are:

The responsibility of the owner.

An evaluation of franchising would conclude that this type of arrangement:

Appeals to people who want to own a business, but are not comfortable starting a company from scratch.

When comparing general partnerships to sole proprietorships, an advantage of partnerships is that they:

Give the firm a stronger financial foundation.

One reason many companies do not organize themselves as an S corporation is that this form of business:

Has a special eligibility restriction, which many businesses are unable to meet.

In the late 1990s, firms found it easier to grow market share by:

Merging with other companies or acquiring new companies.

The form of business ownership best suited to raising large amounts of money for expansion is the:


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