When Ross, Dave, and Elian lost their jobs during the recent recession, they pooled their resources, borrowed a little more, and bought a local bar. All three were concerned about the risk involved in owning their own business, particularly the risk of losing personal assets. As their advisor, which form of business ownership would you recommend?
limited liability company
You inherited 300 shares of L’Oréal stock from your Aunt Agnes. When you are awarded the first dividend from this stock, you learn from your accountant that it is considered a source of income and you will be taxed on that amount. You find this bothersome because the firm paid the dividend from after-tax profits (these dollars were already taxed). This phenomenon is called
double taxation.
which was its largest customer. This strategic decision bringing the two
s together is called a
vertical merger.
In a____, members democratically control the business by electing a board
tors that hires professional management to run the business.
cooperative
As a business owner, unlimited liability means
the business is responsible for the debt it incurs. If the business cannot pay its bills, the debt burden transfers to the owners), and the owners are liable for all debt.
When Yasmin bought a Martinizing Dry Cleaning franchise, she became a
franchisee.
Partnerships refer to more than one owner. What describes a limited partnership?
It consists of general partners and limited partners, at least one of each.
When your profitable franchise fails simply because other similar franchisees have failed is known as
coattail effect.
The owners of a corporation are called
stockholders.
When Jonas started his landscaping business, he wanted to keep things simple.He
one
him to keep company profits, and not have any special taxes. Jonas’ financial resources were limited, but so were his concerns; after all, “he was the business.”
Jonas’ business is most likely a(n)
sole proprietorship.
Which form of business ownership is the most common in the United States
sole proprietorship
What remedy is often offered to brick-and-mortar franchises if their sales are hurt by franchise-sponsored online sites?
reverse royalties
Today, more than____people worldwide are members of cooperatives,
cluding such familiar names as Land O’Lakes, Sunkist Growers, and Ocean Spray.
one billion.
In his search for a franchised business that would earn him a decent living, Rowan noted that the shared profit criterion required of franchisors had significant variance. Some required franchisees to pay 7 percent of their monthly revenues to the franchisor. Others required 4 percent of the profits. In business we refer to this oklidation as a
royalty.
At Pretty Posies, a floral shop, there is only one general partner, Sandy. She spends all her time running the business, and makes all the decisions. Sandy’s r and brother put up money for her to buy the store, but they work full time
r jobs and have no management say in the running of Pretty Posies, but
limited partnership.
Thirty years ago, your parents invested in The Walt Disney Company. As the years have gone by, the investment has grown. However, if Disney should go out or business and declare bankruptcy, what would happen to your parent’s
Your parents will only lose the value of their shares.
Lily and Ashok would like to start a business selling a beauty product new to the
U.S. market. Lily and Ashok have done a considerable amount of research on this product, and think it would be successful in the United States. However, they are still concerned about the risk of a new venture, and both would like to avoid sing any personal assets. They should organize their firm as a
corporation.
A firm’s management purchases all the issued and outstanding stock of the firm and takes the company off the stock market. The management of this company has engaged in
taking the firm private.
T-Mobile and Sprint, two major players in the telecom industry, recently merged under the T-Mobile banner, boosting their total customer base to 100 million. Both companies provided similar services and originally competed against one anothe In business, we would call the joining of these two firms a(n)
horizontal merger.
If the employees of a company successfully borrowed a large sum of money and purchased the firm from its current owners, we would call this event a
leveraged buyout.
Which are characteristics typical of a C corporation?
Owners have limited liability.
Damita and Hugo took over the family’s restaurant business when their father died. Damita operated one of the three locations, kept the firm’s books, and ordered supplies and equipment for all three locations. Hugo operated the other two restaurants. Hugo thought he should get two-thirds of the company profits cause he was responsible for two out of three locations. Damita saw it airferently because she felt her responsibilities spanned the entire business.
What’s important for them to remember in their situation is
they both shared unlimited liability and if one or the other failed to meet their financial commitment, the other partner would also be liable for all debts.
When going into a partnership, you should always
put all terms of the partnership into writing in a partnership agreement.
When Mariah joined her family’s manufacturing business, she was given several hundred shares of stock in the firm, and was officially made a partner. The firm’s accountant explained that the company paid taxes the same way as regular part hips, by passing the profits through to each partner. Mariah could
more shares of the company on a public stock exchange, as long as
someone was willing to sell their shares. This firm was likely a special form of ownership called a
master limited partnership.
