Forms of Business Organizations Quiz
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Questions and Answers

What is a franchise typically defined as?

  • A type of cooperative formed to market products.
  • An investment group formed to finance large projects.
  • A partnership agreement where all goods are held by partners.
  • An agreement between a franchisor and franchisee to sell goods/services under a trademark. (correct)

    • Which of the following is NOT listed as an advantage for a franchisee?

  • Control over the business operations. (correct)
  • Recognition of the trade name/trademark.
  • Access to franchisor advertising.
  • Assistance from the franchisor in starting the franchise.

    • What is the primary disadvantage of franchising from the franchisor's perspective?

  • Low risk in starting franchises.
  • Increased income from franchises.
  • Loss of control over individual franchises. (correct)
  • Ability to exert control over franchise operations.

    • In a 'chain-style' business operation, what role does the franchisor play?

    <p>They help establish a business under their name and methods.</p> Signup and view all the answers

    Which type of franchise allows the franchisee to sell the franchisor’s product in a specific area?

    <p>Distributorship</p> Signup and view all the answers

    Which phrase best describes a joint venture?

    <p>A business relationship between two or more parties for a specific undertaking.</p> Signup and view all the answers

    A business trust is governed by which of the following?

    <p>A group of trustees for beneficiaries.</p> Signup and view all the answers

    What can lead a franchisee to lose their franchise agreement?

    <p>Failure to meet contractual requirements.</p> Signup and view all the answers

    What is the primary legal advantage of converting an unincorporated business to a corporate form?

    <p>Avoidance of personal liability for business debts</p> Signup and view all the answers

    What happens to a business owner's personal assets if the business fails after incorporation?

    <p>They cannot be seized to satisfy business obligations</p> Signup and view all the answers

    What future concern might arise for a business owner using the corporate structure to escape personal debt responsibilities?

    <p>Potential loss of business reputation</p> Signup and view all the answers

    What was the outcome of the first year of operation for the 'Chime' franchise given to Blake by Warren Seizer?

    <p>Sales and revenue exceeded expectations</p> Signup and view all the answers

    What was Warren Seizer's initial reaction to the dissolution of Blake and Allison's marriage?

    <p>Fury and blame directed at Blake</p> Signup and view all the answers

    What action did Warren Seizer take against Blake Patterson?

    <p>He delivered a Notice of Termination of Franchise</p> Signup and view all the answers

    Which of the following accurately describes Blake Patterson's involvement in the restaurant's initial success?

    <p>He believed his hands-on operation contributed to its success</p> Signup and view all the answers

    What ethical concern might arise from the ability to avoid personal obligation for business debts after incorporation?

    <p>Promotes financial irresponsibility among business owners</p> Signup and view all the answers

    What is the main characteristic of a sole proprietorship?

    <p>Unlimited liability for the owner</p> Signup and view all the answers

    Which of the following is true about a general partnership?

    <p>Each partner has equal control and unlimited liability.</p> Signup and view all the answers

    What distinguishes a limited partnership from a general partnership?

    <p>Limited partners have limited liability.</p> Signup and view all the answers

    Which of the following describes a corporation?

    <p>It has a legal identity separate from its owners.</p> Signup and view all the answers

    What is a disadvantage of an 'S' corporation?

    <p>Limits on the number of shareholders.</p> Signup and view all the answers

    What is a key benefit of forming a Limited Liability Company (LLC)?

    <p>Limited liability like a corporation.</p> Signup and view all the answers

    Which statement correctly explains the taxation of partnerships?

    <p>Partners report profits on personal tax returns.</p> Signup and view all the answers

    What is a significant disadvantage of a corporation?

    <p>Double taxation of profits.</p> Signup and view all the answers

    Which feature is NOT associated with a sole proprietorship?

    <p>Limited funding options for growth.</p> Signup and view all the answers

    Which of the following is true about the liability of a general partner in a partnership?

    <p>They are personally liable for all debts of the partnership.</p> Signup and view all the answers

    Study Notes

    Forms of Business Organizations

    • Sole Proprietorship:
      • Owned and operated by one person
      • Owner has complete control
      • Owner has unlimited liability for debts
      • Profits are taxed directly as income to the owner

    Advantages and Disadvantages of Sole Proprietorship

    • Advantages:
      • Easy to start
      • Owner has complete control
      • Owner retains all profits
    • Disadvantages:
      • Unlimited liability for debts
      • Limited funding options

    General Partnership

    • Owned and operated by two or more individuals
    • Each partner has equal control
    • Each partner has unlimited liability for debts
    • Profits are taxed as income to the partners

    Advantages and Disadvantages of Partnership

    • Advantages:
      • Easy to start
      • Partnership income is partner income
      • Business losses can be deducted on taxes
    • Disadvantages:
      • Unlimited personal liability for debts, including those incurred by other partners

    Limited Partnership

    • At least one general partner and one limited partner
    • General partner has managerial control
    • Limited partner's liability is limited to their investment
    • Limited partner has no managerial control

    Corporation

    • State-sanctioned business with a separate legal identity from its owners
    • Owners (shareholders) have limited liability to their investment
    • Profits are taxed as income to the corporation and again to the owners (double taxation)
    • "S" Corporations can avoid double taxation

    Advantages and Disadvantages of Corporations

    • Advantages:
      • Limited liability for shareholders
      • Easy to raise capital by issuing stock
    • Disadvantages:
      • Double taxation
      • Formalities and regulations for establishment and maintenance

    “S” Corporation

    • Considered a corporation under federal tax law but taxed like a partnership
    • No more than 75 shareholders
    • Shareholders report income on their personal income tax forms

    Limited Liability Company (LLC)

    • Has the limited liability of a corporation but is taxed like a partnership
    • Formed under state law
    • Owners ("members") pay personal income taxes on their share of profits
    • No limit on the number of owners permitted

    Specialized Forms of Business Organizations

    • Cooperative: A group formed by individuals to market products
    • Joint Stock Company: A partnership where members hold transferable shares and company goods are held in the partners' names
    • Business Trust: A business governed by trustees who operate it for beneficiaries
    • Syndicate: An investment group formed to finance a large project
    • Joint Venture: A relationship between two or more people or corporations created for a specific business undertaking
    • Franchise: An agreement between a "franchisor" (owner of a trade name/trademark) and a "franchisee" (person who sells goods/services under the trade name/trademark)

    Advantages and Disadvantages of Franchise (for Franchisee)

    • Advantages:
      • Assistance from the franchisor in starting the franchise
      • Trade name/trademark recognition
      • Franchisor advertising
    • Disadvantages:
      • Must meet contractual requirements or risk losing the franchise
      • Limited creative control over the business

    Advantages and Disadvantages of Franchise (for Franchisor)

    • Advantages:
      • Low risk in starting the franchise
      • Increased income from franchises
    • Disadvantages:
      • Limited control (except contractually) over individual franchises
      • May become liable for the franchise if they exert too much control

    Types of Franchises

    • Chain-Style Business Operation: Franchisor helps franchisee establish a business using the franchisor's name and standard methods and practices
    • Distributorship: Franchisor licenses franchisee to sell their product in a specific area
    • Manufacturing Arrangement: Franchisor provides franchisee with technical knowledge to manufacture their product

    Top Ten Global Franchises (2009)

    • Subway
    • Ace Hardware Corp.

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    Related Documents

    Chapter 35 Forms of Business Organizations PDF

    Description

    Test your understanding of different forms of business organizations, including sole proprietorships and partnerships. This quiz covers the advantages and disadvantages of each type, as well as their respective liabilities and taxation. Perfect for students studying business concepts.

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