Intro to Biz w-4-2

To many businesspeople, one of the major attractions of a sole proprietorship is

• the ability to obtain additional financial resources.

• the protection of limited liability.

• an unlimited lifespan.

• the chance to be their own boss.

A significant disadvantage of owning a sole proprietorship is the

• possibility of limited liability.

• heavy tax liability that must be assumed.

• overwhelming time commitment often required of the owner.

• lack of incentives to motivate the owner.

An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a

• sole proprietorship.

• cooperative.

• Corporation.

• general partnership.

Being your own boss means

• reducing your working hours.

• having the freedom to set your own working hours and taking lots of vacations, particularly when just beginning the business.

• accepting accountability for the mistakes of the business.

• having limited financial resources to throw into the business.

Autumn wants to start a business. She has two goals. First, she doesn't have much money but she's ready to get 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 Autumn chooses a sole proprietorship, she would

• achieve both goals since this form of ownership is both the easiest to form and the least risky.

• 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.

• not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability.

• achieve her second goal, since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company. However, she would find that the start-up costs would be higher than if she had incorporated her business.

Which of the following is an advantage of a partnership?

• Ease of starting and ending the business

• Unlimited liability

• Shared management and pooled skills

• Little time commitment

Mac and Charlie own a car repair shop that they operate as co-owners. Both take an active role in the management of the business, and each accepts unlimited liability. Mac and Charlie operate as a

• joint venture.

• general partnership.

• limited partnership.

• cooperative.

What entity elects the board of directors for a corporation?

• Creditors

• Stockholders

• Managers

• Employees

Which of the following statements about buying a franchise is most accurate?

• One of the advantages of buying a franchise is that franchisors are so closely regulated that there is virtually no chance for scams to succeed.

• Before purchasing a franchise, the buyer should carefully evaluate the franchise, the franchisor, his or her own situation, and the nature of the market.

• Franchise agreements are simple to evaluate, since federal law requires that all such agreements must be written in plain English with all fees and terms clearly explained.

• Buying a franchise is the simplest and least expensive way to set up a business, since the franchisor has already worked out all of the details for setting up and running the business.

Zach is a franchisee with Digger's Doggies, a chain of hotdog shops. He was doing well until several other Digger's Doggies franchisees got in trouble and were forced to close their shops. Soon afterward, Zach's business declined and was also forced to close. This is an example of

• an economic shakeout at work.

• the coattail effect.

• the law of diminishing returns.

• management by exception.