Chapter 5:
Forms of Business Ownership
Learning Objectives
1.
Explain the
advantages and the disadvantages of the three major forms of ownership: the
sole proprietorship, the partnership, and the corporation.
2.
Discuss the
advantages and the disadvantages of the S corporation, the limited liability
company, the professional corporation, and the joint venture.
Class Instruction
Introduction
The
most attractive form of business ownership meets the specific needs of the
business and its owners in these eight areas:
1.
Tax
considerations
2.
Liability
exposure
3.
Start-up and
future capital requirements
4.
Control
5.
Managerial
ability
6.
Business goals
7.
Management
succession plans
8.
Cost of formation
Business
owners may need to make concessions due to the trade-offs associated with eight
these factors.
The major forms of ownership include:
·
Sole proprietorship
·
Partnership
·
Corporation
·
S corporation
·
Limited liability
company
·
Joint venture
The
data regarding the distribution of the percentage of each business form and the
percentage of total business sales revenues illustrates the dominate forms of
business ownership.
The Sole Proprietorship LO 1
The sole proprietorship is the most popular
type of ownership, defined as business owned and managed by one individual.
Advantages of the sole
proprietorship include:
1. Simple
to create
2. Least
costly form of ownership to begin
3. Profit
incentive
4. Offers
total decision-making authority
5. No
special legal restrictions
6. Easy
to discontinue
Disadvantages of the sole
proprietorship include:
1. Unlimited
personal liability
2. Limited
skills and capabilities
3. Feelings
of isolation
4. Limited
access to capital
5. Lack
of continuity for the business
The sole proprietorship
has implications regarding the claims of the business’s creditors and the
owner’s personal assets. They are treated the same under this unlimited liability situation.
The Partnership
A partnership is an association of two or more people who
co-own a business for the purpose of making a profit. This
association between the owners is defined by the partnership agreement and The
Uniform Partnership Act (UPA), which codifies the body of law dealing with partnerships.
Advantages
of a partnership include:
1. Easy to establish
2. Complementary skills
3. Division of profits
4. Larger pool of capital
5. Ability to attract limited partners
Types of
partnerships include:
1.
Limited partnership
2.
Limited liability partnership
3.
Master limited partnership
Additional partnership advantages include:
1. Easy
to establish
2. Complementary
skills
3. Division
of profits
4. Larger
pool of capital
5. Ability to attract limited partners
This list can be expanded further to
include:
6. Little
governmental regulation
7. Flexibility
8. Taxation
Disadvantages of partnership
include:
1. Unlimited
liability of at least one partner
2. Capital
accumulation
3. Difficulty
in disposing of partnership interest without dissolving the partnership
4. Lack
of continuity
5. Potential
for personality and authority conflicts
Limited partnerships
are composed of at least one general partner to actively participate in the
business and one or more limited partners that look much like investors in the
business, each with specific roles.
Corporations
The corporation is a separate entity apart
from its owners, and may engage in business, make contracts, sue and be sued,
and pay taxes. It is a legal entity and represents the most complex form of
business ownership.
“C corporations” are creations of the
state and are categorized as either:
1. Domestic corporation
2. Foreign corporation
3. Alien corporation
Corporation can be publicly held by many,
or closely held by a relatively small number of owners.
The process of incorporation includes:
1. Certificate
of Incorporation
2. Bylaws
Advantages of a corporation include:
1. Limited
liability of stockholders
2. Ability
to attract capital
3. Ability
to continue indefinitely
4. Transferable
ownership
Disadvantages of a corporation
include:
1. Cost
and time involved in the incorporation process
2. Double
taxation
3. Potential
for diminished managerial incentives
4. Legal
requirements and regulatory red tape
5. Potential
loss of control by the founder(s)
Other Forms of Ownership LO 2
“S” corporation: An “S” corporation, standing for “small,” is the same as any
other corporation, except that a distinction applies for federal income tax
purposes.
The criteria for businesses seeking “S”
status are that the venture must:
·
Be a domestic (U.S.)
corporation
·
Not have a nonresident alien as a shareholder
·
Have only one class of common stock so all shares have the same rights
·
Limit shareholders to individuals, estates, and certain types of trusts
·
Not have more than 100 shareholders
·
Have less than 25 percent of the corporation’s gross revenues during
three successive tax years came from passive sources
Advantages of an S corporation include:
·
Retains all of the advantages of regular corporations
·
Passes all profits/losses through to individual shareholders
·
Avoids double taxation
·
Avoids taxes paid on assets that have appreciated in value and are sold
Disadvantages of an S corporation
include:
·
Increase in individual tax rates above maximum corporate tax rate
·
Many fringe benefits cannot be deductible business expenses
Choosing an “S” corporation wisely is
important to optimize the advantages this
entity offers.
The Limited
Liability Company (LLC): The limited
liability company is a cross between a partnership
and a corporation. LLCs offer many of the advantages of both, but are not
subject to the restrictions incurred by “S” corporations. LLCs offer the tax
advantage of a partnership, the
legal protection of a corporation, and maximum operating flexibility. These
advantages make the LLC an attractive form of ownership
for smaller companies across many industries.
Creating an LLC is much like creating a
corporation through establishing the articles of organization and an operating
agreement.
LLCs are limited to no more than two of
the following corporate concepts:
·
Limited liability
·
Continuity of life
·
Free transferability of interest
·
Centralized management
Professional Corporation: Professional corporations are designed
to offer professionals—lawyers, doctors, dentists, accountants, and others—the
same advantages of the corporate form of ownership.
Joint Venture: A joint venture is much like a partnership, except the joint venture is formed for a specific
and limited purpose. For example, multiple investors may form a joint venture
to build a building, sell it, and dissolve the joint venture when that sale is
finalized.
Conclusion
The entrepreneur will benefit from an
intentional choice regarding the choice of business ownership. Take all the
important factors into consideration – liability, taxes, capital requirements,
control, managerial abilities, business goals, and a long-term succession plan.
The ownership decision has far-reaching effects for both the entrepreneur and
the business.
Chapter Discussion Questions
1. What
factors should an entrepreneur consider before choosing a form of ownership? (LO 1)
Factors to consider
before choosing a form of ownership include:
·
Tax considerations – calculate the firm's tax bill under each form of
ownership.
·
Liability exposure – how much personal liability is involved in the
ownership form?
·
Start-up capital required – how much capital does the entrepreneur have and how
much will he need?
·
Control
– how much control is involved for each type of business organization? How much
is the entrepreneur willing to give up?
·
Business goals – how large and profitable does the entrepreneur expect the business to
be?
·
Management succession plans – consider smooth transition when passing company to the
next generation of buyers.
·
Cost of formation – some forms are more costly to create.
2. Why are sole
proprietorships so popular as a form of ownership? (LO 1)
Sole proprietorships
are a popular form of ownership for
several reasons. First, they are simple to create. Anyone wanting to start a
business can do so by obtaining the necessary licenses from state, county,
and/or local governments. This form
is normally the least expensive to establish. In addition, the owner has the
total decision- making authority, can keep all profits remaining after expenses
are paid, and may discontinue the sole proprietorship
fairly easily if he or she desires.
3. How does
personal conflict affect partnerships?
(LO 1)
The success/failure of a partnership
depends on the cohesiveness of its partners. In the beginning, there is an “emotional
high” when the startup of the business begins. Partners are so busy creating
strategies and focusing on the new business, that they often do not consider
the idea of future conflict with other partners. If this conflict does occur,
the partnership may suffer. The mutual goals and general business philosophies
may not be shared among the partners at this time. Thus, the demise of many
partnerships can often be traced to interpersonal conflict if there are no
procedures in place to resolve these problems.
4. What
issues should the articles of partnership address? Why are the articles
important to a successful partnership? (LO 1)
The major provisions of a partnership
agreement include the following:
·
The name of the partnership
·
The purpose of the business
·
The domicile of the business
·
The duration of the partnership
·
The partners and their legal addresses
·
The contribution of each partner to the business
·
An agreement on how the profits (or losses) of the partnership will be
distributed
·
An agreement on salaries or drawing rights against profits for each
partner
·
The procedure to be followed in the event that the partnership wishes to
expand through the addition of a new partner
·
How assets of the partnership will be distributed if the partners
voluntarily dissolve the partnership
·
Sale of partnership interest
·
Absence or disability of one of the partners
·
Provisions for alteration or modification of the partnership agreement
5. Can one
partner commit another to a business deal without the other’s consent? Why? (LO 1)
Yes, if the partner was exercising good
faith and reasonable care in the performance of his duties, the law of agency
holds that the actions of a general partner binds the other partners to a
business deal made in the name of the partnership, without the other's consent.
This is another example of why it is so
important to be able to trust your partners!
6. What
issues should the Certificate of Incorporation cover? (LO 1)
A Certificate of Incorporation normally
will include the following:
·
The name of the corporation
·
A statement of the purpose of the corporation
·
The time horizon of the corporation
·
The names and addresses of the corporation
·
Place of business
·
Capital stock authorization
·
Capital required at the time of incorporation
·
Provisions for preemptive rights
·
Restrictions on transferring shares
·
Names and addresses of the initial officers
·
The bylaws by which the corporation will operate
7. How does
an S corporation differ from a regular corporation? (LO 2)
An S corporation offers many of the same
advantages of a corporation—limited liability, capital formation, and others—while being taxed as a partnership.
Thus, the S corporation avoids the corporate disadvantage of double taxation.
8. What role
do limited partners play in a partnership? What happens if a partner takes an
active role in managing the business?
(LO 2)
The limited partner is treated, under the
law, exactly as in a general partnership. The limited partner(s) is treated
more as an investor in the business venture; limited partners have limited
liability, and can only lose the amount invested in the business. If the
limited partner does take an active part in managing the business, a limited
partner may actually forfeit limited liability, taking on the liability status
of a general partner.
9. What
advantages does a limited liability company offer over an S corporation? A
partnership? (LO 2)
An LLC eliminates many restrictions
imposed by an S corporation such as: a maximum of thirty-five shareholders,
none of whom can be foreigners or corporations; a limitation to one class of
stock; restriction on members' ability to become involved in managing the
company; and limited personal liability with imposed requirements. The LLC is
not subject to such restrictions. There
are two advantages an LLC has over a C corporation. First, an LLC offers
limited liability and a C corporation does not. In addition, an LLC does not
pay income tax and avoids the double taxation of C corporations.
10. How is an
LLC created? What criteria must an LLC meet to avoid double taxation? (LO 2)
Creating an LLC is much like creating a
corporation. An LLC is required to file two documents: the articles of
organization and the operating agreement. The articles of organization
establish the company's name, its method of management, its duration, and the
names and addresses of each organizer. The operating agreement outlines the
provisions governing the business’ conduct.
11. Briefly
outline the advantages and disadvantages of the major forms of ownership. (LO 2)
Sole Proprietorship – Least costly to start, offers total
control, typically has favorable tax considerations.
Partnership – Typically favorable tax
considerations, however, unlimited liability for general partner(s). There are
several other forms of partnerships that may be costly to establish but offer
the advantage of limited liability.
Corporation – Least favorable tax
considerations, costly to establish, however, offers limited liability for
owners.
S Corporation
and LLC – Combines the more favorable characteristics of both a
sole proprietorship and corporation.
Chapter Overview
1-A.
Explain the advantages and the disadvantages of the sole proprietorship.
·
A sole proprietorship is a business
owned and managed by one individual and is the most popular form of ownership.
·
Sole proprietorships offer these advantages:
They are simple to create, they are the least costly form to begin, the owner
has total decision-making authority, there are no special legal restrictions,
and they are easy to discontinue.
·
They also suffer from these disadvantages:
unlimited personal liability of owner, limited managerial skills and
capabilities, limited access to capital, and lack of continuity.
1-B.
Explain the advantages and the disadvantages of the partnership.
·
A partnership is an association of
two or more people who co-own a business for the purpose of making a profit.
Partnerships offer these advantages: ease of establishing, complementary
skills of partners, division of profits, larger pool of capital available,
ability to attract limited partners, little government regulation flexibility,
and tax advantages.
·
Partnerships suffer from these disadvantages:
unlimited liability of at least one partner, difficulty in disposing of
partnership, interest lack of continuity, potential for personality and
authority conflicts, and partners bound by the law of agency.
1-C.
Explain the advantages and the disadvantages of the corporation.
·
A corporation, the most complex of
the three basic forms of ownership, is a separate legal entity. To form a
corporation, an entrepreneur must file the articles of incorporation with the
state in which the company will incorporate. Corporations offer these advantages:
limited liability of stockholders, ability to attract capital, ability to
continue indefinitely, and transferable ownership.
·
Corporations suffer from these disadvantages:
cost and time involved in incorporating, double taxation, potential for
diminished managerial incentives, legal requirements and regulatory red tape,
and potential loss of control by the founder(s).
2.
Discuss the advantages and the disadvantages of the S corporation, the LLC, the
professional corporation, and the joint venture.
·
Entrepreneurs can also choose from
several other forms of ownership, including S corporations, and LLCs. An S corporation
offers its owners limited liability protection but avoids the double taxation
of C corporations.
·
An LLC, like an S corporation, is a
cross between a partnership and a corporation yet operates without the
restrictions imposed on an S corporation. To create an LLC, an entrepreneur
must file the articles of organization with the secretary of state and create
an operating agreement.
·
A professional corporation offers
professionals the benefits of the corporate form of ownership.
·
A joint venture is like a
partnership, except that it is formed for a specific purpose.
Self-Study Review
1. In general, what would cause a business owner to select
one form of ownership over another?
a.
Image within the community
b. Tax, liability, and
how big and profitable
c.
Industry membership
d.
Pressure from the business owner's
advisory board
e.
State governmental policy that
dictates what forms are legal
See page 165
2. What is a major advantage of a sole proprietorship?
a. A proprietorship can
be started, for most entrepreneurs, in a single day.
b.
A proprietorship protects the owner,
should a disgruntled customer attempt to sue for damages.
c.
A proprietorship requires approval
from government agencies to cease operations.
d.
A proprietorship is more attractive
from potential investors' perspective.
e.
A proprietorship is looked upon more
favorably, credit-wise, by lending institutions.
See
"The Advantages of a Proprietorship," page 169
3. Why do partnership agreements exist?
a.
Partnership agreements detail the
income requirements of each partner as an employee and are negotiated before
the business starts.
b.
Partnership agreements exist to
establish that both partners have put the same amount of effort and capital
into the new venture.
c.
Partnership agreements show the
willingness of each partner to absorb the other partner's share of liabilities,
should the other partner become financially insolvent.
d. Partnership
agreements exist to lay out the structure for a successful organization and to
protect each partner's interest.
e.
Partnership agreements are required
by state governments as evidence that each partner willingly and knowingly
entered the partnership.
See "The Partnership,"
pages 171–173
4. What is one advantage of a partnership over a
proprietorship?
a.
A partnership is easier to establish
than a sole proprietorship.
b.
A partnership allows for more
control over decision-making than a proprietorship.
c.
A partnership allows for limited
liability among its general partners.
d. A partnership allows
for each partner's skills and abilities to complement each other, whereas a
sole proprietor is responsible for all functions.
e.
A partnership is guaranteed more
profit than a proprietorship.
See "The Advantages of the
Partnership," pages 173–174
5. The _____ legal structure allows investors to limit their
liability to their personal investment in the business.
a.
Partnership
b.
LLP
c. Corporation
d.
Proprietorship
e.
Partnership and LLC
See
"The Advantages of the Corporation," pages 181–183
6. What is this meaning of the phrase "piercing the
corporate veil"?
a.
Competitors occasionally come into
your business and act as customers to elicit competitive information.
b.
Entrepreneurs occasionally see the
benefits of sole proprietorship over corporate structure.
c.
Courts will sometimes overturn the
granting of a corporate legal structure to a new venture.
d.
Entrepreneurs sometimes gain access
to secret documents of their competitors.
e. Courts sometimes hold
entrepreneurs personally liable for claims against the corporations because
they co-mingle personal and corporate assets.
See
"The Advantages of the Corporation," pages 181–183
7. In which of the following legal organization forms is
ownership the most easily transferable?
a. The corporation
b.
The general partnership
c.
The limited liability partnership
(LLP)
d.
The structured partnership (SP)
e.
The proprietorship
See
"Transferable Ownership," page 182–183
8. What is a major advantage of the S corporation over the
corporation or C corporation?
a.
The S corporation may be publicly
traded, and a C corporation may not.
b. The profits of an S
corporation are passed through to the owners' personal income taxes and are
thus taxed only once.
c.
The S corporation offers limited
liability of its owners, limited to their personal investment in the business,
whereas a C corporation does not.
d.
The S corporation allows for
unlimited numbers of owners; a C corporation only allows for up to 75 owners.
e.
Ownership in an S corporation may be
handed down through inheritance, whereas ownership in a C corporation may not.
See "The Advantages of an S Corporation," pages 185–186.
9. If an S corporation's owners choose to reinvest the
company's net income back into the business, ________.
a.
the owners will not have to pay
income taxes on that portion
b.
the S corporation will have to pay
income tax on that portion
c. the owners will have
to pay income tax on that portion, regardless of the fact that they did not
receive the income
d.
the S corporation will not have to
pay sales tax on that portion
e.
the organization will compensate the
owners later in the next year for the money owed them
See "The Advantages of an S Corporation," pages 185–186.
10. Choosing an S corporation as a legal form is generally
wise when ________.
a.
the entrepreneur wants to "go
public" by offering an IPO in the next five years
b.
the organization wishes to do
charity work as a nonprofit
c.
the founding team of entrepreneurs
wants to divide the profits variably according to the amount of effort each has
put into the venture
d.
the business expects to see profits
shortly after opening
e. the entrepreneur
expects losses that can offset personal income in the first few years of
operation
See "When Is an S Corporation a Wise Choice?" page 186.
Chapter Review
MULTIPLE CHOICE
1. Which form of ownership is the most common?
a. Corporations
b. Master limited partnerships
c. General partnerships
d. Sole proprietorships
2. One of the problems with a ___________________ is that
there is no one with whom to share the burden of management.
a. sole proprietorship
b. limited partnership
c. S corporation
d. limited liability company
3. If you are interested in starting your own business,
you want to minimize the hassle and you don’t want to have anyone tell you what
to do, you should organize your business as a:
a. S corporation.
b. limited partnership.
c. sole proprietorship.
d. closed corporation.
4. At Sound Off! a store that buys and sells used
c.d.’s, there is only one owner, Sonia.
She spends all her time running the business, and makes
all the decisions. Sonia’s mother and brother put up money for her to buy the
store, but they work full time at other jobs and have no management say in the
running of Sound Off! This is an example of a:
a. general partnership.
b. master limited partnership.
c. S corporation.
d. limited partnership.
5. When going into a partnership, you should always:
a. put all terms of the partnership into writing, in a
partnership agreement.
b. make sure that you have limited
liability while you are in charge.
c. make sure all the profits are
reinvested into the company.
d. divide the profits equally.
6. A new form of
business ownership looks like a corporation in that it is traded on the stock
exchanges like a corporation, but it is taxed like a partnership and avoids the
corporate income tax. This is known as a:
a. sole
proprietorship.
b. master limited partnership.
c. “S”
corporation.
d. general
partnership.
7. One of the benefits a general partnership has over a
sole proprietorship is:
a.
limited liability.
b. more financial resources.
c. easy to start.
d. a board of directors to help with
decisions.
8. Which form of partnership limits your liability to
only your actions, or those of your subordinates, so that you can operate
without fear that one of your partners might commit an action of malpractice that
could cause you to lose your personal assets?
a. General
partnership
b. Limited
partnership
c. Master
Limited Partnership
d. Limited Liability Partnership
9. The owners of a corporation are called:
a.
general partners.
b. stockholders.
c. limited partners.
d. proprietors.
10. A _____________ is one whose stock is not available
to the general public through a stock exchange.
a. alien corporation
b. domestic corporation
c. public corporation
d. closed corporation
11. Joe and Mark would like to start a new business
selling a product new to the United States, the Peraves Monotracer. This is a motorcycle type vehicle that is
encased in a sort of shell, so that the rider can ride this product in any kind
of weather. Joe and Mark have done a
considerable amount of research on this product, and think it would be
successful in the U.S. However they are
still concerned about the risk of a new venture and would like to avoid losing
personal assets by organizing their firm as a:
a. corporation.
b. limited partnership.
c. general partnership.
d. sole proprietorship.
12. A form of ownership which can have only 100
shareholders, who must be permanent residents of the United States, is called a:
a. conventional C corporation.
b. closed corporation.
c. limited liability partnership.
d. S corporation.
13. __________ can be both an advantage and a
disadvantage of a conventional corporation, as they have the ability to raise
large amounts of money and hire experts, but can become inflexible and tied
down in red tape.
a. Size
b. Tax returns
c.
Termination
d. Limited liability
14. Which of the following is not considered an advantage
of a limited liability company?
a. limited number of shareholders
b. personal asset protection
c. choice of how to be taxed
d. flexible ownership rules
15. When Jeanne-Marie Delacourt was born, her American
grandmother bought her 10 shares of Disney stock. As Jeanne-Marie grows, so will her
investment. However, if Disney should happen
to go out of business:
a.
Jean-Marie will be responsible for
some of the debt of Disney.
b. Jean-Marie will have to go to court to
show she has no involvement in the firm.
c. Jean-Marie will only lose the value of her shares.
d. Jean-Marie will have to borrow money
from her grandmother to pay for the value of her shares.
16. In a
corporation, the Board of Directors:
a. consists
of a group of major shareholders who
want a say in running the business.
b. is elected by the owners/stockholders.
c. is
made up of lenders to the corporation.
d. has
unlimited liability.
17. When the Federated Department Stores, which owns
several department store chains, bought the May Company, another department
store chain, so Federated could expand their product offerings, it was a:
a. vertical merger.
b. horizontal merger.
c. conglomerate merger.
d. cooperative merger.
18. The main reason for a conglomerate merger is that:
a. the investors want more for their
money.
b. it ensures a constant supply of
materials needed by other companies.
c. it allows for a firm to offer a variety
of related products.
d. the business can diversify its business operations and
investments.
19. When a major national bakery bought out a smaller
more regional bakery in the east, it took over all their assets and their debt
and the smaller bakery ceased to exist.
This is an example of a:
a. acquisition.
b. merger.
c. nationalization.
d. appropriation.
20. In order to avoid a hostile takeover by a
Kollmorgaen, managers at Pacific Scientific considered making a bid for all the
company’s stock themselves and taking it off the open market. The term to
describe this action is:
a.
a leveraged buyout.
b. a conglomerate merger.
c. taking the firm private.
d. forming a master limited partnership.
21. When Pat Sloane bought a Tidy Maid franchise, she
became a:
a. franchisor.
b. stockholder.
c. venture capitalist.
d. franchisee.
22. One of the advantages of a franchise is:
a. receiving management and marketing expertise from the
franchisor.
b. fewer restrictions on selling than in
other forms of businesses.
c. lower start-up costs than other
businesses.
d. you get to keep all the profits of your
business after taxes.
23. When your profitable franchise fails simply because
other franchisees have failed, this is known as the:
a. royalty
rate.
b. coattail effect.
c. failure
rate.
d. green
ceiling.
24. International franchising is:
a. a successful area for both small and large franchises.
b. costs about the same as domestic
franchising.
c. becoming increasingly difficult, and so
is not growing.
d. easy, because you really do not have to
adapt your product at all.
25. In a ___________, members democratically control the
business by electing a board of directors that hires professional management.
a. corporation
b. cooperative
c. franchise
d. master limited partnership
TRUE-FALSE
26. One of the benefits of a sole proprietorship is that
you have easy availability of funds from a variety of sources.
True
False
27. It is relatively easy to get in and out of business
when you are a sole proprietor.
True
False
28. A common complaint among sole proprietors is that
good workers are hard to find because they can’t afford to pay competitive
salaries and fringe benefits.
True
False
29. It is best to form a limited partnership because then
there is no one individual who takes on the unlimited liability.
True
False
30. In a partnership, one of the major disadvantages is
the potential for disagreements among the partners.
True
False
31. A master limited partnership is much like a
corporation because its stock is traded on a stock exchange.
True
False
32. Individuals are not permitted to incorporate.
True
False
33. Corporations are the easiest form of ownership to
start and terminate.
True
False
34. One advantage of a corporation is the limited
liability of the owners.
True
False
35. An S corporation avoids the double taxation of a
conventional C corporation.
True
False
36. A disadvantage of incorporation is the possibility of
conflict between the officers of the corporation and the stockholders and/or
the board of directors.
True
False
37. A limited liability company can choose to be taxed
either as a corporation or as a partnership.
True
False
38. An example of a vertical merger was the merger
between Daimler, a German automaker, and Chrysler, an American automotive
manufacturer.
True
False
39. In a leveraged buyout the managers of a company buy
all of the stock of a firm and take it off the open market.
True
False
40. A franchise can be formed as a sole proprietorship, a
partnership, or a corporation.
True
False
41. As a franchisee, you are entitled to financial advice
and assistance from the franchisor.
True
False
42. One of the disadvantages of a franchise is that if you
want to sell, the franchisor must approve the new owner.
True
False
43. Female participation in franchising grows as the cost
of the franchise increases.
True
False
44. One of the advantages that a home based franchisee
has over a business owner based at home is that the franchisee feels less
isolated.
True
False
45. One common element of a cooperative is for members to
work a few hours a month as part of their duties.
True
False
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