Pilar is interested in buying a franchise from Quixotic Travel Tours

Pilar is interested in buying a franchise from

  • University of Oregon
  • BE 325
  • xinchengzheng
  • 13
  • 100% (15) 15 out of 15 people found this document helpful

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35.Pilar is interested in buying a franchise from Quixotic Travel & Tours Corporation. Quixotic must disclose material facts that Pilar needs to make an informed decision concerning this purchase, according toa.no law.b.the Petroleum Marketing Practices Act of 1979.c.the Federal Trade Commission's Franchise Rule.d.the Uniform Commercial Code.ANS: CPTS:1DIF:EasyREF:565OBJ:19-5NAT:BUSPROG: ReflectiveLOC:AICPA: BB-LegalKEY:Bloom's: KnowledgeTYP:NESSAY1.Owen plans to open Owen's Pets Store, a pet sales and pet supplies outlet, and to hire Quimby and Ruth. Owen will invest only his own money. He does not expect to make any profit for at least two years and to make almost no profit for the first three years, but he hopes to expand eventually. Which form of business organization would be most appropriate? What are the chief characteristics, advantages, and disadvantages of this form of business organization? If Owen wants to obtain additional capital to expand the business, but does not want to lose control of the firm, what is his best option?ANS:When a business is relatively small and is not diversified, employs relatively few people, has modest profits, and is not likely to expand significantly or require extensive financing in the immediate future, the most appropriate form for doing business may be a sole proprietorship. A sole proprietorship is easier and less costly to start than other forms of business, because few legal forms are involved. The owner is free to make business decisions without consulting others. Taxes are paid on the business's income as the owner's personal income.
In a sole proprietorship, the owner and the business are the same. Anyone who creates a business without designating a specific form for its organization is doing business as a sole proprietorship. An advantage of the sole proprietorship is its greater organizational flexibility over other forms of businessorganization. The owner can operate the enterprise without any formalities. A significant disadvantage of this form of organization, however, is that unlike most other forms of business organization, there are no limits on the liability of the owner for the debts and obligations of the firm. Another disadvantage of the sole proprietorship form can be the ability of a sole proprietor to raise capital whilemaintaining control and retaining the same form. This course may be limited chiefly to borrowing funds. Bringing in partners would convert the business to a partnership. Issuing stock would require incorporating or establishing another form of business. Selling the business would sacrifice all control. The only way to obtain additional business capital without accumulating it through business profit is by borrowing funds.

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