Cole Jasmin

Introduction to Business
Chapter 10 – Managing the Forms of Business Ownership

Page 252 10.1 Assessment (Questions 1 and 2- answers only)

1. C
2. D

Page 257 10.2 Assessment (Questions 1 and 2 – answers only)

1.
2. D

Page 258 Focus on Partnership to Corporation – Ben and Jerry’s Homemade, Inc
Key and complete the Think Critically questions (4 questions). Be sure to write out the
questions before answering.

1. At the outset, was Ben and Jerry’s business typical for a new enterprise? Give
reasons for your answer.

Lots of businesses start of small before they grow to an enterprise, if they ever do. But Ben
and Jerry’s startup was unique in respect to the relationship between the partners and the
business model. The business was started by two friends from 7 th grade, so they weren’t
just business partners. I also find it interesting that they focused on the quality of
ingredients so much, they focused on making a high quality product instead of maxing
output.

2. Why did Ben and Jerry want their company to remain small?

Ben and Jerry were very focused on the job fulfillment from their brand. They enjoyed
“experimenting with new product and flavors” and as the business expanded, they did not
like that “they began to grow apart from their employees.”

3. At one point in time, Ben and Jerry limited the pay of their highest-paid executive to
no more than five times the salary of their lowest paid employee, which was later
revised to seven times before the rule was dropped. If the lowest-paid employee
earned $24,000 a year, what would the maximum salary be for the highest paid
manager under the 5-to-1 or –to-1 rules? Why might this manager be unhappy
about these rules?

If the lowest paid employee was making $24,000 a year, the 5-to-1 rule would allow the
highest paid executive to make $120,000 a year, and the 7-to-1 rule would allow for a
maximum salary of $168,000. His may upset the manager as the rule allows for no possible
growth past that salary.
 4. Use the internet to determine what the company is doing today to fulfill its social
obligations. Also, find out about its new products, sales, and profits.

Today, Ben and Jerry’s has an entire page on their website devoted to their Community
Involvement. The Ben and Jerry’s foundation funds the Vermont Community Action Team
(CAT). The CAT fund many different community programs, such as social services
organizations, cultural, recreational, or arts programs. The CAT was also able to make grants
totaling $180,500 to 152 different organizations.

Page 265 10.3 Assessment (Questions 3 and 4- type question and answer)

3. A few of the biggest advantages of corporations include capital. The interest of investors
in corporations is far greater than that in proprietorships. This allows corporations to have
large sums of money more readily available. Corporations also allow the owners, directors,
and managers to not be held responsible for the debts of the corporation beyond their
owned share. Corporations are also more permanent, as they do not die or end with the
owner.

4. Corporations are subject to more tax than other forms of businesses. Taxes that are
unique to corporations include filing fee, organizational tax, and annual state tax.
Corporations are also only allowed to participate in the activities stated in their charter. I
other words, they can only sell their stated product unless they get it government
approved. There are also tighter restrictions on how and where corporations operate. For
an example, if a corporation wishes to perform business in another state, they must obtain
a license to do so in each new state.

Page 269 10.4 Assessment (Questions 3 and 4 – type question and answer)

3. Explain the advantages of structuring a joint venture.

A joint venture can help corporations spread and reach business in new markets that
weren’t before reached. Joint ventures can also give businesses and corporations in
developing countries the opportunity to learn how to operate in a free-market.

5. Explain why a company would elect to have an LLC or Subchapter S Status.

Specifically small growing partnerships are enticed by Limited Liability Corporations, as

they are a special type of corporation that are taxed as if it were a sole proprietorship or
partnership. A major factor that makes LLCs popular is the unlimited liability of a
partnership. A Subchapter S allows liability protection but allows taxation like a
partnership, avoiding double taxation.

Page 274 Case In Point - Thinking Critically – Type questions and answers

1. Does John have the personality to be a partner?

No, John was talking about being an owner in a way that makes it obvious he is not very
enticed by the idea of taking on more responsibility.
 2. Do you think John is seriously ready to become a partner? Explain your answer.

No definitely not. John made it very clear that he doesn’t think the long hours that he sees
his boss put in seem very rewarding. He also included a detail regarding a different job
they could both take that would allow for more relaxation time.

3. If you were in John’s position, how would you decide?

If I was John, I would lay out the pros and cons on a piece of paper, but I think most
importantly I would ask myself if the raise in ay would be worth the raise in hours. I think
that is the simplest question to ask in this situation.

4. If John decides to accept Tyrone’s offer, what action should be taken next?

If John decides to accept, he should immediately come up with a plan on how he will pay off
the loan from his grandmother. Then, he should make sure he gets enough training and
assistance from Tyrone so that he knows how to run the business.

5. Why would Tyrone offer to make John a partner?

Tyrone seems like he is taking on a lot of work load, and he may be wanting to divide that
work up a bit to relieve some stress for himself. Also, it seems as though John has been a
great employee for him and he may think John is deserving of the position.

6. Find information from the library or internet that might help John make a decision.
One possible source is the website of the Small Business Administration.

On a site that reported the pros and cons for becoming a partial owner of a business, the
site describes a lot of cons that apply to John’s situation. For example, becoming a part
owner means taking on more responsibility for the activities of the business. It also
changes relationships between people, and you still don’t have full control.