Law of Commercial Transactions Exam 1

ethics

The study of what constitutes right and wrong behavior, and it is a branch of philosophy focused on morality

philosophy

The study of the fundamental nature of knowledge, reality, and existence

morality philosophy

contemplates what is right and wrong, and it explores the nature of morality and examines how people should live their lives

business ethics

looks at the decisions businesses make and whether those decisions are right or wrong, and whether those businesses used moral or ethical principles in making their decisions

duty-based ethics

An ethical philosophy rooted in the idea that every person has certain duties to others, including both humans and the planet. Those duties may be derived from religious principles or from other philosophical reasoning

principle of rights

"rights theory," is a theory used to determine whether a decision is ethical based on how that decision affects the rights of others

duty-based ethics example

Robin Hood steals from the rich and gives to the poor

good intent + good action

morally good

bad intent + good action

morally bad

bad intent +bad action

morally bad

outcome-based ethics

focuses on the impacts of a decision on society

good outcome

morally good

bad outcome

morally bad

utilitarianism

a form of ethical reasoning that determines that a good decision results in the greatest good for the greatest number of people affected by the decision

expanding factory, it gives hundreds of people jobs, it causes thousands of people pollution

utilitarianism example

systematic approach

a five-step checklist that identifies the most efficient means of generating constant and optimal results

systematic approach: step one

inquiry

systematic approach: step two

discussion

systematic approach: step three

decision

systematic approach: step four

justification

systematic approach: step five

evaluation

entreprenuer

initiates and assumes the financial risk of a new business enterprise and undertakes to provide or control its management

true or false: an entrepreneur is financially responsible for their business

true

Reasons for a business form

1. ease of creation

2. how liable you will be

3. tax implications

liable

to be held legally responsible

sole proprietorship

The simplest form of business organization in which the owner is the business. The owner reports business income on his or her own personal tax return and is legally responsible for all debts and obligations incurred by the business

proprietor

owner of the business

true or false: in a sole proprietorship, the law considers you and your business the same

true

personally liable

someone who sues you can receive money out of your personal assets, like personal bank accounts, your home, or your vehicles

personal assets

things of value by an individual or household

advantages of a sole proprietorship

1. The sole proprietor gets all the profits

2. it is easier to set up

3. it is free to set up

4. pass-through entity

5. the most flexible

pass-through entity

a business entity that passes the income on to the owners of the business and avoids double taxation

disadvantages of a sole proprietorship

1. unlimited personal liability

2. lack of continuity

3. limited ability to raise capital

franchise

an arrangement in which the owner of intellectual property licenses others to use it in the selling of goods and services

franchise contract

specifies the terms and conditions of the franchise and the rights and duties of the franchisor and franchisee

franchisor

seller of the franchise

franchisee

purchaser of the franchise

terms

what we agree to do

conditions

what rules must be followed to do what we agreed to do

distributorship

A manufacturer (the franchisor) licenses a dealer (the franchisee) to sell its products

license

a permit to own or use something

manufacturing agreement

the franchisor transmits to the franchisee the formula to make a particular product

example of manufacturing agreement

open a coke bottle factory, get the formula for Coca-Cola, make and sell the product

chain-style business operation

the franchise operates under a franchisor's trade name, and the franchisee must follow standardized methods of operations

example of chain-style business operation

fast food chains (McDonlad's)

trade name

a name by which something is known in a particular trade

intellectual property

property resulting from intellectual, creative processes

trademark

a symbol, word, or words that represent a company or product