question

Which of the following is true of a sole proprietorship? a. The owner of the business is not held accountable for the losses incurred by the business. b. The business needs to be created by filing articles of incorporation. c. The business and its owner are considered to be a single entity. d. The members of the firm have a limited liability.

answer

c

question

A partnership: a. is a voluntary agreement under which two or more people act as co-owners of a business for profit. b. is a form of business ownership that offers both limited liability to its owners and flexible tax treatment. c. is a form of business ownership with a single owner who usually actively manages the company. d. is a form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners.

answer

a

question

Which of the following would be an example of a corporation? a. The dissolution of Nutrimax Pizzas results in its owners having to repay the debts of the firm. b. The profits earned by Luxe Clothing are legally considered as the income of the firm's owners. c. Sparkles is a business firm owned by a single person who takes up complete liability for the business. d. The owners of Octave Inc. are not personally responsible for the debts and obligations of the firm.

answer

d

question

_____ are documents filed with state governments to establish the existence of new corporations. a. Corporate bonds b. The bills of lading c. Franchise disclosure documents d. The articles of incorporation

answer

d

question

Which of the following is true about a limited liability company? a. The firm has no separate legal entity. b. The firm and the owner are considered to be one. c. The owners can elect the way in which they would like the business to be taxed. d. The owners of the business are personally liable for the debts of the firm.

answer

c

question

Which of the following is a disadvantage of a sole proprietorship? a. The costs of formation of the firm are more compared to other business forms. b. The profits of the firm have to be shared between its members. c. The owner is personally liable for the debts of the firm. d. The firm is subject to double taxation.

answer

c

question

which of the following is an advantage of sole proprietorship? a. Shared workload and responsibilities b. Ease of formation c. Unlimited financial resources d. Attraction of talented employees

answer

b

question

The locals residing near a small chemical factory file a complaint against it for polluting the environment. The owner of the factory learns that if he loses the case, his personal possessions might also be confiscated. Which of the following types of ownership is the factory functioning under? a. Sole proprietorship b. Partnership c. Limited liability company d. Corporation

answer

a

question

Which of the following is an advantage of general partnerships? a. Partnerships have no scope for disagreements. b. If a partner withdraws, his investment stays with the company. c. Partners can share the burden of running the business. d. All partners have limited liability.

answer

c

question

A disadvantage of a general partnership is that: a. there are limited financial resources available for the partnership. b. there is difficulty in withdrawing from the company. c. there is difficulty in the formation of the company. d. it involves double taxation for the partners.

answer

b

question

Which of the following aspects of a limited partnership differentiates general partners from limited partners? a. Participation in management of the company b. Financial contribution to the company c. Duration of the partnership in the company d. Sharing of profits of the company

answer

a

question

A limited partnership is different from a limited liability partnership in that, in a limited partnership: a. all members actively participate in the management of the firm. b. only the members who have the protection of limited liability actively participate in the management of the firm. c. all members have limited liability. d. only the members with unlimited liability are allowed to manage the firm.

answer

b

question

Two friends invest to form a small firm that provides career counseling for students who just graduated from college. They agree on their specific roles in the firm and their profit shares without any written document. Which of the following types of ownerships is the firm likely to have? a. Limited liability company b. Statutory closed corporation c. General partnership d. Sole proprietorship

answer

c

question

____ are the basic rules governing how a corporation is organized and how it conducts its business. a. Bills of lading b. Articles of organization c. Corporate bylaws d. The articles of incorporation

answer

c

question

A(n) _____ is a form of corporation that avoids double taxation by having its income taxed as if it were a partnership. a. sole proprietorship b. franchise c. S corporation d. C corporation

answer

c

question

A C corporation is owned by _____. a. line managers b. chief executive officers c. boards of directors d. shareholders

answer

d

question

A type of corporation that can have no more than 100 shareholders is a(n): a. statutory closed corporation. b. nonprofit corporation. c. sole proprietorship. d. S corporation

answer

d

question

_____ cannot have stockholders. a. nonprofit corporation b. S corporation c. statutory closed corporation d. C corporation

answer

a

question

Shaun receives tax deductions for his investments in the Biocal Labs. The Biocal Labs is a(n): a. nonprofit corporation. b. S corporation. c. statutory closed corporation. d. C corporation.

answer

a

question

A(n) _____ is a corporate restructuring in which one firm buys another. a. spin-off b. divestiture c. acquisition d. merger

answer

c

question

Graden Corp. and Kefy Inc. are leading producers and distributors of coffee beans and have joined together to become the world's largest distributor of coffee. This is an example of a(n)_____. a. upward merger b. conglomerate merger c. vertical merger d. horizontal merger

answer

d

question

A conglomerate merger is: a. a corporate restructuring in which one firm starts a new venture with the help of another firm. b. a combination of firms that are in unrelated industries. c. when one firm buys another firm in the same industry. d. a combination of firms that are at different stages in the production of a product or service creating a buyer-seller relationship.

answer

b

question

Matrix Media, a leading video production company, acquired KTN, a start-up software company. The acquisition occurred even after strong opposition from the board members of KTN. This situation is is an example of a(n): a. unfriendly acquisition. b. hostile takeover. c. divestiture. d. forced merger

answer

b

question

A divestiture occurs when a firm: a. purchases another firm that is at a different stage in the production of a product in the same industry. b. combines with another firm in an unrelated industry. c. transfers total or partial ownership of some of its operations to investors or to another company. d. combines with another firm in the same industry.

answer

c

question

In a carve-out, a firm: a. purchases a company in a new industry and sells its shares to outside investors. b. purchases a company in a new industry and sells its shares to existing shareholders. c. distributes the stock of its new company to existing shareholders. d. distributes the stock of its new company to outside investors.

answer

d

question

Which of the following is a characteristic of limited liability companies? a. They are required to produce larger amounts of paperwork than corporations. b. They are required to hold timely board meetings. c. They are made to pay annual franchise taxes in many states. d. They are subject to double taxation.

answer

c

question

Which of the following is an advantage of limited liability companies? a. The foreign status in other states is not applicable to limited liability companies. b. All types of firms can form limited liability companies. c. Limited liability companies can have any number of owners. d. The process of formation is simple and fast.

answer

c

question

Celtix, a branded shoe manufacturer, has licensed Checkers Corp. to market and sell its products. This is an example of a _____. a. spin-off b. conglomerate merger c. divestiture d. distributorship

answer

d

question

Which of the following best describes a business format franchise? a. It is a broad franchising agreement in which the franchisee pays the franchisor for the right to use the production methods of the franchisor and functions under a different name and identity. b. It is a type of franchising arrangement in which the franchisor shares ownership with the franchisee by selling a number of its shares. c. It is a broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and production methods of the franchisor. d. It is a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.

answer

c

question

A Franchise Disclosure Document: a. is a document sent to the franchisor by the franchisee indicating that the franchisee will no longer sell products under the franchisor's name. b. extensively uses legal jargon to explain the procedures and rules of the franchisor to the franchisee. c. contains information about every aspect of the franchise agreement. d. is a monthly document compiled by a franchisee providing information about its sales and profits.

answer

c

question

The form they choose affect virtually every aspect of establishing and operating their firm, including

answer

the initial cost of setting up the business, the way the profits are distributed, the types of taxes (if any) the business must pay, and the types of regulations it must follow. Choice of ownership also determines the degree to which each owner is personally liable for the firm's debuts and the sources of funds available to the firm to finance future expansion

question

sole proprietorship

answer

a form of business ownership with a single owner who usually actively manages the company A sole proprietorship is simply an extension of the owner. Company earnings are treated just like the owner's income; likewise, any debts the company incurs are considered to be the owner's personal debts

question

partnership

answer

a voluntary agreement under which two or more people act as co-owners of a business for profit

question

a general partnership

answer

a partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm

question

corporation

answer

: a form of business in which the business is considered a legal entity that is separate and distinct from its owners

question

articles of incorporation

answer

the document filed with a state government to establish the existence of a new corporation A corporation is considered to be a legal entity that is separate and distinct from its owner. Like an artificial person

question

limited liability

answer

when owners are not personally liable for claims against their firm. Owners with limited liability may lose their investment in the company, but their other personal assets are protected

question

limited liability company (LLC)

answer

a form of business ownership that offers both limited liability to its owners and flexible tax treatment Like a corporation, an LLC is considered a legal entity separate from its owners- an LLC offers its owners limited liability for the debts of their business One of the most interesting characteristics of an LLC is that its owners can elect to have their business taxed either as a corporation or a partnership. The IRS doesn't track LLC information separately. Instead, it classifies each LLC based on the tax treatment the company selects

question

Advantages of sole proprietorship

answer

Ease of formation Retention of control Pride of ownership Retention of profits Possible tax advantage

question

disadvantages of SP

answer

Limited financial resources Unlimited liability Limited ability to attract and maintain talented employees Heavy workload and responsibilities Lack of permanence

question

There is no limit on the number of partners who can participate in a general partnership, but most partnerships

answer

consist of only a few partners- often just two.

question

advantages of partnership

answer

Ability to pool financial resources Ability to share responsibilities and capitalize on complementary skills Ease of formation Possible tax advantages

question

disadvantages of partnership

answer

Unlimited liability Potential for disagreements Lack of continuity Difficulty in withdrawing from a partnership

question

limited partnership

answer

a partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability

question

General partners have the right to participate fully in managing their partnership, but

answer

they also assume unlimited personal liability for any of its debts- just like the partners in a general partnership

question

Limited partners cannot actively participate in its management, but they

answer

have the protection of limited liability. This means that, as long as they do not actively participate in managing the company, their personal wealth is not at risk.

question

limited liability partnerships

answer

a form of partnership in which all partners have the right to participate in management and have limited liability for company debts

question

c corporation

answer

the most common type of corporation which is a legal business entity that offers limited liability to all of its owners, who are called stockholders [an owner of a corporation]

question

corporate by laws

answer

the basic rules governing how a corporation is organized and how it conducts its business Forming a corporation tends to be more expensive and complex than forming a sole proprietorship or partnership

question

Ownership of C corporations is represented

answer

by shares of stock (owners are stockholders or shareholders)

question

One key difference between the two types of stock involves voting rights; common stockholders normally ......, while preferred stockholders .....

answer

have the right to vote in stockholders' meetings do not.

question

Stock in large corporations is usually ..... But many smaller corporations are owned by just a handful of stockholders who don't actively trade their stock. It's even possible for individuals to incorporate their business and be the sole shareholder in their corporations. Stockholders don't have to be individuals.

answer

publicly traded, meaning that anyone with the money and inclination to do so can buy shares- and that anyone who owns shares is free to sell them.

question

institutional investor

answer

an organization that pools contributions from investors, clients, or depositors and uses these funds to buy stocks and other securities

question

the individuals who are elected by stockholders of a corporation to represent their interests

answer

board of directors

question

advantages of corporations

answer

limited liability permanence ease of transfer of ownership ability to raise large amounts of financial capital ability to make use of specialized management

question

disadvantages of corporations

answer

expense and complexity of formation and operation complications when operating in more than one state double taxation of earnings and additional taxes more paperwork, more regulation, and less secrecy possible conflicts of interest

question

s corporation

answer

a form of corporation that avoids double taxation by having its income taxed as if it were a partnership

question

statutory (closed) corporation

answer

a corporation with a limited number of owners that operates under simpler, less formal rules than a C corporation

question

nonprofit corporation

answer

a corporation that does not seek to earn a profit and differs in several fundamental respects from C Corporations

question

acquisition

answer

a corporate restructuring in which one firm buys another

question

merger

answer

a corporate restructuring that occurs when two formerly independent business entities combine to form a new organization

question

divestitures

answer

the transfer of total or partial ownership of some of a firm's operations to investors or to another company

question

LLC advantages

answer

Limited liability Tax pass through Simplicity and flexibility in management and operation Flexible ownership

question

LLC Disadvantages

answer

Complexity of formation Annual franchise tax Foreign status in other states Limits on types if firms that can form LLCs Differences in state law

question

horizontal merger

answer

a combination of two firms that are in the same industry Goal: increase size and market power within the industry; improve efficiency by eliminating duplication of facilities and personnel

question

vertical merger

answer

a combination of firms at different stages in the production of a good or service Goal: provide tighter integration of production and increased control over the supply of crucial input

question

conglomerate merger

answer

a combination of two firms that are in unrelated industries Goal: reduce risk by making the firm less vulnerable to adverse conditions in any single market

question

franchise

answer

a licensing arrangement under which a franchisor allows franchisees to use its name, trademark, products, business methods, and other property in exchange for monetary payments and other considerations

question

franchisor

answer

the business entity in a franchise relationship that allows others to operate its business using resources it supplies in exchange for money and other considerations

question

franchisee

answer

the party in a franchise relationship that pays for the right to use resources supplied by the franchisor

question

distributorship

answer

a type of franchising arrangement in which the franchisor makes a product and licenses that franchisee to sell it

question

business format franchise

answer

a broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor

question

franchise advantages

answer

Less risk Training and support Brand recognition Easier access to funding

question

franchise disadvantages

answer

Costs Lack of control Negative Halo effect Growth challenges Restrictions on sale Poor execution Entering into a franchise agreement

question

franchise agreement

answer

the contractual arrangement between a franchisor and franchisee that spells out the duties and responsibilities of both parties Terms and conditions: Fees and other payments Training and support Specific operational requirements Conflict resolution Assigned territory

question

franchise disclosure document

answer

a detailed description of all aspects of a franchise that the franchisor must provide to the franchisee at least 14 calendar days before the franchise agreement is signed

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