chapter 6 BUS 100 cmu – Flashcards
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A corporation must register or qualify as a _____ in every state in which it operates other than its state of incorporation. domestic corporation foreign corporation closed corporation C corporation
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foreign corporation
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The difference between common stockholders and preferred stockholders is that common stockholders: must always be individuals. do not have the right to vote in stockholders' meetings. have the right to vote in stockholders' meetings. cannot sell the shares of stocks that they own.
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have the right to vote in stockholders' meetings.
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Justin Rolando decided to operate his own web design firm and is leaning toward organizing it as a sole proprietorship. One factor Justin should realize is that by choosing this form of business he would be: incurring the problem of double taxation. creating a business that was legally separate and distinct from himself. exposing himself to unlimited personal liability for the company's debts. required to fill out special forms and pay proprietorship fees to get the company legally established.
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exposing himself to unlimited personal liability for the company's debts.
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A general partnership avoids the problem of double taxation experienced by _____ because earnings of partnerships are taxed only as income of the _____, with no separate tax on the income of the _____. C corporations; business; partners C corporations; partners; business sole proprietorships; business; partners sole proprietorships; partners; business
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C corporations; partners; business
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Hans is considering forming a company that specializes in international consultations. He wants to serve as a liaison between domestic and Chinese toy distributors, offering the U.S. firms access to lower cost labor and offering the Chinese firms access to one of the largest markets in the world. In addition, he will need to access capital for the operation by offering shares of common stock. Which business entity should he choose? A sole proprietorship An LLP A corporation An LLC
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A corporation
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A ________ is a form of partnership in which all partners have the right to participate in management and have limited liability for company debts. limited liability partnership governmental partnership general partnership limited partnership
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limited liability partnership
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In a limited partnership, the limited partner: cannot actively participate in the management of the partnership. can only invest their money in the company for a limited time period. cannot own more than 10 percent of the company's stock. has the right to participate fully in managing the partnership.
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cannot actively participate in the management of the partnership.
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Samantha has a talent for making attractive but inexpensive jewelry and wants to set up a small business to sell some of her creations. She asks for your advice about setting up her firm, telling you that she wants to start her business as quickly and inexpensively as possible. In addition, she doesn't want to share control (or profits) with anyone else. Which form of business ownership would you suggest for Samantha? A sole proprietorship A general partnership A C corporation A limited liability company
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A sole proprietorship
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The vast majority of LLCs elect to be taxed as _____. partnerships C corporations sole proprietorships S corporations
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partnerships
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A "spin-off" is a common type of _____. acquisition vertical merger divestiture horizontal merger
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divestiture
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A _____ is a licensing arrangement under which one party allows another party to use its name, trademark, patents, copyrights, business methods, and other property in exchange for monetary payments and other considerations. limited liability partnership general partnership franchise limited liability company
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franchise
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Firms that want to improve the integration of production activities or increase their control over the supply of inputs would most likely consider a _____ merger. generic vertical conglomerate horizontal
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vertical
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The party in a franchise relationship that pays for the right to use resources supplied by another business entity is known as the _____. franchisee limited partner franchisor general corporation
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franchisee
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A(n) _____ occurs when two companies agree to combine operations to form a new company. merger accommodation limited partnership acquisition
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merger
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A(n) _____ merger is the combination of two or more firms at different stages of production of a good or service, creating a buyer-seller relationship. vertical conglomerate horizontal upward
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vertical
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In a typical business format franchise, the franchisor: pays royalties and fees to the franchisees. owns all of the franchise outlets but leases them to the franchisees. provides the franchisees with management training and support. allows franchisees to operate loosely as long as they are profitable
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provides the franchisees with management training and support.
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Which of the following best describes the kind of relationship an automobile company has with its local dealer? Mutually beneficial product franchise Business format franchise Receivership Distributorship
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Distributorship
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Sole proprietors have _____ for the debts of their companies. no liability unlimited liability shared liability limited liability
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unlimited liability
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What are the three types of partnerships? General, limited, and limited liability Sole, general, and specific General, unlimited, and specific liability Specific, general, and generic
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General, limited, and limited liability
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A _____ maintains limited liability but offers more flexibility in terms of tax treatment than a corporation. sole proprietorship limited liability company corporation limited liability partnership
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limited liability company
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Rob is an engineer who works in nuclear power plants. He is considering starting his own engineering company. Over the last couple of months he has spent considerable time researching different business ownership options. Due to the type of work performed by his new company, Rob wants to avoid unlimited liability. In this case, which business model would you recommend? A corporation A sole proprietorship A general partnership A cooperative
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A corporation
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To reduce risk of vulnerability to downturns in any single markets, corporations would most likely consider a _____ merger. horizontal vertical downward conglomerate
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conglomerate
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_____ are by far the most common type of business organization in the United States. Limited liability companies Corporations Sole proprietorships General partnerships
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Sole proprietorships
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Sandra Harper, who resides in Ontario, Canada, is a Canadian citizen. Three of her friends in the United States recently told her about an S corporation in which they own stock. She would like to own stock in this company. Is this possible? No, because she is neither a citizen nor a resident of the United States. Yes, because under the terms of the NAFTA, Canadian citizens have the same rights to own shares of stock in an S corporation as American citizens. Yes, because anyone can own stock in an S corporation as long as he or she is willing to fill out the appropriate paperwork. No, because stock in an S corporation cannot be held by more than three people.
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No, because she is neither a citizen nor a resident of the United States
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A _____ is a voluntary agreement under which two or more people act as co-owners of a business for profit. corporation sole proprietorship limited liability company partnership
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partnership
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Historically, the three basic forms of business ownership in the United States have been the: monopoly, duopoly, and oligopoly. joint venture, cooperative, and holding company. full partnership, nominal partnership, and silent partnership. sole proprietorship, partnership, and corporation.
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sole proprietorship, partnership, and corporation.
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As an artificial person, a(n) _____ can legally engage in almost any business activity a natural person can, including owning property, entering into binding contracts, and initiating legal actions. LLC partnership sole proprietorship corporation
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corporation
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Thomas started an engineering company two years ago with only three employees. Now, since the company has grown and is getting larger projects, he wants to expand the workforce. Unfortunately, Thomas is finding it hard to acquire new employees. The most likely reason for this is that his company is a sole proprietorship and: is heavily regulated by the government. it exposes the employees to unlimited liability for any debts made by the company. his company is a sole proprietorship and may not be able to pay the high salaries and perks that well- established companies might pay their employees. heavy taxes are levied on employees' salaries.
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his company is a sole proprietorship and may not be able to pay the high salaries and perks that well- established companies might pay their employees.
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Which of the following is an advantage of franchising for the franchisee? It allows the franchisee complete freedom on how the business should be run. It's relatively cheap to setup a franchise. It is shielded from any kind of negative halo effect. It provides instant brand recognition for the franchisee.
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It provides instant brand recognition for the franchisee.
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Which of the following is NOT a function of the board of directors of a corporation? The board sets the level of compensation for the corporate officers who manage the company. The board ensures that the company adheres to major regulatory requirements. The board takes an active role in the day-to-day management of the company. The board appoints the chief executive officer to manage the company.
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The board takes an active role in the day-to-day management of the company.
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Which of the following is an advantage of sole proprietorship? the owner's limited liability on business debts The ease of pooling financial resources The availability of a business partner's skills The retention of control
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The retention of control
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Suzanne Limley was just elected to the board of directors at United Bank Corporation. As a board member, she is expected to represent the interests of the bank's: creditors. shareholders. customers. senior managers.
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shareholders
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A _____ merger is the combination of firms in the same industry. vertical horizontal conglomerate hostile
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horizontal
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Justin Rolando decided to operate his own web design firm and is leaning toward organizing it as a sole proprietorship. One factor Justin should realize is that by choosing this form of business he would be: creating a business that was legally separate and distinct from himself. exposing himself to unlimited personal liability for the company's debts. incurring the problem of double taxation. required to fill out special forms and pay proprietorship fees to get the company legally established.
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exposing himself to unlimited personal liability for the company's debts.
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Which of the following is a disadvantage of general partnerships? Compared to the other forms of ownership, the paperwork and costs involved in forming a general partnership are the most extensive. All general partners have unlimited liability for the debts and obligations of their business. A partner who withdraws from a partnership cannot be held liable for any debts the firm had at the time of withdrawal. The partners in a general partnership are exposed to double taxation.
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All general partners have unlimited liability for the debts and obligations of their business.
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In 1988, Philip Morris, the leading cigarette manufacturer in the United States, merged with Kraft, Inc., the maker of several leading food brands, such as Miracle Whip, Velveeta, and Maxwell House. This combination would be classified as a _____ merger. conglomerate horizontal macro vertical
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conglomerate
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A _____ allows all partners to participate in management while also offering them limited liability. nominal partnership general partnership limited partnership limited liability partnership
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limited liability partnership
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All of the following are advantages of limited liability companies EXCEPT: simplicity in management and operation. flexible ownership. limited liability. uniform state laws.
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uniform state laws.
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One reason a firm would consider a _____ merger would be to increase size and market power in its industry. vertical horizontal conglomerate generic
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horizontal
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Tina is the owner of a piano tuning business. As a sole proprietor, any profit she earns is: taxed only when she withdraws the money from a bank. taxed twice, once as a business and then taxed again as Tina's income. treated as personal income of Tina. tax free.
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treated as personal income of Tina.
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John Littleton is a partner in Mike's Motorcycles Inc., which has operated for the last 20 years as a partnership. Recently, the partners agreed to change the structure of the business and decided to incorporate the company in Delaware. As a result, John Littleton will now become a _____. limited partner shareholder board member CEO
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shareholder
