Question 1

One of the drawbacks of a limited liability company is that most states do not yet recognize this form of ownership.

Accepted Answer

A) True 
 B)False

Question 2

Joji is a 37-year-old married business owner. He runs a dry cleaning service with three locations in Toledo, Ohio. His personal obligations are the home that he owns with his wife, who works for a large financial consulting firm; the healthcare of his family; and his commitment toward saving for his three children's college educations. Joji knows that two of his locations require a large infusion of cash to pay for new and expensive dry cleaning equipment. Although his wife's job provides the family with health insurance, it also places the family in a higher income tax bracket. Joji would certainly like to minimize his taxes. Which of the following forms of business ownership would you suggest for him?

Accepted Answer

A)   Joji should consider a sole proprietorship due to the fact that it pays its own taxes and it has limited liability.
B)   Joji should consider a sole proprietorship due to the fact that it has unlimited liability and it will protect the family's personal assets.
C)   Joji should consider a corporation because he can avoid the negative aspect of limited liability. Corporations are always taxed at a lower rate than individuals.
D)   Joji should consider a limited liability company because he will only be liable for what he has invested in the business. His personal assets will be protected, and he can be taxed like a sole proprietorship.E) A) and B)
F) C) and D)

Question 3

An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a

Accepted Answer

A)   sole proprietorship.
B)   cooperative.
C)   C corporation.
D)   general partnership.E) A) and D)
F) All of the above

Question 4

A(n)  ________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

Accepted Answer

A)   limited partnership
B)   conventional corporation
C)   unlimited partnership
D)   nonprofit organizationE) All of the above
F) A) and B)

Question 5

The form of business ownership that usually requires the most detailed record keeping is the

Accepted Answer

A)   corporation.
B)   partnership.
C)   sole proprietorship.
D)   limited partnership.E) A) and B)
F) A) and C)

Question 6

If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system, the franchisor may also be willing to serve as a source of financing for your operation.

Accepted Answer

A) True 
 B)False

Question 7

A distinguishing feature of a cooperative is that it

Accepted Answer

A)   maintains a distinct separation between ownership and management.
B)   is only intended to operate for a limited period of time.
C)   is owned and operated by the people who use it.
D)   can have no more than 75 owners, all of whom must be citizens of the United States.E) C) and D)
F) None of the above

Question 8

A(n)  ________ occurs when one company buys the property and obligations of another company.

Accepted Answer

A)   cooperative
B)   hostile takeover
C)   leveraged buyout
D)   acquisitionE) None of the above
F) B) and C)

Question 9

Janie is a general partner in a local bakery. All of her personal assets are legally protected from the debts of the business.

Accepted Answer

A) True 
 B)False

Question 10

Dr. Limmer, Dr. Lowder, and Dr. Lynch want to incorporate their practice. There is no advantage due to the costs involved.

Accepted Answer

A) True 
 B)False

Question 11

Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership.

Accepted Answer

A) True 
 B)False

Question 12

People who form cooperatives

Accepted Answer

A)   believe the government should play a larger role in the economy.
B)   dislike the notion of having owners, managers, and customers as separate individuals with separate goals.
C)   see competitive behavior as the key to ensuring rapid economic growth.
D)   want to find a way to supply basic necessities free of charge to everyone.E) A) and B)
F) A) and D)

Question 13

Double taxation means

Accepted Answer

A)   if stockholders decide to sell their shares, they are subject to paying twice the amount of taxes on any capital gains.
B)   as the owner of the company, you pay twice the amount in employment taxes on yourself, as you do on your employees.
C)   corporations pay taxes on their profits. If they distribute after-tax profits to the stockholders, the stockholders also pay taxes on the distribution.
D)   if the corporation doubles its profits from the previous year, the firm's tax rate (the percentage it pays in taxes)  will also double.E) A) and B)
F) All of the above

Question 14

One disadvantage of ________ is the initial cost of formation.

Accepted Answer

A)   corporations
B)   general partnerships
C)   sole proprietorships
D)   limited partnershipsE) None of the above
F) All of the above

Question 15

When investors successfully take a firm private, the company's stock is

Accepted Answer

A)   converted into bonds.
B)   converted into cash.
C)   no longer sold to investors on the open market.
D)   pledged as collateral to its bondholders.E) None of the above
F) A) and B)

Question 16

Matthew is leading a group of stockholders who want to take the Cash Cow Corporation private. If Matthew's group succeeds, Cash Cow's stock will no longer be available to investors on the open market.

Accepted Answer

A) True 
 B)False

Question 17

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

Accepted Answer

A) True 
 B)False

Question 18

In a general partnership, all partners are entitled to an equal share of the firm's profits.

Accepted Answer

A) True 
 B)False

Question 19

A merger involving a software producer and a clothing manufacturer is an example of a ________ merger.

Accepted Answer

A)   vertical
B)   horizontal
C)   linear
D)   conglomerateE) None of the above
F) C) and D)

Question 20

A(n)  ________ is a company that has a proven business model and is willing to sell the rights to use the business model to others so that they can sell the same product or service within a given territory.

Accepted Answer

A)   intrapreneur
B)   franchisee
C)   limited partner
D)   franchisorE) A) and B)
F) A) and D)

Exam 5: How to Form a Business

Matthew is leading a group of stockholders who want to take the Cash Cow Corporation private. If Matthew's group succeeds, Cash Cow's stock will no longer be available to investors on the open market.

Correct Answer
verified

The form of business ownership that usually requires the most detailed record keeping is the

Correct Answer
verified

A(n) ________ is a company that has a proven business model and is willing to sell the rights to use the business model to others so that they can sell the same product or service within a given territory.

Correct Answer
verified

Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership.

Correct Answer
verified

One disadvantage of ________ is the initial cost of formation.

Correct Answer
verified

Double taxation means

Correct Answer
verified

An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a

Correct Answer
verified

In a general partnership, all partners are entitled to an equal share of the firm's profits.

Correct Answer
verified

One of the drawbacks of a limited liability company is that most states do not yet recognize this form of ownership.

Correct Answer
verified

Dr. Limmer, Dr. Lowder, and Dr. Lynch want to incorporate their practice. There is no advantage due to the costs involved.

Correct Answer
verified

A distinguishing feature of a cooperative is that it

Correct Answer
verified

Correct Answer
verified

People who form cooperatives

Correct Answer
verified

If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system, the franchisor may also be willing to serve as a source of financing for your operation.

Correct Answer
verified

A merger involving a software producer and a clothing manufacturer is an example of a ________ merger.

Correct Answer
verified

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

Correct Answer
verified

When investors successfully take a firm private, the company's stock is

Correct Answer
verified

A(n) ________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

Correct Answer
verified

A(n) ________ occurs when one company buys the property and obligations of another company.

Correct Answer
verified

Janie is a general partner in a local bakery. All of her personal assets are legally protected from the debts of the business.

Correct Answer
verified

Exam 5: How to Form a Business

Matthew is leading a group of stockholders who want to take the Cash Cow Corporation private. If Matthew's group succeeds, Cash Cow's stock will no longer be available to investors on the open market.

Correct AnswerverifiedShow Answer

The form of business ownership that usually requires the most detailed record keeping is the

Correct AnswerverifiedShow Answer

A(n) ________ is a company that has a proven business model and is willing to sell the rights to use the business model to others so that they can sell the same product or service within a given territory.

Correct AnswerverifiedShow Answer

Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership.

Correct AnswerverifiedShow Answer

One disadvantage of ________ is the initial cost of formation.

Correct AnswerverifiedShow Answer

Double taxation means

Correct AnswerverifiedShow Answer

An entrepreneur who wishes to start a business with little delay or hassle, and who wants to be his or her own boss, should organize the business as a

Correct AnswerverifiedShow Answer

In a general partnership, all partners are entitled to an equal share of the firm's profits.

Correct AnswerverifiedShow Answer

One of the drawbacks of a limited liability company is that most states do not yet recognize this form of ownership.

Correct AnswerverifiedShow Answer

Dr. Limmer, Dr. Lowder, and Dr. Lynch want to incorporate their practice. There is no advantage due to the costs involved.

Correct AnswerverifiedShow Answer

A distinguishing feature of a cooperative is that it

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

People who form cooperatives

Correct AnswerverifiedShow Answer

If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system, the franchisor may also be willing to serve as a source of financing for your operation.

Correct AnswerverifiedShow Answer

A merger involving a software producer and a clothing manufacturer is an example of a ________ merger.

Correct AnswerverifiedShow Answer

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

Correct AnswerverifiedShow Answer

When investors successfully take a firm private, the company's stock is

Correct AnswerverifiedShow Answer

A(n) ________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

Correct AnswerverifiedShow Answer

A(n) ________ occurs when one company buys the property and obligations of another company.

Correct AnswerverifiedShow Answer

Janie is a general partner in a local bakery. All of her personal assets are legally protected from the debts of the business.

Correct AnswerverifiedShow Answer

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