Question 1

One of the major disadvantages of a partnership is that profits must be divided equally.

Accepted Answer

A) True 
 B)False

Question 2

Compared to the C corporation, the limited liability company is an attractive form of business ownership because

Accepted Answer

A)   even though it is a little more expensive to form, it has a longer life than the C corporation.
B)   a limited liability company permits one owner to own all the stock of the company, whereas a C corporation requires several owners.
C)   once formed, the limited liability company is a legal form of business ownership, worldwide, whereas the C corporation must file for corporate status in each nation it elects to do business.
D)   once formed, the limited liability company does not require the firm to hold annual meetings, and has the option to avoid double taxation.E) A) and C)
F) B) and C)

Question 3

In a leveraged buyout, the managers of a firm, its employees, or other investors

Accepted Answer

A)   move the company elsewhere and start over.
B)   obtain the assets of the company through bankruptcy proceedings.
C)   borrow funds to buy out the firm's stockholders.
D)   negotiate a merger with another firm to create a conglomerate.E) None of the above
F) A) and B)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

Accepted Answer

A) True 
 B)False

Question 6

The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business.

Accepted Answer

A) True 
 B)False

Question 7

In a cooperative, members/customers

Accepted Answer

A)   democratically control their businesses by electing a board of directors.
B)   are known as limited partners.
C)   each have unlimited liability for the debts of the firm.
D)   take turns serving on the board that manages the company.E) B) and C)
F) All of the above

Question 8

One reason franchises have become so popular is that this arrangement provides the franchisee with

Accepted Answer

A)   a nationally recognized name and product.
B)   a low-cost way to start a business.
C)   limited liability.
D)   the right to retain all profits earned by their franchise.E) A) and C)
F) All of the above

Question 9

The ownership of Dogs of Denver, a small company that designs and manufactures coats, sweaters, jackets, and rainwear for dogs, wants to organize as an LLC. All the owners are under forty and two are expecting children by the end of the year. This is good strategy because each member can choose to commit to limited or unlimited liability.

Accepted Answer

A) True 
 B)False

Question 10

According to the Uniform Partnership Act, the three key elements of any general partnership are

Accepted Answer

A)   a board of directors, a written partnership agreement, and a well-defined product or service.
B)   two owners, an adequate financial base, and a written statement describing the manner in which profits and losses will be divided.
C)   common ownership, shared profits and losses, and right to participate in managing the operations.
D)   common stock, a board of directors, and a statement of limited liability.E) None of the above
F) A) and B)

Question 11

When a sole proprietor dies

Accepted Answer

A)   the sole proprietor's heirs have the option of taking over the business.
B)   the business is sold to a larger corporation.
C)   the company continues to function as it always has.
D)   the company always closes down.E) A) and B)
F) None of the above

Question 12

Ramses owns a roofing business. He enjoys being his own boss, but it comes at a price. Often, his days are filled with organizing the activities of the employees and seeking out new customers. He often misses events with friends and family because of the obligations of running his own business. He also knows that he has unlimited personal liability for any of his firm's debts. Ramses's business is organized as a(n)

Accepted Answer

A)   joint venture.
B)   C corporation.
C)   S corporation.
D)   sole proprietorship.E) A) and C)
F) All of the above

Question 13

When entering into a new partnership, a good strategy is to

Accepted Answer

A)   avoid putting the agreement in writing since this would limit the flexibility of the partnership.
B)   put the partnership agreement in writing.
C)   plan to incorporate as soon as possible.
D)   agree to put the first year's profits back into the partnership.E) A) and B)
F) B) and C)

Question 14

Rowan and Vanessa plan to pool their money and talents to form a general partnership and start a music school. One of the first things Rowan and Vanessa should do is

Accepted Answer

A)   seal the deal with at least five clubs where they can book three months' worth of gigs.
B)   consult an attorney and put their agreement in writing.
C)   pay the partnership formation fee to their state's commerce commission.
D)   file the limited liability paperwork at the courthouse in the county in which their partnership will be formed.E) All of the above
F) A) and C)

Question 15

Huong is opening an international food store. Though her products will span the globe, she wants to focus on items from the Middle East. She wants to be the firm's only general partner, but she is trying to get several friends to participate as limited partners. It's apparent Huong wants to

Accepted Answer

A)   limit her personal liability to the amount she personally invests in the company.
B)   keep all of the firm's profits.
C)   obtain a strong financial base for the firm while maintaining personal control over the firm's management.
D)   meet the legal requirements of the Uniform Partnership Act.E) A) and C)
F) A) and B)

Question 16

Which of the following statements is the most accurate?

Accepted Answer

A)   A foreign corporation does business in one or more states, but is chartered in another state.
B)   A foreign corporation is 50% owned by individuals or companies from another nation.
C)   A foreign corporation is headquartered in another nation.
D)   A foreign corporation is the same thing as a multinational corporation.E) B) and D)
F) All of the above

Question 17

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Accepted Answer

A) True 
 B)False

Question 18

A ________ merger unites firms at different stages of related businesses.

Accepted Answer

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

Question 19

A franchise may be organized as a sole proprietorship, partnership, or corporation.

Accepted Answer

A) True 
 B)False

Question 20

Penny Pebble and Stuart Stone formed a partnership in a landscape business. Under their arrangement, Penny actively manages the company and assumes unlimited liability for its debts. Stuart has invested several thousand dollars of his money with plans to share in the profits, but does not actively make management decisions, nor will he assume liability beyond his initial investment. Penny and Stuart are in a limited partnership.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

A ________ merger unites firms at different stages of related businesses.

Correct Answer
verified

Correct Answer
verified

Huong is opening an international food store. Though her products will span the globe, she wants to focus on items from the Middle East. She wants to be the firm's only general partner, but she is trying to get several friends to participate as limited partners. It's apparent Huong wants to

Correct Answer
verified

Which of the following statements is the most accurate?

Correct Answer
verified

Compared to the C corporation, the limited liability company is an attractive form of business ownership because

Correct Answer
verified

When a sole proprietor dies

Correct Answer
verified

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

Correct Answer
verified

In a cooperative, members/customers

Correct Answer
verified

Rowan and Vanessa plan to pool their money and talents to form a general partnership and start a music school. One of the first things Rowan and Vanessa should do is

Correct Answer
verified

The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business.

Correct Answer
verified

In a leveraged buyout, the managers of a firm, its employees, or other investors

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 major disadvantages of a partnership is that profits must be divided equally.

Correct Answer
verified

One reason franchises have become so popular is that this arrangement provides the franchisee with

Correct Answer
verified

A franchise may be organized as a sole proprietorship, partnership, or corporation.

Correct Answer
verified

According to the Uniform Partnership Act, the three key elements of any general partnership are

Correct Answer
verified

When entering into a new partnership, a good strategy is to

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Correct Answer
verified

Exam 5: How to Form a Business

A ________ merger unites firms at different stages of related businesses.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Huong is opening an international food store. Though her products will span the globe, she wants to focus on items from the Middle East. She wants to be the firm's only general partner, but she is trying to get several friends to participate as limited partners. It's apparent Huong wants to

Correct AnswerverifiedShow Answer

Which of the following statements is the most accurate?

Correct AnswerverifiedShow Answer

Compared to the C corporation, the limited liability company is an attractive form of business ownership because

Correct AnswerverifiedShow Answer

When a sole proprietor dies

Correct AnswerverifiedShow Answer

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

Correct AnswerverifiedShow Answer

In a cooperative, members/customers

Correct AnswerverifiedShow Answer

Rowan and Vanessa plan to pool their money and talents to form a general partnership and start a music school. One of the first things Rowan and Vanessa should do is

Correct AnswerverifiedShow Answer

The stockholders of large, publicly traded corporations have a daily pulse on the operation of the business.

Correct AnswerverifiedShow Answer

In a leveraged buyout, the managers of a firm, its employees, or other investors

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 major disadvantages of a partnership is that profits must be divided equally.

Correct AnswerverifiedShow Answer

One reason franchises have become so popular is that this arrangement provides the franchisee with

Correct AnswerverifiedShow Answer

A franchise may be organized as a sole proprietorship, partnership, or corporation.

Correct AnswerverifiedShow Answer

According to the Uniform Partnership Act, the three key elements of any general partnership are

Correct AnswerverifiedShow Answer

When entering into a new partnership, a good strategy is to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Stockholders in a corporation accept unlimited liability for the corporation's debts.

Correct AnswerverifiedShow Answer

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