Question 1

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Accepted Answer

A)   Ease of formation
B)   Lower taxes
C)   Simplified paperwork
D)   Limited liability of owners

Question 2

In a typical franchise agreement, the franchisor pays the franchisee a fee to manage its company, and the two of them split the profits based on the percentages established in the agreement.

Accepted Answer

A) True 
 B)False  False

Question 3

A leveraged buyout is an attempt by top management to gain control of a company by issuing a large amount of new stock.

Accepted Answer

A) True 
 B)False

Question 4

A limited partnership consists of one or more general partners and one or more limited partners.

Accepted Answer

A) True 
 B)False

Question 5

Unlimited liability means

Accepted Answer

A)   when you own your own business you are responsible for all the business debts.
B)   you are only liable for the money you invest in the business.
C)   as a franchisee your franchisor is responsible for the debts of the franchise.
D)   you are liable for whatever advertising promises your firm makes.

Question 6

Right now, Car Keepers Garage is operated as a

Accepted Answer

A)   limited liability company.
B)   cooperative.
C)   sole proprietorship.
D)   solitary subsidiary.

Question 7

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.

Question 8

A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following people would be most interested in participating in a business organized as a cooperative?

Accepted Answer

A)   Eric is interested in the idea of combining his time and resources with others to operate a business providing a good or service that they all will use.
B)   Rose looks to be an owner of a business and share in its profits, but does not want to take an active role in managing the company or participating in its daily operations.
C)   Matteo wants to work for a government-owned business because he believes government ownership ensures a more equitable distribution of income and wealth.
D)   Juliana prefers to work for a charitable organization that emphasizes helping people who are less fortunate than she is.

Question 10

The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about the operation of a corporation is correct?

Accepted Answer

A)   A corporation receives its charter from a state government.
B)   A corporate charter automatically expires in 99 years and must be renewed if the corporation wants to remain in business.
C)   Owners of a corporation have unlimited liability for any claims against their company.
D)   A corporation tends to be much easier to set up than a sole proprietorship or partnership.

Question 12

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

Accepted Answer

A) True 
 B)False

Question 13

James and Reilly were arguing over who was the senior partner and who was the junior partner, even though they started the business at the same time. If you were brought on board as their business advisor, you would explain to them that all partnerships have at least one general partner (known as the senior partner) and one limited partner (known as the junior partner).

Accepted Answer

A) True 
 B)False  False

Question 14

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

Accepted Answer

A)   Very few American franchisors of any size have had success in international markets.
B)   Large franchisors have had success in other nations, but newer and smaller franchisors have lacked the financial strength and reputation to succeed in global markets.
C)   The only nations in which American franchisors have achieved any success are Great Britain and Mexico.
D)   Both large and small franchises have found success in foreign countries by providing convenience and a predictable level of service and quality.

Question 15

Tee Time Golf Resort has the opportunity to buy 1,000 acres of property adjacent to its award-winning 18-hole golf course. After talking with her banker and her lawyer, the owner is encouraged to begin the paperwork to change from a limited liability company form of business ownership to a corporation. You applaud this strategy because she will eliminate the problem of double taxation.

Accepted Answer

A) True 
 B)False

Question 16

Most states have legal restrictions that prevent individuals from incorporating.

Accepted Answer

A) True 
 B)False

Question 17

________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

Accepted Answer

A)   Regulated equity companies
B)   Corporate cooperatives
C)   Limited liability companies
D)   Private drawing companies

Question 18

One advantage of a partnership is that there is a simple process for partners to terminate their business.

Accepted Answer

A) True 
 B)False  False

Question 19

Stockholders in a corporation have limited liability.

Accepted Answer

A) True 
 B)False

Question 20

Originally, farm cooperatives were formed to provide better prices for farmers. These groups now cooperatively buy farm equipment and other products, and realize economies of scale by banding together for these things.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Correct Answer
verified

In a typical franchise agreement, the franchisor pays the franchisee a fee to manage its company, and the two of them split the profits based on the percentages established in the agreement.

Correct Answer
verified
False

A leveraged buyout is an attempt by top management to gain control of a company by issuing a large amount of new stock.

Correct Answer
verified

A limited partnership consists of one or more general partners and one or more limited partners.

Correct Answer
verified

Unlimited liability means

Correct Answer
verified

Right now, Car Keepers Garage is operated as a

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

A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested.

Correct Answer
verified

Which of the following people would be most interested in participating in a business organized as a cooperative?

Correct Answer
verified

The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives.

Correct Answer
verified

Which of the following statements about the operation of a corporation is correct?

Correct Answer
verified

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

Correct Answer
verified

Correct Answer
verified
False

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

Correct Answer
verified

Correct Answer
verified

Most states have legal restrictions that prevent individuals from incorporating.

Correct Answer
verified

________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

Correct Answer
verified

One advantage of a partnership is that there is a simple process for partners to terminate their business.

Correct Answer
verified
False

Stockholders in a corporation have limited liability.

Correct Answer
verified

Originally, farm cooperatives were formed to provide better prices for farmers. These groups now cooperatively buy farm equipment and other products, and realize economies of scale by banding together for these things.

Correct Answer
verified

Exam 5: How to Form a Business

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Correct AnswerverifiedShow Answer

In a typical franchise agreement, the franchisor pays the franchisee a fee to manage its company, and the two of them split the profits based on the percentages established in the agreement.

Correct AnswerverifiedFalse

A leveraged buyout is an attempt by top management to gain control of a company by issuing a large amount of new stock.

Correct AnswerverifiedShow Answer

A limited partnership consists of one or more general partners and one or more limited partners.

Correct AnswerverifiedShow Answer

Unlimited liability means

Correct AnswerverifiedShow Answer

Right now, Car Keepers Garage is operated as a

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

A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested.

Correct AnswerverifiedShow Answer

Which of the following people would be most interested in participating in a business organized as a cooperative?

Correct AnswerverifiedShow Answer

The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives.

Correct AnswerverifiedShow Answer

Which of the following statements about the operation of a corporation is correct?

Correct AnswerverifiedShow Answer

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFalse

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Most states have legal restrictions that prevent individuals from incorporating.

Correct AnswerverifiedShow Answer

________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

Correct AnswerverifiedShow Answer

One advantage of a partnership is that there is a simple process for partners to terminate their business.

Correct AnswerverifiedFalse

Stockholders in a corporation have limited liability.

Correct AnswerverifiedShow Answer

Originally, farm cooperatives were formed to provide better prices for farmers. These groups now cooperatively buy farm equipment and other products, and realize economies of scale by banding together for these things.

Correct AnswerverifiedShow Answer

Correct Answer
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False

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False

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False

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