Question 1

One reason many companies do not organize themselves as an S corporation is that this form of business:

Accepted Answer

A)  Is subject to a higher tax rate than a general partnership.
B)  Does not provide owners with limited liability.
C)  Has a special eligibility restriction,which many businesses are unable to meet.
D)  Is much more difficult to set up than C corporations.E) A) and B)
F) All of the above

Question 2

Marilyn paid a sizeable franchise fee to obtain a Fontmaster Printers franchise in Cleveland,Ohio.With the franchise fee behind her,she can look forward to using her creative talents to make her print shop different and more attractive than other Fontmaster shops in the Cleveland are
A.

Accepted Answer

A) True 
 B)False

Question 3

Compared to a sole proprietorship,which of the following is considered an advantage of a general partnership?

Accepted Answer

A)  Ability to pool financial resources
B)  Unlimited liability for all owners
C)  Division of profits among owners
D)  Ease and flexibility in transferring shares of ownership to othersE) B) and D)
F) All of the above

Question 4

Joshua wants to run his own business.A friend suggested that an inexpensive way to get started is to buy a franchise,where he will have the freedom to run it exactly as he sees fit.As a recent student of business,you concur with this advice.

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.E) None of the above
F) B) and C)

Question 6

Three types of corporate mergers are:

Accepted Answer

A)  Economic,geographic,and financial.
B)  Vertical,horizontal,and conglomerate.
C)  Flexible,differentiated,and conditional.
D)  Explicit,implicit,and intrinsic.E) A) and B)
F) B) and D)

Question 7

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 8

In the Legal Briefcase box,"Virtual Companies," the discussion is about:

Accepted Answer

A)  A new form of LLC offered in the state of Vermont,where all members can operate virtually.
B)  The fact that it is difficult to ask firms to commit to one form of business ownership since "global is now local".
C)  A new law that says your firm can be a corporation in the U.S. ,an LLC in England,and a sole proprietorship in China.
D)  How states are competing for your business,particularly individuals who want to start sole proprietorships.E) A) and D)
F) A) and C)

Question 9

One result of taking a firm private is:

Accepted Answer

A)  The firm's stock is no longer available for purchase on the open market.
B)  Managers lose some control as the number of stockholders increases.
C)  The public image of the firm will suffer.
D)  The firm will have access to more capital.E) A) and B)
F) B) and C)

Question 10

Sergio has agreed to become a partner in his brother's horse breeding business.Since he provided 30 percent of the money to start the firm and build an air-conditioned barn,he is entitled to 30 percent of any profits the firm earns during its first year of operation.

Accepted Answer

A) True 
 B)False

Question 11

The __________ is usually the easiest form of business to start and end.

Accepted Answer

A)  sole proprietorship
B)  limited partnership
C)  corporation
D)  cooperativeE) None of the above
F) C) and D)

Question 12

All partners in a general partnership have limited liability for the debts of their firm.

Accepted Answer

A) True 
 B)False

Question 13

A prospective franchise owner wants to keep his monthly costs at a minimum.The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month.The franchisor is claiming that a franchisee can expect monthly sales to be as high as:

Accepted Answer

A)  $2,125,000
B)  $2,000,000
C)  $3,125,000
D)  $200,000E) B) and C)
F) A) and D)

Question 14

In a sole proprietorship,the profits earned by the business are:

Accepted Answer

A)  Taxed as income for the business,but is exempt from the personal income tax paid by the owner.
B)  Taxed at the lowest corporate rate.
C)  The property of the owner,except for taxes owed to the government.
D)  Tax-free if the appropriate exemption is filed with the local government.E) A) and D)
F) None of the above

Question 15

Leanne,a franchisee runs a chain of small restaurants with a well-known name.Due to her hard work and people skills,her locations are doing quite well.She has noticed that several other franchisees in the same franchise system have let their restaurants deteriorate,especially in terms of lack of upgrades.Leanne should be concerned about this trend,since it eventually could affect her own business.

Accepted Answer

A) True 
 B)False

Question 16

A master limited partnership MLP) is:

Accepted Answer

A)  Not traded on the stock exchanges.
B)  Pays corporate income taxes.
C)  Taxed like a partnership.
D)  The corporate form of choice for small groups of individuals.E) C) and D)
F) B) and C)

Question 17

A cooperative consists of people with similar needs who pool their resources for mutual gain.

Accepted Answer

A) True 
 B)False

Question 18

In the late 1990s,firms found it easier to grow market share by:

Accepted Answer

A)  Switching from the corporate form of ownership to the partnership form of ownership.
B)  Merging with other companies or acquiring new companies.
C)  Downsizing their operations.
D)  Avoiding problems with antitrust regulations.E) A) and B)
F) A) and C)

Question 19

The following companies: Blue Diamond,Ocean Spray,and Land O'Lakes are well known cooperatives.

Accepted Answer

A) True 
 B)False

Question 20

One reason individuals incorporate is to obtain the advantage of limited liability.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

Marilyn paid a sizeable franchise fee to obtain a Fontmaster Printers franchise in Cleveland,Ohio.With the franchise fee behind her,she can look forward to using her creative talents to make her print shop different and more attractive than other Fontmaster shops in the Cleveland are A.

Correct Answer
verified

The __________ is usually the easiest form of business to start and end.

Correct Answer
verified

A prospective franchise owner wants to keep his monthly costs at a minimum.The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month.The franchisor is claiming that a franchisee can expect monthly sales to be as high as:

Correct Answer
verified

Unlimited liability means:

Correct Answer
verified

Three types of corporate mergers are:

Correct Answer
verified

Correct Answer
verified

A cooperative consists of people with similar needs who pool their resources for mutual gain.

Correct Answer
verified

One result of taking a firm private is:

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

Joshua wants to run his own business.A friend suggested that an inexpensive way to get started is to buy a franchise,where he will have the freedom to run it exactly as he sees fit.As a recent student of business,you concur with this advice.

Correct Answer
verified

Sergio has agreed to become a partner in his brother's horse breeding business.Since he provided 30 percent of the money to start the firm and build an air-conditioned barn,he is entitled to 30 percent of any profits the firm earns during its first year of operation.

Correct Answer
verified

In the Legal Briefcase box,"Virtual Companies," the discussion is about:

Correct Answer
verified

In a sole proprietorship,the profits earned by the business are:

Correct Answer
verified

The following companies: Blue Diamond,Ocean Spray,and Land O'Lakes are well known cooperatives.

Correct Answer
verified

Compared to a sole proprietorship,which of the following is considered an advantage of a general partnership?

Correct Answer
verified

All partners in a general partnership have limited liability for the debts of their firm.

Correct Answer
verified

In the late 1990s,firms found it easier to grow market share by:

Correct Answer
verified

A master limited partnership MLP) is:

Correct Answer
verified

One reason many companies do not organize themselves as an S corporation is that this form of business:

Correct Answer
verified

One reason individuals incorporate is to obtain the advantage of limited liability.

Correct Answer
verified

Exam 5: How to Form a Business

Marilyn paid a sizeable franchise fee to obtain a Fontmaster Printers franchise in Cleveland,Ohio.With the franchise fee behind her,she can look forward to using her creative talents to make her print shop different and more attractive than other Fontmaster shops in the Cleveland are A.

Correct AnswerverifiedShow Answer

The __________ is usually the easiest form of business to start and end.

Correct AnswerverifiedShow Answer

A prospective franchise owner wants to keep his monthly costs at a minimum.The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month.The franchisor is claiming that a franchisee can expect monthly sales to be as high as:

Correct AnswerverifiedShow Answer

Unlimited liability means:

Correct AnswerverifiedShow Answer

Three types of corporate mergers are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A cooperative consists of people with similar needs who pool their resources for mutual gain.

Correct AnswerverifiedShow Answer

One result of taking a firm private is:

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

Joshua wants to run his own business.A friend suggested that an inexpensive way to get started is to buy a franchise,where he will have the freedom to run it exactly as he sees fit.As a recent student of business,you concur with this advice.

Correct AnswerverifiedShow Answer

Sergio has agreed to become a partner in his brother's horse breeding business.Since he provided 30 percent of the money to start the firm and build an air-conditioned barn,he is entitled to 30 percent of any profits the firm earns during its first year of operation.

Correct AnswerverifiedShow Answer

In the Legal Briefcase box,"Virtual Companies," the discussion is about:

Correct AnswerverifiedShow Answer

In a sole proprietorship,the profits earned by the business are:

Correct AnswerverifiedShow Answer

The following companies: Blue Diamond,Ocean Spray,and Land O'Lakes are well known cooperatives.

Correct AnswerverifiedShow Answer

Compared to a sole proprietorship,which of the following is considered an advantage of a general partnership?

Correct AnswerverifiedShow Answer

All partners in a general partnership have limited liability for the debts of their firm.

Correct AnswerverifiedShow Answer

In the late 1990s,firms found it easier to grow market share by:

Correct AnswerverifiedShow Answer

A master limited partnership MLP) is:

Correct AnswerverifiedShow Answer

One reason many companies do not organize themselves as an S corporation is that this form of business:

Correct AnswerverifiedShow Answer

One reason individuals incorporate is to obtain the advantage of limited liability.

Correct AnswerverifiedShow Answer

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