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Exam 5: How to Form a Business

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Question 151

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To change ownership in a corporation you simply sell your stock to someone else.

A) True
B) False

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Question 152

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It is not unusual for members of cooperatives to work for and help manage their cooperative.

A) True
B) False

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Question 153

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

In a general partnership,all partners share in management of the business and in the liability for the firm's debts.

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.

With all these choice,Jenna's head is swirling with ideas.She knows that Al and Lew have expertise in business and management,but she also knows that she will need to read on her own for more information.Referring back to a textbook she had in her Introduction to Business class in College,she comes upon the following statement:

In today's economy,only large business enterprises should operate as corporations.

The most popular businesses for franchising are restaurants.

Although most new firms start out as sole proprietorships,few large firms are organized this way.Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms?

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

Naomi is planning to invest in a new online franchise - the Novel Artist,Inc.The franchisor provides proprietary software and training for designing invitations and cards for special occasions such as weddings,graduations,and birth announcements.The franchisee is obligated to pay a monthly fee to the franchisor.Naomi will use the software to create her own special designs that she will ultimately feature on her website.She also has chat availability so she can accommodate customers with special requests.Order turn-around time must be fast.She can only take on as many clients as she can make good on delivery.An advantage of Naomi's online franchise is:

Which of the following statements is the most accurate? Sole proprietorships:

An advantage of corporations is their ability to attract good talent by offering stock options and other employee benefits.

Stockholders in a corporation exert a significant degree of control over the company's daily operations.

A non-profit corporation does not seek personal profit for its owners.

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

According to the Spotlight on Small Business box,"The Ties That Bind",it is really not necessary to interview your prospective partner carefully,especially if they are an old friend.

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

The owners of California Canines,a firm that designs and manufactures coats,sweaters,jackets,and rainwear for dogs want to organize as an LLC.Two members are college students and two others are thirty something couples with young children.This is good strategy because each member can choose to commit to limited or unlimited liability.

Because of the growth of minority-owned businesses in the U.S. ,franchisors are becoming more focused on recruiting minority franchisees.