Question 1

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

Accepted Answer

A)  Avoid putting their 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) C) and D)
F) B) and D)

Question 2

Jim is one of several general partners who own Beef 'N Beer,a small chain of restaurants located in Missouri and Illinois.Jim is interested in converting the partnership into a master limited partnership.If he convinces other partners to go along with his idea,Beef 'N Beer will:

Accepted Answer

A)  Offer shares of ownership that are traded on a stock exchange much like a corporation.
B)  Pay its taxes like a corporation.
C)  Begin to operate much like a sole proprietorship.
D)  Have to change its name to include the term Ltd.in its title to indicate its owners have limited liability.E) A) and C)
F) All of the above

Question 3

An) ___________________ 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) B) and C)
F) A) and B)

Question 4

The owners of Idle Time Gaming Company would like to switch to an S corporation.Unfortunately,their lawyer advised them that they do not meet some of the requirements necessary to qualify as an S corporation.An alternative form of business that would give them similar advantages is a limited liability company.

Accepted Answer

A) True 
 B)False

Question 5

Compared to sole proprietorships,an advantage of partnerships is their ability to obtain more financial resources.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Daggie's Sandwiches,Inc. ,sells the rights to use its name and sell its sandwiches in a given market area to aspiring business people who are willing to pay agreed upon fees and meet certain contractual terms.Daggie's:

Accepted Answer

A)  Is offering investors the opportunity to form limited partnerships.
B)  Is a franchisor.
C)  Creates private subsidiary companies.
D)  Offers a tax-free investment potential.E) None of the above
F) All of the above

Question 8

A franchise agreement is an arrangement where a franchisor sells the rights to a business name and the right to sell a product or service within a given territory to a franchisee.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements about farm cooperatives is most accurate? Farm cooperatives have:

Accepted Answer

A)  Declined in importance in recent years.
B)  Become a major force in American agriculture.
C)  Run afoul of U.S.antitrust laws in recent years.
D)  Increased in number,but decreased in size in recent years.E) A) and C)
F) B) and C)

Question 10

An evaluation of franchising would conclude that this type of arrangement:

Accepted Answer

A)  Has become the dominant form of business organization in the United States because it has many advantages and almost no disadvantages.
B)  Appeals to people who want to own a business,but are not comfortable starting a company from scratch.
C)  Has a much higher risk of failure than independent companies.
D)  Has little chance of success outside the United States because many foreign countries do not allow such arrangements.E) All of the above
F) B) and C)

Question 11

Franchisors may send reverse royalties to franchisees who:

Accepted Answer

A)  Have not yet created their own web site.
B)  Feel their sales have been hurt by the franchisor's Internet sales.
C)  Are using e-commerce to expand their sales territory.
D)  Desire to streamline their communication with employees,customers,and vendors.E) None of the above
F) A) and D)

Question 12

Starting a new business as a sole proprietorship:

Accepted Answer

A)  Requires retaining the services of an attorney.
B)  Is simple,but the proprietorship fee is very expensive in some states.
C)  Is usually simpler and less expensive than starting other forms of ownership.
D)  Is very similar to starting a business as a corporation.E) B) and C)
F) A) and D)

Question 13

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) C) and D)
F) B) and D)

Question 14

A disadvantage of corporations is that they generally require extensive paperwork.

Accepted Answer

A) True 
 B)False

Question 15

One disadvantage of _________ is the initial cost of formation.

Accepted Answer

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

Question 16

An) _____________ 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) C) and D)
F) B) and C)

Question 17

Maria has a lot of self-confidence and business knowledge.She recently opened a bakery as a sole proprietor.She is expecting a high level of profits and is looking forward to:

Accepted Answer

A)  The lower corporate tax rate paid by sole proprietorships.
B)  Keeping all of the money she earns except for the taxes she is required to pay.
C)  Keeping all of the money she earns since she does not have to pay taxes as a sole proprietor.
D)  Easily raising additional large sums of money from the capital markets since she is a sole proprietor.E) B) and D)
F) C) and D)

Question 18

Jenna approached Al Ternator about joining the business as an owner.She proposed that she continue to provide the technical expertise and deal directly with customers,while Al,who has a college degree in finance,handles many of the financial aspects of running AutoMotion.In addition,Jenna wants Al to contribute some much-needed money for expansion.Under Jenna's proposal,she and Al would operate the business together as:

Accepted Answer

A)  Limited partners.
B)  General partners.
C)  Majority shareholders.
D)  Business consultants.E) A) and D)
F) None of the above

Question 19

A limited partnership refers to a partnership set up for a temporary purpose,such as a real estate development project.

Accepted Answer

A) True 
 B)False

Question 20

____________ comprise about 20% of all businesses but account for about 81% of U.S.business receipts.

Accepted Answer

A)  Corporations
B)  Partnerships
C)  Sole proprietorships
D)  Limited liability companiesE) B) and D)
F) All of the above

Exam 5: How to Form a Business

A disadvantage of corporations is that they generally require extensive paperwork.

Correct Answer
verified

An) _____________ 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

Which of the following statements about farm cooperatives is most accurate? Farm cooperatives have:

Correct Answer
verified

An evaluation of franchising would conclude that this type of arrangement:

Correct Answer
verified

Daggie's Sandwiches,Inc. ,sells the rights to use its name and sell its sandwiches in a given market area to aspiring business people who are willing to pay agreed upon fees and meet certain contractual terms.Daggie's:

Correct Answer
verified

One disadvantage of _________ is the initial cost of formation.

Correct Answer
verified

Jim is one of several general partners who own Beef 'N Beer,a small chain of restaurants located in Missouri and Illinois.Jim is interested in converting the partnership into a master limited partnership.If he convinces other partners to go along with his idea,Beef 'N Beer will:

Correct Answer
verified

A franchise agreement is an arrangement where a franchisor sells the rights to a business name and the right to sell a product or service within a given territory to a franchisee.

Correct Answer
verified

Compared to sole proprietorships,an advantage of partnerships is their ability to obtain more financial resources.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Franchisors may send reverse royalties to franchisees who:

Correct Answer
verified

A limited partnership refers to a partnership set up for a temporary purpose,such as a real estate development project.

Correct Answer
verified

Maria has a lot of self-confidence and business knowledge.She recently opened a bakery as a sole proprietor.She is expecting a high level of profits and is looking forward to:

Correct Answer
verified

An) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

Correct Answer
verified

When a sole proprietor dies:

Correct Answer
verified

____________ comprise about 20% of all businesses but account for about 81% of U.S.business receipts.

Correct Answer
verified

Starting a new business as a sole proprietorship:

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Exam 5: How to Form a Business

A disadvantage of corporations is that they generally require extensive paperwork.

Correct AnswerverifiedShow Answer

An) _____________ 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

Which of the following statements about farm cooperatives is most accurate? Farm cooperatives have:

Correct AnswerverifiedShow Answer

An evaluation of franchising would conclude that this type of arrangement:

Correct AnswerverifiedShow Answer

Daggie's Sandwiches,Inc. ,sells the rights to use its name and sell its sandwiches in a given market area to aspiring business people who are willing to pay agreed upon fees and meet certain contractual terms.Daggie's:

Correct AnswerverifiedShow Answer

One disadvantage of _________ is the initial cost of formation.

Correct AnswerverifiedShow Answer

Jim is one of several general partners who own Beef 'N Beer,a small chain of restaurants located in Missouri and Illinois.Jim is interested in converting the partnership into a master limited partnership.If he convinces other partners to go along with his idea,Beef 'N Beer will:

Correct AnswerverifiedShow Answer

A franchise agreement is an arrangement where a franchisor sells the rights to a business name and the right to sell a product or service within a given territory to a franchisee.

Correct AnswerverifiedShow Answer

Compared to sole proprietorships,an advantage of partnerships is their ability to obtain more financial resources.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Franchisors may send reverse royalties to franchisees who:

Correct AnswerverifiedShow Answer

A limited partnership refers to a partnership set up for a temporary purpose,such as a real estate development project.

Correct AnswerverifiedShow Answer

Maria has a lot of self-confidence and business knowledge.She recently opened a bakery as a sole proprietor.She is expecting a high level of profits and is looking forward to:

Correct AnswerverifiedShow Answer

An) ___________________ is a state-chartered legal entity with authority to act and to have liability separate from its owners.

Correct AnswerverifiedShow Answer

When a sole proprietor dies:

Correct AnswerverifiedShow Answer

____________ comprise about 20% of all businesses but account for about 81% of U.S.business receipts.

Correct AnswerverifiedShow Answer

Starting a new business as a sole proprietorship:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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