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Exam 5: How to Form a Business

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Question 21

True/False

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It is said that corporations have perpetual life.

A) True
B) False

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Question 22

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Josie belongs to a food cooperative in her community. As a member, she can expect to have a vote in the election of the cooperative's board of directors.

A) True
B) False

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Question 23

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

Alani and Jeremy have considered creating their own company but are concerned about the possibility of losing all of their personal assets if the business fails. One way for Alani and Jeremy to avoid this risk would be to organize their firm as a

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

A general partner takes an active role in the management of the business.

One drawback of franchises is that they have a higher failure rate than other types of business ventures.

A conglomerate merger will

Beau has agreed to invest $19,000 in a partnership with his brother and sister-in-law. Not being in the same line of work as them, Beau does not intend to actively work in the partnership. He also does not want to risk any of his own assets other than the $19,000 investment. The partnership has agreed to permit him to share in the profits. As an expert on forms of business ownership, you know that Beau is a ________ in this partnership.

Hidden Valley Communications, Inc., located in a remote area of Utah, made a special device that was used in LTE phones. After three years of local operations, the company that employed 4,000 people was planning to close its Utah operation and move the assembly offshore. Under the direction of a financial services company that financed the deal, the employees agreed to become owners of the company and continue to operate the business. The business concept that describes this arrangement is

A major objective of a leveraged buyout is to enable investors to gain control of a company by issuing new shares of ownership, thus minimizing the use of debt.

Although shares of master limited partnerships can be purchased on one of the national stock exchanges, these companies are taxed like partnerships.

Al also suggested another way Genna could finance her expansion. He described setting up a chain of Car Keepers Garages by selling the rights to use the Car Keepers' name, business model, garage design, and service ideas to others who would like to own a similar shop. These individuals would pay Car Keepers an initial fee and monthly royalties based on earnings. Al is suggesting that Genna set up a

When two firms which do not participate in the same industries, for example, a software company and a fast food restaurant company, decide to merge, the result is called a ________ merger.

Once a business is established, it's almost impossible to change from one form of business ownership to another.

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

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

If a group of stockholders or management obtain all the stock of a previously publicly traded firm for themselves, this is referred to as

By filling out the correct paperwork annually, any corporation can qualify to be classified as an S corporation.

Taking a firm private involves converting a firm from a corporation to a general partnership.