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Exam 5: How to Form a Business

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Question 111

True/False

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In the Spotlight on Small Business box,titled,"Pick Your Partners Wisely",the writer suggests that potential partners discuss the types of skills that each brings to the business.Partners with complimentary skills may enhance the business.

A) True
B) False

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Question 112

True/False

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A few years back,your friends who are horse fanatics inherited several acres of land that they turned into a retirement haven for race horses.Peaceful Pastures was recently incorporated as a limited liability company.The members are re-evaluating this form of ownership.Unlike an S-corporation,they now pay self-employment taxes on all company profits - not just on the salaries they pay themselves.

A) True
B) False

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Question 113

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Describe and differentiate between the three types of corporate mergers.Give an example of each type.

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

When a group of investors take a firm private,they purchase all the company's outstanding stock.

The vast majority of corporations in the U.S.are:

A group of medical doctors are interested in incorporating their business.There is no advantage due to the costs involved.

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

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

Maria recently purchased 100 shares of stock in Idle Time Gaming,Inc.Maria is a(n) ______________ of this company.

In rural areas electrical power is often sold by ____________ that take advantage of the government's policy to sell them electricity at wholesale rates.

Few people today start their own business.

It is said that corporations have perpetual life.

After a successful five years,Peaceful Pastures,LLC (a retirement ranch for race horses)thinks it may be able to attract donations from animal activist groups and even the federal government if it becomes a non-profit corporation.As its business advisor,you explain that as a non-profit corporation,the owner(s)may earn a salary but the business should not seek after-tax profits.

Cory Raider is leading a group of stockholders who wants to take the Bigbux Corporation private.If Cory's group succeeds,Bigbux's stock will no longer be available to investors on the open market.

A(n) _________ occurs when one company buys the property and obligations of another company.

Franchising has certainly become a key component of the U.S.economy.What are the major advantages and disadvantages of franchising?

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

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.

According to the Thinking Green box,"Root,Root,Root for the Green Team",high profile sports franchises are serious about the environment.The new Washington Nationals stadium is LEED (Leadership in Energy and Environmental Design)certified. D.C.asked the owners of the new Washington Nationals team to go the extra mile and build a LEED certified stadium.MLB (Major League Baseball)franchise system is cooperating with the trend toward going green by encouraging its franchisees to initiate projects that protect the environment.