Question 1

A(n)  ________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

Accepted Answer

A)   conditional grant
B)   franchise agreement
C)   trade contract
D)   extended ownership agreementE) A) and B)
F) None of the above

Question 2

Ivy is investing in a home cleaning franchise called HomeKeepers. At her first interview with the franchisor's selling agent, she was told the parent company expects 5% royalties. What are royalties?

Accepted Answer

A)   The initial investment, also known as the franchise fee paid to the franchisor
B)   The cost of supplies that she will purchase one time each month from the parent company
C)   The milestones that the parent company expects her to reach. With each milestone, she will be rewarded with commissions
D)   The share of the profits or a percentage share of revenues (net sales) E) C) and D)
F) None of the above

Question 3

Which of the following statements is the most accurate?

Accepted Answer

A)   A foreign corporation does business in one or more states, but is chartered in another state.
B)   A foreign corporation is 50% owned by individuals or companies from another nation.
C)   A foreign corporation is headquartered in another nation.
D)   A foreign corporation is the same thing as a multinational corporation.E) A) and B)
F) B) and C)

Question 4

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

Accepted Answer

A) True 
 B)False

Question 5

If a partner in a limited partnership dies, the partnership ceases to exist.

Accepted Answer

A) True 
 B)False

Question 6

A franchise can be formed

Accepted Answer

A)   only as a general partnership.
B)   only as a corporation.
C)   as either a corporation or partnership, but not as a sole proprietorship.
D)   as a corporation, partnership, or sole proprietorship.E) A) and B)
F) A) and D)

Question 7

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?

Accepted Answer

Sole proprietorships have many features ...

Question 8

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

Accepted Answer

Students should be able to identify and ...

Question 9

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

Accepted Answer

A) True 
 B)False

Question 10

Foreign investment in U.S. companies continues to be strong. When Belgian-based In-Bev purchased the largest beer company in the U.S., Anheuser-Busch, this action constituted a(n)  ________ with a negotiated selling price of $52 billion.

Accepted Answer

A)   merger
B)   aggregate
C)   acquisition
D)   unequivocal buy-inE) B) and D)
F) C) and D)

Question 11

When one of the owners of a corporation dies, the corporation legally ceases to exist.

Accepted Answer

A) True 
 B)False

Question 12

One reason that a firm may choose to merge or acquire another company would be to diversify products or services.

Accepted Answer

A) True 
 B)False

Question 13

In a cooperative, members/customers

Accepted Answer

A)   democratically control their businesses by electing a board of directors.
B)   are known as limited partners.
C)   each have unlimited liability for the debts of the firm.
D)   take turns serving on the board that manages the company.E) C) and D)
F) A) and B)

Question 14

An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities.

Accepted Answer

A) True 
 B)False

Question 15

Finnegan is a limited partner in Gettout & Associates, a local financial consulting company. Heywood U. Gettout is one of the general partners in the company and is needing to temporarily leave the company to attend to some personal matters. Heywood has asked Finnegan to perform his managerial duties while he is gone. As a limited partner, Finnegan

Accepted Answer

A)   can fill in as a manager whenever necessary, as long as it is for only a limited time.
B)   can make managerial decisions as long as they do not involve the payment of money.
C)   cannot participate in the management of the partnership.
D)   can manage the firm as long as he gets approval from the company's other general partners.E) None of the above
F) B) and C)

Question 16

A master limited partnership (MLP)  is

Accepted Answer

A)   is not traded on the stock exchanges.
B)   pays corporate income taxes.
C)   is taxed like a partnership.
D)   is the corporate form of choice for small groups of individuals.E) None of the above
F) A) and B)

Question 17

When Genna confided in Lou and Al that she too was concerned about adding additional risk, Lou suggested that they explore the possibility of a different type of business ownership, a(n)  ________, which has very flexible ownership rules and would give them more choices in how the company's earnings are taxed while still protecting all owners from high levels of risk.

Accepted Answer

A)   alien corporation
B)   master limited partnership
C)   limited partnership
D)   limited liability companyE) A) and C)
F) None of the above

Question 18

According to the box, "Kickstarting a Benefit Corporation," a benefit corporation is

Accepted Answer

A)   a mission-based company judged by how well it meets its own set of socially or environmentally beneficial goals.
B)   a nonprofit organization.
C)   a corporation without the possibility of double taxation because it's tax exempt.
D)   a special corporation type for crowdfunding sites.E) B) and C)
F) None of the above

Question 19

In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

Foreign investment in U.S. companies continues to be strong. When Belgian-based In-Bev purchased the largest beer company in the U.S., Anheuser-Busch, this action constituted a(n) ________ with a negotiated selling price of $52 billion.

Correct Answer
verified

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

Correct Answer
verified

If a partner in a limited partnership dies, the partnership ceases to exist.

Correct Answer
verified

A(n) ________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

Correct Answer
verified

When one of the owners of a corporation dies, the corporation legally ceases to exist.

Correct Answer
verified

A franchise can be formed

Correct Answer
verified

In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing.

Correct Answer
verified

Which of the following statements is the most accurate?

Correct Answer
verified

Ivy is investing in a home cleaning franchise called HomeKeepers. At her first interview with the franchisor's selling agent, she was told the parent company expects 5% royalties. What are royalties?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

A master limited partnership (MLP) is

Correct Answer
verified

In a cooperative, members/customers

Correct Answer
verified

One reason that a firm may choose to merge or acquire another company would be to diversify products or services.

Correct Answer
verified

According to the box, "Kickstarting a Benefit Corporation," a benefit corporation is

Correct Answer
verified

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

Correct Answer
verified

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

Correct Answer
verified
Students should be able to identify and ...
View Answer

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?

Correct Answer
verified
Sole proprietorships have many features ...
View Answer

An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities.

Correct Answer
verified

Exam 5: How to Form a Business

Foreign investment in U.S. companies continues to be strong. When Belgian-based In-Bev purchased the largest beer company in the U.S., Anheuser-Busch, this action constituted a(n) ________ with a negotiated selling price of $52 billion.

Correct AnswerverifiedShow Answer

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

Correct AnswerverifiedShow Answer

If a partner in a limited partnership dies, the partnership ceases to exist.

Correct AnswerverifiedShow Answer

A(n) ________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

Correct AnswerverifiedShow Answer

When one of the owners of a corporation dies, the corporation legally ceases to exist.

Correct AnswerverifiedShow Answer

A franchise can be formed

Correct AnswerverifiedShow Answer

In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing.

Correct AnswerverifiedShow Answer

Which of the following statements is the most accurate?

Correct AnswerverifiedShow Answer

Ivy is investing in a home cleaning franchise called HomeKeepers. At her first interview with the franchisor's selling agent, she was told the parent company expects 5% royalties. What are royalties?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A master limited partnership (MLP) is

Correct AnswerverifiedShow Answer

In a cooperative, members/customers

Correct AnswerverifiedShow Answer

One reason that a firm may choose to merge or acquire another company would be to diversify products or services.

Correct AnswerverifiedShow Answer

According to the box, "Kickstarting a Benefit Corporation," a benefit corporation is

Correct AnswerverifiedShow Answer

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedStudents should be able to identify and ...View AnswerShow Answer

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?

Correct AnswerverifiedSole proprietorships have many features ...View AnswerShow Answer

An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Students should be able to identify and ...
View Answer

Correct Answer
verified
Sole proprietorships have many features ...
View Answer

Correct Answer
verified