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Exam 5: How to Form a Business

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Question 21

Multiple Choice

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Earnings of C conventional) corporations can be:

A) Taxed twice if they are distributed as dividends to stockholders.
B) Taxed at twice the going rate of a partnership or sole proprietorship.
C) Taxed by the federal government,but they are exempt from state taxes if the corporation owns any facilities within that state.
D) Taxed the same as a partnership.

E) None of the above
F) A) and B)

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Question 22

Multiple Choice

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Adam is a major stockholder in Precision Transmission Services PTS) ,a nationwide network of transmission repair shops founded by his father.Currently,PTS stock is sold on the open market,but Adam has talked to several relatives about his desire to get all of the PTS stock back in his family's hands.Adam is interested in _______________________________.

A) taking the firm private
B) a hostile takeover of the firm
C) converting the firm to a general partnership
D) forming a master limited partnership

E) A) and D)
F) A) and C)

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Question 23

True/False

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

Mojo Motors is a small conventional corporation with only 212 stockholders.Eleven of the stockholders are citizens of Mexico,and eight others are citizens of Canad A.Due to its size and diversity in ownership,you would recommend that Mojo Motors change to an S-Corporation.

A franchise may be organized as a sole proprietorship,partnership,or corporation.

One disadvantage of a limited liability company is that it:

An alien corporation does business abroad but is chartered in the U.S.

Corporations are easy to start and easy to terminate.

Although franchise arrangements are a good source of income for the franchisee,these businesses do not contribute significantly toward job creation.

Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products.In a franchise arrangement,Midas would be the __________,and the buyer of the franchise is the __________.

The S corporation form of business would be particularly attractive to fast growing companies that want to attract thousands of new stockholders.

A drawback of sole proprietorships is that they usually have limited access to additional financial resources.

The form of business ownership best suited to raising large amounts of money for expansion is the:

Maya plans to open a shop specializing in foods and cultural items from the Middle East.She wants to be the firm's only general partner,but she is trying to get several friends to participate as limited partners.Apparently Maya wants to:

When two firms who 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.

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

According to the Uniform Partnership Act,the three key elements of any general partnership are:

The corporation is the most common form of business ownership.

Franchised businesses are successful both domestically and internationally) because:

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