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Exam 5: How to Form a Business

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Question 141

Multiple Choice

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In a cooperative, members/customers:

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) None of the above
F) C) and D)

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Question 142

True/False

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

A) True
B) False

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Question 143

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

A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners.

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

The sole proprietorship form of ownership tends to be attractive to people who want to invest in a company without taking an active role in management.

If firms wish to gain market share in their current market, they would consider a conglomerate merger.

Emily wants to open a chain of hair styling salons and hopes to attract investors to help finance growth. She considered forming a C corporation, but wants to have more flexibility about how the new business will be taxed. She also wants to offer investors/owners limited liability. Emily can satisfy her objectives by setting up a(n) :

Which of the following is not a disclosure that should be part of a partnership agreement?

Mel, Tim, and Bill agreed to partner in a small rehab business. Initially, they were enthusiastic contributors until their first project took more work than Mel initially estimated; Tim wanted morning meetings and long lunch hours; and, Bill decided to go on vacation even though the project was not complete and ready to sell. As the Spotlight on Small Business box, titled, "Pick Your Partners Wisely" indicates,

When evaluating a franchised opportunity, which of the following would you not find it necessary to do?

(p. 132; Maria is already a successful franchisee with Nite Lite, a chain of "no frills" motels that provide clean rooms and good service at 136) affordable rates. The motel she currently operates is located in Texas, but she is considering an opportunity to open another Nite Lite motel in Canada. Although her costs of operating in a foreign nation may be higher, she has the benefit of an expanding market and less competition.

Which of the following is an attractive benefit of a corporation?

The first step in starting a sole proprietorship is to fill out a proprietorship charter application form and file it with the state government.

is by far the most popular target for American franchisors seeking to establish franchises in other countries.

Compared to a sole proprietorship, which of the following is considered an advantage of a general partnership?

Compared to sole proprietorships, partnerships offer the advantage of shared management and pooled knowledge.

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

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 .

Which of the following statements identifies an advantage for women who have become franchisors in recent years?