Exam 4: Choosing a Form of Business Ownership

Which of the following are the basic legal requirements for setting up an LLP?

Namra and her brother, Faisal, took over the family-owned pet store when her father retired. Sales have been sluggish due to a larger pet store opening in the area. Namra is panicked because the pet store owes various creditors $25,000. If the business closes, she will have to sell her car to pay back the debt. Faisal tells her, "Don't worry! There is no way the creditors can come after your personal property." How can Faisal be so sure?

Zach inherited a large amount of money from his uncle. Zach wishes to start a business with his college friend, and his lawyers encourage him to make it a corporation. What is the advantage of forming a corporation instead of a partnership?

Taraun has always dreamed of starting his own restaurant. He graduated from culinary school and has worked as an executive chef in several restaurants. Now that he is ready to open his own restaurant he realizes he will need some help. Taraun is obviously knowledgeable about all things culinary, but needs some help with management, marketing, and finance. Which of the following is the best choice for Taraun?

Which of the following is the simplest form of business, owned and operated by one person?

The Wilson Furniture Company has been in existence for 75 years and was started as a family business. However, all members from the original business have since passed away, and none of the current owners are part of the Wilson family. This business is most likely to be which of the following?

Karissa is 25% owner in a corporation that builds custom machinery. Last year the corporation suffered due to intense competition. After losing $1,000,000 last year, the business is shutting its doors. The business has unpaid debts of $9,000,000. What is Karissa's personal liability?

Derek and his friend Tim own a bicycle shop. Tim works at the store full-time, whereas Derek only works on the weekends. Derek invested $5,000 in the business to get it started, plus he owned the building the shop is housed in, which is worth $50,000. Derek invested $15,000 in the business. Which of the following explains why Derek and Tim will split this year's profits of $130,000 with Tim getting 40% of the profits and Derek getting 60%?

Jutta and Carl have a small medical practice that operates as a partnership. Jutta does 70% of the work and Carl does 30%. However, Carl invested 60% of the money required to start the business. If the company makes $100,000 in profit this year, how much will each partner receive?

Thomas wants to make money, so he starts his own business as a sole proprietor. Why does he like this form of business?

Which form of business is the easiest to start?

After Leo graduates from college, he will be joining his father, uncles, and grandfather in the family business. His grandfather will be retiring soon and Leo isn't sure who will be running the business. This relates to which key consideration for choosing ownership structure?

What is the term for ownership structures where profits go straight to the owners and taxes are reported on each owner's individual tax return?

Aoife and her friend Maureen would like to open a dog-walking business in Coquitlam. Maureen will handle acquiring new clients, billing, and advertising, and Aoife will walk the dogs. They agree Aoife will earn 60% of the profits the business earns. They don't plan on needing any investment into the company and prefer to make all the decisions regarding the business themselves. They are concerned about liability in case one of the dogs happens to get injured while in their care. Which type of business ownership best suits Aoife and Maureen?

Three college friends start a new mobile messaging service in the hope that venture capital investors will buy part of the company within a few years. Which form of ownership should they choose?

What is the most effective form of business organization for raising capital?

Which of the following statements about corporations is true?

Nastasia is 50% owner in a manufacturing company that runs as an LLP. She invested $25,000 when the business started and has received no money from the business since then. The company just lost a $1,000,000 patent infringement lawsuit and will have to shut down. What is Nastasia's personal loss on this business?

The gift shop chain that Althea started has since been incorporated. Which of the following best describes the liability that Althea has as the primary shareholder in this corporation?

Edward would like a form of business that is a separate legal entity, with most of the legal rights of a real person. Which form of business should he consider?