Exam 6: Business Formation: Choosing the Form That Fits

A corporation is a voluntary agreement under which two people act as co-owners of a business for profit.

Svelter Corporation does not face the problem of double taxation as the Internal Revenue Service (IRS) does not tax the earnings of the company separately. Instead, taxes are only levied on the personal income of the stockholders. A limitation, however, is that the company is only allowed to have a maximum number of 100 stockholders at a time. Given this information, Svelter Corporation is a(n) _____.

A(n) _____ is a form of business ownership that offers both restricted responsibility to its owners and flexible tax treatment.

Franchising is used by companies to move into foreign markets.

Which of the following is a key item that is most likely covered in a franchise agreement?

Identify a true statement about limited liability companies (LLCs).

IFGI Life Insurance, an insurance company, is one of the stockholders of a pharmaceutical company. Given this information, IFGI Life Insurance is most likely a(n) _____.

Which of the following statements is true of a franchisor-franchisee relationship?

Melvin is the co-owner of a gadget store. Unlike his partner who only provides monetary support to the business, Melvin is responsible for handling the daily operations of the store and bears complete personal liability for any debts incurred by the store. Melvin and his partner, however, share the profits of the store equally. In this scenario, Melvin is a _____.

Matisse and Oliver own an antique furniture business. They are in a form of partnership where Oliver is only a dormant partner who contributes financially to the business, whereas Matisse actively manages the business and takes care of imports and exports. Matisse and Oliver are bound by an agreement where, unlike Oliver, Matisse is personally responsible for all the debts incurred by the business. In the given scenario, Matisse and Oliver have a _____.

One of the limitations of a not-for-profit corporation is that it cannot have stockholders.

Which of the following is a disadvantage of franchising for a franchisee?

An advantage of franchising is the:

The nature of work and the workflow in the animation department of Hanzel Talkies, a movie production company, completely differs from that of other departments in the company. Hence, Hanzel Talkies decides to branch the animation department out into a new company by selling the stock to outside investors. In this scenario, Hanzel Talkies is using a strategy called a(n):

A sole proprietorship tends to be both larger and more profitable than a partnership.

A _____ is a partnership arrangement that includes at least one general partner and at least one limited partner.

Arocare International, a general hospital, converts its cancer unit into a new hospital called Miracle. Arocare then issues stock in the new hospital and sells the stock to outside investors. This helps Arocare raise additional funds. This scenario exemplifies:

Joshua and Hubert are the co-owners of a shoe manufacturing company. They have a disagreement over company policies and business methods. Following the discord, Joshua withdraws from the company and comes under the obligation to pay a sum of $10,000-the debts of the firm that are due at the time of his withdrawal. In the given scenario, Joshua and Hubert most likely _____.

Francois is the sole owner of a photo studio and handles most of the work himself. All earnings from the studio become Francois's income. Given this information, Francois:

Carla and Liang both have shares in HD&Z Corporation, a C corporation that offers limited liability to all its owners. In this context, Carla and Liang are the _____ of HD&Z Corporation.