Exam 6: Business Formation: Choosing the Form That Fits

There is no limit on the number of partners who can participate in a general partnership.

Describe at least one advantage and one disadvantage of franchising for the franchisor and at least one advantage and disadvantage of franchising for the franchisee.

Which of the following is a disadvantage associated with sole proprietorships?

Which of the following is a difference between limited liability companies (LLCs) and corporations?

A premium brand of men's wear introduces a new range of dinner suits and licenses its franchisees to sell this product. However, the brand retains the production rights. This scenario exemplifies a(n) _____.

Which of the following is one of the reasons why many people prefer a sole proprietorship?

A large film production company merges with a popular sound processing studio, resulting in the formation of a new company out of the two previously independent firms. This is most likely an example of a _____.

Which of the following statements is true of forming C corporations?

Tania starts a bookstore with her friend. However, owing to other commitments, Tania is unable to help with the daily operations of the bookstore. Therefore, Tania proposes that she would not actively participate in managing the business but would provide financial support to the business. By doing this, she would be sharing the profits equally with her friend, without incurring any of the business debts personally. In this scenario, Tania is a(n) _____.

Razak's, a popular chain of fast-food restaurants in the Middle East, plans to expand its market in Asia and signs a contract with an Indian firm. The contract allows the firm to set up restaurants with Razak's name and trademark and use the supplies provided by Razak to make its products. Under the contract, the Indian firm is required to adhere to the same cooking procedures and use the same equipment that are used by other outlets of the restaurant. The given scenario exemplifies a _____.

One of the advantages of a C corporation is ease of formation.

Which of the following is a similarity between a general partner and a limited partner in a limited partnership?

A(n) _____, a type of divestiture, occurs when a company issues stock in one of its own divisions or operating units and sets it up as a separate company-complete with its own board of directors and corporate officers.

The stockholders of a construction firm decide to start a steel company, but they want to have limited liability. After completing the business plan, they initiate the process of establishing the company by filing articles of incorporation and paying the filing fees to the state government. In this scenario, the stockholders of the firm want to start a _____.

Tasmeen owns a retail business along with four other people. Like the other owners, Tasmeen is not personally responsible for the debts of the company. Her personal assets are thus protected in case the company incurs losses. Given this information, it can be assumed that Tasmeen _____.

Flaira, a high-end clothing brand in Florida, signs a licensing agreement with a firm in Honolulu to allow the latter to use Flaira's brand name, trademark, and business methods to operate the same clothing business in Honolulu. In exchange, the Honolulu firm has to pay the owner of Flaira an annual fee. This scenario is an example of a(n) _____.

It is possible to establish a corporation by a simple verbal agreement.

All owners of a _____ can actively participate in management while still having limited liability.

A textile corporation has two hundred odd stockholders. As it is inconvenient for so many stockholders to manage the company, the stockholders elect a group of individuals to oversee the company's operation and to represent their interests. In this scenario, the stockholders elect a _____.

Amanda has always been inclined toward baking and wants to open her own bakery. She takes a loan of $20,000 from the bank and starts a bakery in her hometown. In the context of the four forms of business, Amanda most likely _____.