Exam 6: Business Formation: Choosing the Form That Fits

Which of the following is an advantage associated with a sole proprietorship?

Sarcosine Chemicals Corp. issues stock in one of its operating units and sets it up as a separate company called Prussic Corp., with its own board of directors and corporate officers. Sarcosine Chemicals Corp. then distributes the stock in Prussic Corp. to its existing stockholders. Which of the following forms of divestitures does this scenario exemplify?

Which of the following statements is true of the board of directors of a corporation?

In the context of an acquisition, when the acquiring firm buys the target firm despite the opposition of the target's board and top management, the result is called a _____.

In the context of an acquisition, the firm that is purchased by another firm is called the _____.

A sole proprietorship is a form of business ownership in which:

A disadvantage of an S corporation is that it can have no more than 50 stockholders.

A(n) _____ can operate under simpler arrangements than conventional corporations.

Hot and Black Tide Inc., an electronics manufacturer, merges with Crimp Corp., a food manufacturing brand, to make the firms less vulnerable to adverse conditions in any single market. This scenario is an example of a(n) _____.

A(n) _____ is a combination of two firms that are in unrelated industries.

A limited liability company (LLC) can elect to be taxed as a corporation.

Samuel and Dexter start a logistics company together. Both of them have an equal right to participate in the company's management and share in the company's profits. In this scenario, Samuel and Dexter most likely _____.

Several prominent owners of a uranium mining company pass away within a period of two years. However, the company continues to operate as it remains financially viable and a majority of its stockholders wish for the continuation of the business. In this scenario, the uranium mining company is an example of a _____.

Signing a franchise agreement exempts the franchisee from making any form of payments to use a franchisor's products.

Which of the following is an advantage of a C corporation?

Three brothers of a family own a furniture showroom. Each of them is actively involved in handling the day-to-day business activities. However, when the business suffered huge losses at the end of the last fiscal year, the personal wealth and assets of the brothers did not get affected. This is most likely because the brothers have a:

The most basic form of a partnership is known as a general partnership.

Chloe and Tamara start a vintage fashion boutique. While both invest equally in the store and are entitled to equal profits, it is Tamara who looks after the day-to-day business transactions and manages the store. Chloe does not actively participate in managing the store, and her personal wealth is not at risk in case the business suffers losses. In this scenario, Chloe is a _____.

Tangypop and Fizzmania, two giant soft drink companies in Brazil, join together to form a new company out of the two previously independent firms. They take this step to reduce competition, leverage economies of scale, and increase their size and market power within the soft drink industry. This association is most likely an example of a _____.

A corporation offers more flexibility than a limited liability company (LLC) in terms of tax treatment.