Exam 5: How to Form a Business

Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area. He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants. Greg is likely to learn that:

Nutty Dough is a small chain of donut shops currently owned and operated by a group of seven partners. The owners think that their chain has the potential for rapid growth, but several of the partners are concerned about the growing financial risks that will accompany this growth. One way the partners could deal with this problem would be to incorporate their business.

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

The most popular type of business for franchising is:

Joe Jackson operates a sole proprietorship, but he is in poor health and may be unable to continue running the business. If Joe becomes incapacitated, his business:

Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

Trevor and Tyler own all the stock in the Double T Corporation. The stock of this corporation is not sold to the general public. Trevor and Tyler own a:

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

Compared to the C-corporation, the limited liability company is an attractive form of business ownership because:

A limited liability company is similar to an S corporation, but without the special eligibility requirements.

Stock options are the right to purchase shares of the corporation for a fixed price.

Several years ago. Regis Corporation, a very large hair styling salon company purchased 60 "Your Father's Mustache" salons. Although this was initially an acquisition, the merging of these two businesses was a(n) . Regis went on to purchase several hair care product companies. Joining forces with hair care product companies would represent a .

A type of partnership called a acts much like a corporation and is traded on stock exchanges, but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

Stockholders in a corporation accept unlimited liability for the corporation's debts.

comprise about 20% of all businesses but account for about 81% of U.S. business receipts.

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

According to recent data, 80% of all franchises are restaurants.

A major objective of limited liability partnerships (LLPs) is to limit each partner's personal liability to the consequences of their own acts and those of people under their supervision.

Franchisors give franchisees the right to use their name and product, with the understanding that franchisees obtain all financing and develop all marketing strategies on their own.