Exam 5: How to Form a Business

Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products. In a franchise arrangement, Midas would be the , and the buyer of the franchise is the .

Dane is a stockholder in SmallWorld, Inc., a C-corporation that manufactures amusement park rides. The company recently lost a major court decision and will probably be forced into bankruptcy. In fact, the damages awarded are so great that, even if all company assets are sold and the proceeds are used to pay its debts, SmallWorld is likely to still owe money to its creditors. If SmallWorld go bankrupt, Dane and the other stockholders will:

If a firm is advertising that it is selling franchise opportunities, the prospective franchisee can be assured that the government has performed due diligence on this company, and has deemed it a safe investment.

A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project.

The is the most common form of business ownership.

Selma owns a roofing business. She enjoys being her own boss, but her satisfaction comes at a price. Her days are filled with organizing the activities of her employees and soliciting new customers. She often misses activities with friends and family because of the obligations of running her own business. She also knows that she has unlimited personal liability for any of her firm's debts. Selma's business is organized as a(n):

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

Because of the growth of minority-owned businesses in the U.S., franchisors are becoming more focused on recruiting minority franchisees.

Jocelyn belongs to a food cooperative in her community. As a member, she can expect to have a vote in the election of the cooperative's board of directors.

If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system, the franchisor may also be willing to serve as a source of financing for your operation.

A franchise can be formed:

Starting a new business as a sole proprietorship:

A merger involving a commercial bakery and a grocery retailer would be an example of a:

If a franchisee decides he wants out of the business, he is free to close-up shop or sell the business, just as if he were a sole proprietor or partnership outside of a franchise arrangement.

A horizontal merger refers to a merger between two companies that serve entirely different markets.

Which of the following statements about S corporations is most accurate?

One reason that companies participate in mergers and acquisitions is:

In today's economy, only large business enterprises should operate as corporations.

A is an arrangement whereby someone with proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

Javier is the sole proprietor of a golf shop. Because he is a sole proprietor, any profit Javier's business earns is: