Chat with AIExam 6: Business Formation: Choosing the Form That Fits
Michael owns stock in an S corporation based in the U.S. He has told his friend Juan about the company, and now Juan wants to invest in the company. Juan is a Mexican citizen who lives in northern Mexico. In this scenario, Juan will be allowed to own stock in the company.
(35) 
VerifiedFalse
Thomas started an engineering company as a sole proprietorship two years ago with only three employees. Thomas is finding it hard to acquire new employees. Which of the following is most likely the reason for the company's inability to attract new employees?
(34) VerifiedA
How does a merger differ from an acquisition. What are the three basic types of mergers, and how do they differ? Identify a reason why firms might pursue each type of merger.
(36) VerifiedAn acquisition occurs when one corporation buys controlling interest in another firm. The firm being acquired ceases to exist as an independent entity, while the acquiring firm continues to operate. A merger occurs when two formerly independent firms agree to combine and form a new business entity. There are three basic types of mergers: horizontal, vertical, and conglomerate. A horizontal merger is a combination of firms in the same industry. This type of merger enables the firm to achieve more power and control within a given market. It may also allow the new firm to be more efficient through the elimination of duplicate facilities and personnel. A vertical merger is between firms that are at different stages in the production process for a good or service. This type of merger may allow tighter integration of production and increased control over the supply of resources and inputs. A conglomerate merger is between firms that are in unrelated industries. A key reason cited for this type of merger is the desire to reduce risk by making the firm less vulnerable to adverse conditions in any single market.
Mergers and acquisitions basically mean the same thing; the only difference is the size of the companies involved.
(36) Rob is an engineer who works in nuclear power plants. He is considering starting his own engineering company. Due to the nature of work at his new company, Rob wants to avoid unlimited liability. Which of the following forms of business ownership is most suitable for Rob?
(37) Which of the following is an advantage of franchising for the franchisee?
(37) A limited partnership allows one partner to contribute financially to a company without having to participate in the daily management.
(28) One reason given to justify a conglomerate merger is the desire to diversify into new markets, thus reducing the risk associated with adverse conditions in any single market.
(29) Individuals who want to be their own boss and use their own methods are likely to have difficulty accepting the terms of a typical franchise agreement.
(38) LLCs are as easy to form as a partnership or sole proprietorship.
(37) Owners of limited liability companies are known as stockholders.
(35) What is a sole proprietorship? Identify and explain two advantages and two disadvantages of sole proprietorships.
(36) Dalton Inc., a cigarette manufacturer, merges with Crimson Corp., a food brand, to make the firms less susceptible to unfavorable market conditions in any single market. This is an example of a _____ merger.
(34) A _____ is a legal business entity that offers limited liability to all of its owners.
(33) A limited liability partnership (LLP) is attractive to partners because:
(27) 
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