Exam 5: How to Form a Business

James and Reilly were arguing over who was the senior partner and who was the junior partner, even though they started the business at the same time. If you were brought on board as their business advisor, you would explain to them that all partnerships have at least one general partner (known as the senior partner) and one limited partner (known as the junior partner).

One advantage of a partnership is that there is a simple process for partners to terminate their business.

In a typical franchise agreement, the franchisor pays the franchisee a fee to manage its company, and the two of them split the profits based on the percentages established in the agreement.

Which of the following is an advantage of the corporate form of business when compared to sole proprietorships and partnerships?

Stockholders in a corporation have limited liability.

A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested.

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives.

Originally, farm cooperatives were formed to provide better prices for farmers. These groups now cooperatively buy farm equipment and other products, and realize economies of scale by banding together for these things.

Most states have legal restrictions that prevent individuals from incorporating.

Unlimited liability means

A limited partnership consists of one or more general partners and one or more limited partners.

Which of the following people would be most interested in participating in a business organized as a cooperative?

Right now, Car Keepers Garage is operated as a

________ are companies that are similar to S corporations but are not restricted with similar eligibility requirements.

Rowan and Vanessa plan to pool their money and talents to form a general partnership and start a music school. One of the first things Rowan and Vanessa should do is

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

A leveraged buyout is an attempt by top management to gain control of a company by issuing a large amount of new stock.

Which of the following statements about the operation of a corporation is correct?

Tee Time Golf Resort has the opportunity to buy 1,000 acres of property adjacent to its award-winning 18-hole golf course. After talking with her banker and her lawyer, the owner is encouraged to begin the paperwork to change from a limited liability company form of business ownership to a corporation. You applaud this strategy because she will eliminate the problem of double taxation.