Exam 5: How to Form a Business

Melanie, Elliot, and Caleb agreed to partner in a small home rehab business. Initially, they were enthusiastic and eager workers. That is until their first project took more work than Melanie initially estimated, Elliot wanted morning meetings and long lunch hours, and Caleb decided to go on vacation even though the home was not complete and ready to sell. As Figure 5.2 indicates,

A drawback of sole proprietorships is that they usually have limited access to additional financial resources.

Silver Screen Pictures, Inc. recently bought Superstar Entertainment, Inc. for an undisclosed amount of money. It now owns all of Superstar Entertainment's properties and obligations. This is an example of a(n)

Corporations are easy to start and easy to terminate.

To many businesspeople, one of the major attractions of a sole proprietorship is

Stockholders in a corporation normally exert a significant degree of control over the company's daily operations.

If a corporation distributes after-tax profits to its stockholders in the form of dividends, the government considers these distributions as part of each stockholder's personal income. Stockholders pay taxes on these distributions.

A significant disadvantage of owning a sole proprietorship is the

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 nonprofit corporation does not seek personal profit for its owners.

Kevin is a major stockholder in Professional Transmission Services (PTS), a nationwide network of transmission repair shops founded in 1975 by his father. Currently, PTS stock is sold on the open market, but Kevin has talked to several relatives about his desire to get all of the PTS stock back in his family's hands. Kevin is interested in ________.

The S corporation is likely to be less popular in the future because

Attributes such as trust and integrity are not something you should get overly concerned about when selecting partners. This is a business decision, not a friendly game of golf.

The ownership of Dogs of Denver, a small company that designs and manufactures coats, sweaters, jackets, and rainwear for dogs, wants to organize as an LLC. All the owners are under forty and two are expecting children by the end of the year. This is good strategy because each member can choose to commit to limited or unlimited liability.

The form of business ownership best suited to raising large amounts of money for expansion is the

The purpose of a farm cooperative is to

When two or more people legally agree to become co-owners of a business, the form of business is called a partnership.

A quasi-public corporation is a corporation chartered by the government as an approved monopoly to perform services to the general public.

Partnerships are the most common form of business ownership.

The first step in starting a sole proprietorship is to fill out a proprietorship charter application form and file it with the state government.