Exam 5: How to Form a Business

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.

A partner (owner) who invests money in a business does not take an active role in managing the operation, and is only subject to losing the funds he/she invested is known as a(n) ________ partner.

The coattail effect refers to the burden of corporate rules and regulations on franchisees.

Yoshi operates a shoe store as a sole proprietorship. However, he is in poor health and may be unable to continue running the business. If Yoshi becomes incapacitated, his business

Which of the following is an attractive benefit of a corporation?

A major advantage of S corporations is that they

A separation between ownership and management is most likely to occur in a

One of the major disadvantages of a sole proprietorship is the

An evaluation of franchising would conclude that this type of arrangement

Motor Masters is a conventional corporation with 516 stockholders. A number of the stockholders are citizens of Canada and others are citizens of Mexico, though most are American. Due to its size and diversity in ownership, you would recommend that Motor Masters change to an S corporation.

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

Kooky Cookies Corporation purchased the Crazy Cookie Company. Although this was initially an acquisition, the merging of these two businesses was a ________ merger. Kooky Cookies went on to purchase several baking product companies. Joining forces with some of its suppliers would represent a ________ merger.

An acquisition is when one company buys the property and obligations of another company.

A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business.

Huang has agreed to become a partner in his cousin's waste management business. Since he provided 30 percent of the money to start the company and built an air-conditioned garage, he is entitled to 30 percent of any profits the company earns during its first year of operation.

An advantage of corporations is their ability to attract good talent by offering stock options and other employee benefits.

Limited partnerships are just like general partnerships, except that they are partners for a limited time period.

A comparison of the three major forms of business ownership shows that sole proprietorships are usually the most difficult type of business to establish.

________ is by far the most popular target for American franchisors seeking to establish franchises in other countries.

The difference between a merger and an acquisition is