Exam 5: How to Form a Business

Ivy is investing in a home cleaning franchise called HomeKeepers. At her first interview with the franchisor's selling agent, she was told the parent company expects 5% royalties. What are royalties?

If a partner in a limited partnership dies, the partnership ceases to exist.

Finnegan is a limited partner in Gettout & Associates, a local financial consulting company. Heywood U. Gettout is one of the general partners in the company and is needing to temporarily leave the company to attend to some personal matters. Heywood has asked Finnegan to perform his managerial duties while he is gone. As a limited partner, Finnegan

Which of the following statements is the most accurate?

A(n) ________ is an arrangement whereby someone with a 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.

In order to protect all parties and minimize misunderstandings among partners, all terms of the partnership should be spelled out in writing.

According to the box, "Kickstarting a Benefit Corporation," a benefit corporation is

A franchise can be formed

The owners of a limited liability company (LLC) must pay self-employment taxes on any profits they earn, even if they did not obtain a salary from the company.

Franchising is a key component of the U.S. economy. What are the major advantages and disadvantages of franchising?

Although most new firms start out as sole proprietorships, few large firms are organized this way. Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms?

Foreign investment in U.S. companies continues to be strong. When Belgian-based In-Bev purchased the largest beer company in the U.S., Anheuser-Busch, this action constituted a(n) ________ with a negotiated selling price of $52 billion.

A master limited partnership (MLP) is

When Genna confided in Lou and Al that she too was concerned about adding additional risk, Lou suggested that they explore the possibility of a different type of business ownership, a(n) ________, which has very flexible ownership rules and would give them more choices in how the company's earnings are taxed while still protecting all owners from high levels of risk.

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

It is not unusual for members of cooperatives to work for and help manage their cooperative.

When one of the owners of a corporation dies, the corporation legally ceases to exist.

In a cooperative, members/customers

An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities.

One reason that a firm may choose to merge or acquire another company would be to diversify products or services.