Exam 5: How to Form a Business

A merger is a mutual agreement where companies join together, whereas an acquisition is when one firm purchases the assets and obligations of another firm.

A disadvantage of corporations is that their charters are only valid for 99 years, so corporations are less permanent than other types of businesses.

With respect to taxes, the sole proprietorship

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) common ownership, (2) shared profits and losses, and (3) the right to participate in managing the operations of the business.

The owners of Game Guys are looking to become an S corporation. Unfortunately, after speaking with their lawyer, she advised them that they do not meet some of the requirements necessary to qualify as an S corporation. An alternative form of business that would give them similar advantages is a limited liability company.

A nonprofit corporation does not seek personal profit for its owners.

A domestic corporation does business in the state in which it's chartered.

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.

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

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?

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

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

Two of your friends are horse fanatics. They inherited several acres of land that they turned into a retirement sanctuary for racehorses. Serenity Stables was originally incorporated as a limited liability company. The members are reevaluating this form of ownership. Unlike an S corporation, they now pay self-employment taxes on all company profits-not just on the salaries they pay themselves.

A merger involving a commercial bakery and a grocery retailer would be an example of a ________ merger.

Corporations represent 20 percent of all the businesses in the U.S. and earn over 80 percent of the total U.S. business receipts.

The fairest way to handle profits in any partnership arrangement is to divide things evenly. If there are two owners in the business, each gets 50%. If there are three owners (even if one is a limited partner), each gets 33.333% of any accumulated profits.

The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations.

It is correct to say that if a franchisor expects an 8% royalty fee on revenue, the franchisor earns 8 cents on each dollar of revenue the franchisee generates.

A foreign corporation is chartered in a country outside the U.S.

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