Exam 6: Business Formation: Choosing the Form That Fits

Yadira works for an organization whose earnings are exempt from federal and state income taxes. The organization is barred from funding any political campaign. Given this information, Yadira most likely works for a(n):

Which of the following is a disadvantage associated with sole proprietorships?

Hot and Black Tide Inc., an electronics manufacturer, merges with Crimp Corp., a food manufacturing brand, to make the firms less vulnerable to adverse conditions in any single market. This scenario is an example of a(n) _____.

Svelter Corporation does not face the problem of double taxation as the Internal Revenue Service (IRS) does not tax the earnings of the company separately. Instead, taxes are only levied on the personal income of the stockholders. A limitation, however, is that the company is only allowed to have a maximum number of 100 stockholders at a time. Given this information, Svelter Corporation is a(n) _____.

Ronnie is the owner of a pet store and manages the store by himself. Any profit that Ronnie's store earns is:

Which of the following statements is true of forming C corporations?

Arocare International, a general hospital, converts its cancer unit into a new hospital called Miracle. Arocare then issues stock in the new hospital and sells the stock to outside investors. This helps Arocare raise additional funds. This scenario exemplifies:

Which of the following is a disadvantage of franchising for a franchisee?

Flaira, a high-end clothing brand in Florida, signs a licensing agreement with a firm in Honolulu to allow the latter to use Flaira's brand name, trademark, and business methods to operate the same clothing business in Honolulu. In exchange, the Honolulu firm has to pay the owner of Flaira an annual fee. This scenario is an example of a(n) _____.

Melvin is the co-owner of a gadget store. Unlike his partner who only provides monetary support to the business, Melvin is responsible for handling the daily operations of the store and bears complete personal liability for any debts incurred by the store. Melvin and his partner, however, share the profits of the store equally. In this scenario, Melvin is a _____.

Which of the following is an advantage of general partnerships?

Samuel and Dexter start a logistics company together. Both of them have an equal right to participate in the company's management and share in the company's profits. In this scenario, Samuel and Dexter most likely _____.

It is possible to establish a corporation by a simple verbal agreement.

A _____ is a partnership arrangement that includes at least one general partner and at least one limited partner.

In the context of franchising, which of the following statements is true of a business format franchise?

Choice of ownership determines the degree to which each owner has personal liability for the firm's debts.

Harvey, a shareholder in Braxwell Technologies, reinvests 10% of the dividends received from the company back into it, partly to evade taxes and partly to support the company. This scenario reflects the concept of _____.

The shareholders of a C corporation fill in all the required paperwork with a government agency. They also adopt a set of rules that will govern the way the corporation is organized and conducts its business. Given this information, the shareholders most likely adopt _____.

Clara and Sandra collaborate to open a cafe. They come to an arrangement wherein Sandra manages the cafe from Monday to Wednesday, Clara manages it from Thursday to Saturday, and both jointly manage it on Sunday. Both Clara and Sandra share the profits of the business equally while facing a personal liability for any debts or losses that the cafe may incur. In this scenario, Clara and Sandra most likely _____.

A group of five people wants to start a limited liability company (LLC) in their city. The group files a document with the state government to establish the existence of the LLC. In this scenario, which of the following documents is filed by the group?