Exam 5: Business Formation: Choosing the Form That Fits

What type of merger is the combination of two or more firms in unrelated industries?

The Limited Member Partnership (LMP) is another form of partnership.

In a limited partnership, all owners have limited liability for the debts and obligations of their company.

One drawback of operating a franchise is the greater risk of failure relative to independently owned businesses.

What is the most common type of franchise agreement?

To increase size and market power in its industry, what type of merger would a firm consider?

From the standpoint of an owner, what is a major advantage of a sole proprietorship?

In which of the following types of ownership do all partners have the right to actively participate in the management of the firm and to share in any profits or losses incurred by the business?

Joe owns 500 shares of stock in the Megabux Corporation. He is pleased to learn that the company earned a very nice profit over the most recent operating period. The company has announced that they will pay each shareholder a dividend of $1 per share out of the after-tax profits. This payment will represent tax-free income to Joe.

Individuals who want to be their own boss and use their own methods are likely to have difficulty accepting the terms of a typical franchise agreement.

Which of the following can be classified as an artificial person that can legally engage in almost any business activity a natural person can, including owning property, entering into binding contracts, and initiating legal actions?

Marcel's Motorcycles Inc. has just incorporated the business in Ontario. If John Chu had been a partner, what would he now become?

What is the term for the business entity in a franchise relationship that allows others to operate a business using resources it supplies in exchange for money and other considerations?

A franchise agreement is the contractual arrangement between a franchisor and franchisee that details the duties and responsibilities of both parties.

A horizontal merger occurs when firms from different industries join.

Suzie Xu just graduated with honours from a leading university with a degree in financial management. She wants (and expects) to get a job with excellent pay and benefits, as well as the opportunity for growth and advancement. Suzie is likely to be very interested in working for a company that is organized as a sole proprietorship.

Each member in a cooperative has equal ownership of the co-op and has an equal voice in how the co-op is run.

Preferred shareholders usually have the right to vote, while common shareholders normally do not.

List and define three advantages and three disadvantages of forming a general corporation.

As business entities, corporations may engage in virtually any business activity a natural person can, including buying and selling property and entering into binding contracts.