Exam 5: Business Formation: Choosing the Form That Fits

When the acquiring firm buys the target firm despite the opposition of the target's board and top management, the result is called an unapproved takeover.

There are attractive advantages and no significant drawbacks to starting a sole proprietorship.

A horizontal merger is a combination of two firms that are in the same industry.

A business entity that allows others to operate a business using its name, trademark, business methods, and products in exchange for money and other considerations is called a franchisee.

A disadvantage of a sole proprietorship is that it is relatively expensive and complex to form.

The board of directors establishes the corporation's mission and sets its board objectives but seldom takes an active role in the day-to-day management of the company.

In 1988, Philip Morris, the leading cigarette manufacturer in the United States, merged with Kraft Inc., the maker of several leading food brands such as Miracle Whip, Velveeta, and Maxwell House. What type of merger would this combination be classified as?

For the franchisee, what are the advantages of a franchise arrangement?

What is the term for the party in a franchise relationship that pays for the right to use resources supplied by another business entity?

What is the name of the document that must be filed to form a corporation in most provinces?

A general partnership is a voluntary partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm.

The general partnership is the dominant form of business ownership, with the vast majority of large business organizations using this form of ownership.

The owners of a corporation have limited liability.

A franchisee is the business entity in a franchise relationship that pays for the right to use resources supplied by the franchisor.

Fly By Knight and Air Pockets are two mid-sized regional airlines that serve much the same territory. If these two airlines merged, the result would be a horizontal merger.

To reduce risk of vulnerability to downturns in single markets, corporations would consider what type of merger?

Describe three types of business ownership and the liability associated with each type.

Families may be able to protect their personal assets from lawsuits and creditors by forming limited partnerships, with the parents as general partners and the children as limited partners.

General corporations normally are at a distinct disadvantage compared to other forms of business ownership when it comes to raising financial capital.

Selena has a talent for making attractive but inexpensive jewellery and wants to set up a small business to sell some of her creations. She asks for your advice about setting up her firm, telling you that she wants to start her business as quickly and inexpensively as possible. In addition, she doesn't want to share control (or profits) with anyone else. Which form of business ownership would you suggest for Selena?