Exam 5: Business Formation: Choosing the Form That Fits

What is currently occurring where franchising is concerned?

The first step in forming a sole proprietorship is filing the appropriate paperwork and paying the necessary filing fees.

Which statement best describes limited partners?

What do we call a merger of firms in the same industry?

One reason for a conglomerate merger when diversifying into new markets is to reduce the risk associated with adverse conditions in any single market.

Anita Persaud has opened a new downtown boutique. She wants to pay minimal taxes and she wants to remain in complete control of her company and be her own boss. What form of ownership should she choose?

If an oil company merged with a company that produced motion pictures, the result would be a vertical merger.

To increase production capacity and provide consumers with market stability, Exxon and Mobil created ExxonMobil. What type of merger is this?

A limited partnership is an agreement between two or more individuals to operate a business as co-owners for a limited period of time.

In a general partnership, each partner incurs unlimited liability only for claims resulting from his or her own negligence.

In Canada, which of the following is the dominant form of business ownership?

Relative to sole proprietorships and partnerships, what is a disadvantage of the corporate form of business ownership?

Henry Hanks has a great idea for a new business-one he is sure will make a ton of money. He's eager to get started, so he wants to form his business with a minimum of hassle, expense, and red tape. He also wants to be his own boss and have complete control over the company. Henry's goals suggest that he should seriously consider operating his business as a sole proprietorship.

Marco Valez is comparing forms of business structure in order to make the best decision for the business he plans to form next month. He plans to be the only investor/owner, and he will also actively manage the business. He is convinced that the company will be profitable, so he wants to keep all of the after-tax earnings for himself. Which of the following forms of business ownership is Marco most likely to choose?

A business format franchise is a broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor.

Explain the similarities and differences between limited partnerships and limited liability partnerships.

Bankers and other lenders may be more willing to loan you money if your business is part of an established franchise.

Unlike general corporations, not-for-profit corporations have no shareholders and pay no dividends.

What type of merger would firms that want to improve the integration of production activities or increase their control over the supply of inputs be most likely to consider?

Why do most sole proprietorships remain relatively small?