Question 1

Some forms of ownership are much more costly and involved to create.

Accepted Answer

A) True 
 B)False

Question 2

What is a corporation? Explain the advantages and the disadvantages of a corporation.

Accepted Answer

A corporation is a separate legal entity

Question 3

Mini Case 6-1: "Today, You Gotta' Be a Corporation"
Duke has been a successful used car dealer for 25 years in the same location, operating as a proprietorship. In those 25 years, he has expanded his operation and become the largest independent car dealer in a city of 85,000 people. Few people in town can boast of a business reputation better than Duke's. As he says, "I've always done business in a fair and honest fashion, and I've tried to give my customers an honest deal. The public has responded well, and last year the business revenue increased to an all-time high of $830,000."
As the business has grown, so have Duke's liabilities. On a given day, Duke will have cars worth from $350,000 to $450,000 as inventory on the lot. "Twenty years ago, if I'd asked the bank for a line of credit of $200,000, they'd have tossed me out the front door. There is no question that today business is different."
Duke's only daughter recently married a garage mechanic who has worked in the area for the past three years. Though Duke thinks the boy is certainly nice enough, he does not believe he is very smart. "The kid sure knows how to fix a car, but that's as far as it goes," says Duke. "On my last visit to the accountant, he suggested I consider incorporating. I guess he knows what he's talking about. That's all you hear today - 'you gotta be a corporation.' I guess he's right. But, to tell you the truth, I don't know."
-Would you recommend Duke establish an S corporation? What conditions would he have to meet?

Accepted Answer

Duke's business looks as though it would

Question 4

Profits earned by a partnership are taxed in the same fashion as those earned by a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 5

Before purchasing an existing business, an entrepreneur should analyze both its existing and its potential customers.

Accepted Answer

A) True 
 B)False

Question 6

Mini Case 6-1: "Today, You Gotta' Be a Corporation"
Duke has been a successful used car dealer for 25 years in the same location, operating as a proprietorship. In those 25 years, he has expanded his operation and become the largest independent car dealer in a city of 85,000 people. Few people in town can boast of a business reputation better than Duke's. As he says, "I've always done business in a fair and honest fashion, and I've tried to give my customers an honest deal. The public has responded well, and last year the business revenue increased to an all-time high of $830,000."
As the business has grown, so have Duke's liabilities. On a given day, Duke will have cars worth from $350,000 to $450,000 as inventory on the lot. "Twenty years ago, if I'd asked the bank for a line of credit of $200,000, they'd have tossed me out the front door. There is no question that today business is different."
Duke's only daughter recently married a garage mechanic who has worked in the area for the past three years. Though Duke thinks the boy is certainly nice enough, he does not believe he is very smart. "The kid sure knows how to fix a car, but that's as far as it goes," says Duke. "On my last visit to the accountant, he suggested I consider incorporating. I guess he knows what he's talking about. That's all you hear today - 'you gotta be a corporation.' I guess he's right. But, to tell you the truth, I don't know."
-Should Duke incorporate or should he remain a proprietorship? Why?

Accepted Answer

There are significant advantag

Question 7

Which of the following issues would a typical partnership agreement address?

Accepted Answer

A)  The contributions of each partner to the business. 
B)  How the partnership profits (or losses) will be distributed. 
C)  How a partner can sell her/his ownership in the business. 
D)  All of the above 
A)  The contributions of each partner to the business. 
B)  How the partnership profits (or losses) will be distributed. 
C)  How a partner can sell her/his ownership in the business. 
D)  All of the above

Question 8

Which of the following statement(s) is/are true?

Accepted Answer

A)  Closely held corporations are owned by only a few shareholders - often family members. 
B)  Most closely held corporations require shareholders interested in selling their stock to offer it first to the corporation. This is known as the right of first refusal. 
C)  Shares of stock the corporation itself owns are called treasury stock. 
D)  All of the above 
A)  Closely held corporations are owned by only a few shareholders - often family members. 
B)  Most closely held corporations require shareholders interested in selling their stock to offer it first to the corporation. This is known as the right of first refusal. 
C)  Shares of stock the corporation itself owns are called treasury stock. 
D)  All of the above

Question 9

If a partnership agreement does not exist, the partnership will be governed by the Uniform Partnership Act.

Accepted Answer

A) True 
 B)False

Question 10

An S corporation form of ownership overcomes which disadvantage of the regular or C corporation form of ownership?

Accepted Answer

A)  The double taxation issue. 
B)  The expense and difficulty of formation. 
C)  The amount of regulation and red tape involved in its operation. 
D)  The potential loss of control by the founder. 
A)  The double taxation issue. 
B)  The expense and difficulty of formation. 
C)  The amount of regulation and red tape involved in its operation. 
D)  The potential loss of control by the founder.

Question 11

Accounts receivable are rarely worth face value and should be "aged" when evaluating a company's assets.

Accepted Answer

A) True 
 B)False

Question 12

In a partnership, profits (and losses) must be shared according to the ratio of capital originally invested in the partnership.

Accepted Answer

A) True 
 B)False

Question 13

A disadvantage of the corporate form of ownership is when profits are taxed at the corporate rate and at the individual rate and this is referred to as ________.

Accepted Answer

A)  double taxation 
B)  limited liability 
C)  double liability 
D)  single taxation 
A)  double taxation 
B)  limited liability 
C)  double liability 
D)  single taxation

Question 14

The process of investigating the details of a company that is for sale to determine the strengths, weaknesses, opportunities and threats facing it is known as the ________.

Accepted Answer

A)  hidden market process 
B)  due diligence process 
C)  skimming process 
D)  business assessment process 
A)  hidden market process 
B)  due diligence process 
C)  skimming process 
D)  business assessment process

Question 15

During the acquisition process, the potential buyer usually must sign a ________, which is an agreement to keep all conversations and information secret and legally binds the buyer from telling anyone any information the seller shares with her/him.

Accepted Answer

A)  covenant not to compete 
B)  nondisclosure document 
C)  letter of intent 
D)  purchase agreement 
A)  covenant not to compete 
B)  nondisclosure document 
C)  letter of intent 
D)  purchase agreement

Question 16

Mini Case 6-1: "Today, You Gotta' Be a Corporation"
Duke has been a successful used car dealer for 25 years in the same location, operating as a proprietorship. In those 25 years, he has expanded his operation and become the largest independent car dealer in a city of 85,000 people. Few people in town can boast of a business reputation better than Duke's. As he says, "I've always done business in a fair and honest fashion, and I've tried to give my customers an honest deal. The public has responded well, and last year the business revenue increased to an all-time high of $830,000."
As the business has grown, so have Duke's liabilities. On a given day, Duke will have cars worth from $350,000 to $450,000 as inventory on the lot. "Twenty years ago, if I'd asked the bank for a line of credit of $200,000, they'd have tossed me out the front door. There is no question that today business is different."
Duke's only daughter recently married a garage mechanic who has worked in the area for the past three years. Though Duke thinks the boy is certainly nice enough, he does not believe he is very smart. "The kid sure knows how to fix a car, but that's as far as it goes," says Duke. "On my last visit to the accountant, he suggested I consider incorporating. I guess he knows what he's talking about. That's all you hear today - 'you gotta be a corporation.' I guess he's right. But, to tell you the truth, I don't know."
-Would a limited liability corporation be any better for Duke? Why or why not?

Accepted Answer

A limited liability corporation offers m

Question 17

All the profits of a sole proprietorship are taxed as current income of the owner even if they are not withdrawn from the business.

Accepted Answer

A) True 
 B)False

Question 18

A ________ partnership is composed of at least one general partner and at lease one limited partner.

Accepted Answer

A)  general 
B)  limited 
C)  silent 
D)  passive 
A)  general 
B)  limited 
C)  silent 
D)  passive

Question 19

The "Das Spelunker" corporation, formed in Germany and conducting business in the U.S., is considered to be a(n) ________ corporation.

Accepted Answer

A)  alien 
B)  domestic 
C)  foreign 
D)  distant 
A)  alien 
B)  domestic 
C)  foreign 
D)  distant

Question 20

Which of the following is a disadvantage of the corporation form of ownership?

Accepted Answer

A)  An inability to accumulate capital. 
B)  The unlimited liability to the members of the board. 
C)  Double taxation on profits. 
D)  The lack of continuity. 
A)  An inability to accumulate capital. 
B)  The unlimited liability to the members of the board. 
C)  Double taxation on profits. 
D)  The lack of continuity.

Some forms of ownership are much more costly and involved to create.

What is a corporation? Explain the advantages and the disadvantages of a corporation.

Profits earned by a partnership are taxed in the same fashion as those earned by a sole proprietorship.

Before purchasing an existing business, an entrepreneur should analyze both its existing and its potential customers.

Which of the following issues would a typical partnership agreement address?

Which of the following statement(s) is/are true?

If a partnership agreement does not exist, the partnership will be governed by the Uniform Partnership Act.

An S corporation form of ownership overcomes which disadvantage of the regular or C corporation form of ownership?

Accounts receivable are rarely worth face value and should be "aged" when evaluating a company's assets.

In a partnership, profits (and losses) must be shared according to the ratio of capital originally invested in the partnership.

A disadvantage of the corporate form of ownership is when profits are taxed at the corporate rate and at the individual rate and this is referred to as ________.

The process of investigating the details of a company that is for sale to determine the strengths, weaknesses, opportunities and threats facing it is known as the ________.

During the acquisition process, the potential buyer usually must sign a ________, which is an agreement to keep all conversations and information secret and legally binds the buyer from telling anyone any information the seller shares with her/him.

All the profits of a sole proprietorship are taxed as current income of the owner even if they are not withdrawn from the business.

A ________ partnership is composed of at least one general partner and at lease one limited partner.

The "Das Spelunker" corporation, formed in Germany and conducting business in the U.S., is considered to be a(n) ________ corporation.

Which of the following is a disadvantage of the corporation form of ownership?

The Foundations of Entrepreneurship

Ethics and Social Responsibility: Doing the Right Thing

Inside the Entrepreneurial Mind: From Ideas to Reality

Conducting a Feasibility Analysis and Designing a Business Model

Crafting a Business Plan and Building a Solid Strategic Plan

Franchising and the Entrepreneur

Building a Powerful Bootstrap Marketing Plan

E-Commerce and the Entrepreneur

Pricing and Credit Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Sources of Financing: Debt and Equity

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters

Exam 6: Forms of Business Ownership and Buying an Existing Business

Some forms of ownership are much more costly and involved to create.

What is a corporation? Explain the advantages and the disadvantages of a corporation.

Profits earned by a partnership are taxed in the same fashion as those earned by a sole proprietorship.

Before purchasing an existing business, an entrepreneur should analyze both its existing and its potential customers.

Which of the following issues would a typical partnership agreement address?

Which of the following statement(s) is/are true?

If a partnership agreement does not exist, the partnership will be governed by the Uniform Partnership Act.

An S corporation form of ownership overcomes which disadvantage of the regular or C corporation form of ownership?

Accounts receivable are rarely worth face value and should be "aged" when evaluating a company's assets.

In a partnership, profits (and losses) must be shared according to the ratio of capital originally invested in the partnership.

A disadvantage of the corporate form of ownership is when profits are taxed at the corporate rate and at the individual rate and this is referred to as ________.

The process of investigating the details of a company that is for sale to determine the strengths, weaknesses, opportunities and threats facing it is known as the ________.

During the acquisition process, the potential buyer usually must sign a ________, which is an agreement to keep all conversations and information secret and legally binds the buyer from telling anyone any information the seller shares with her/him.

All the profits of a sole proprietorship are taxed as current income of the owner even if they are not withdrawn from the business.

A ________ partnership is composed of at least one general partner and at lease one limited partner.

The "Das Spelunker" corporation, formed in Germany and conducting business in the U.S., is considered to be a(n) ________ corporation.

Which of the following is a disadvantage of the corporation form of ownership?

The Foundations of Entrepreneurship

Ethics and Social Responsibility: Doing the Right Thing

Inside the Entrepreneurial Mind: From Ideas to Reality

Conducting a Feasibility Analysis and Designing a Business Model

Crafting a Business Plan and Building a Solid Strategic Plan

Franchising and the Entrepreneur

Building a Powerful Bootstrap Marketing Plan

E-Commerce and the Entrepreneur

Pricing and Credit Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Sources of Financing: Debt and Equity

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters