Exam 6: Business Formation: Choosing the Form That Fits

The basic rules governing how a corporation is organized and how it conducts its business are known as__________.

Harry is one of the top managers in RPLD Corporation. He, along with seven other members, takes the major decisions of the company and oversees its operation. Although Harry is not the owner of the corporation, he holds stocks in the company and has the power to appoint a chief executive officer (CEO) for the company. In this scenario, Harry is part of the _____ of RPLD Corporation.

Tania starts a bookstore with her friend. However, owing to other commitments, Tania is unable to help with the daily operations of the bookstore. Therefore, Tania proposes that she would not actively participate in managing the business but would provide financial support to the business. By doing this, she would be sharing the profits equally with her friend, without incurring any of the business debts personally. In this scenario, Tania is a(n) _____.

In the case of C corporations, shareholders don't pay income taxes on__________.

Chloe and Tamara start a vintage fashion boutique. While both invest equally in the store and are entitled to equal profits, it is Tamara who looks after the day-to-day business transactions and manages the store. Chloe does not actively participate in managing the store, and her personal wealth is not at risk in case the business suffers losses. In this scenario, Chloe is a _____.

A(n) _____ is a corporation that has limited number of owners that operates under simpler, less formal rules than a C corporation.

Which of the following is a characteristic of limited liability companies (LLCs)?

Tangypop and Fizzmania, two giant soft drink companies in Brazil, join together to form a new company out of the two previously independent firms. They take this step to reduce competition, leverage economies of scale, and increase their size and market power within the soft drink industry. This association is most likely an example of a _____.

A premium brand of men's wear introduces a new range of dinner suits and licenses its franchisees to sell this product. However, the brand retains the production rights. This scenario exemplifies a(n) _____.

Mikhail, a Korean, wishes to be a stockholder in an airline company in the United States. However, he is told that he cannot buy shares of the company as he is neither a U.S. citizen nor a permanent resident of the country. Besides this, he can become a stockholder only if any of the current stockholders decide to sell their shares as the company already has 100 stockholders. Given this information, it can be assumed that Mikhail wants to be a stockholder of a(n) _____.

Inkglot Technologies, a medium-sized corporation, is allowed to have only 35 stockholders at any point of time. However, all stockholders of the company can actively participate in the management of the company while still maintaining limited liability. Given this information, Inkglot Technologies is most likely a(n):

An advantage of franchising is:

Several prominent owners of a uranium mining company pass away within a period of two years. However, the company continues to operate as it remains financially viable and a majority of its stockholders wish for the continuation of the business. In this scenario, the uranium mining company is an example of a _____.

Scoopjoe, an ice cream brand in Wisconsin, has ten other outlets in Illinois, Michigan, and Ohio. As part of the agreement between Scoopjoe's main outlet and the other outlets, the former not only supplies raw materials to the latter but also provides help with site selection, training of staff, and finance. The given scenario exemplifies a:

Jovi's Corner, a toy store, abruptly closes down after the death of its owner. Without an heir or an experienced person to manage the store, Jovi's Corner is shut down, and the property is sold off to another party. The profits are donated to an orphanage. In the given scenario, Jovi's Corner is most likely an example of a _____.

Lancelock Inc. buys a less accomplished firm by directly signing a deal with the target firm's shareholders. The move is vehemently opposed by the board of directors and the top management of the target firm. This is an example of a _____.

Happta is a corporation with tax-exempt status. It has members but cannot have stockholders. Given this information, Happta is most likely a(n):

A textile corporation has two hundred odd stockholders. As it is inconvenient for so many stockholders to manage the company, the stockholders elect a group of individuals to oversee the company's operation and to represent their interests. In this scenario, the stockholders elect a _____.

A corporation is a voluntary agreement under which two people act as co-owners of a business for profit.

A(n)__________, a type of divestiture, occurs when a company issues stock in one of its own divisions or operating units and sets it up as a separate company-complete with its own board of directors and corporate officers.