Exam 6: Business Formation: Choosing the Form That Fits

Which of the following is a disadvantage of franchising?

Franchising is used by companies to move into foreign markets.

Sarcosine Chemicals Corp. issues stock in one of its operating units and sets it up as a separate company called Prussic Corp., with its own board of directors and corporate officers. Sarcosine Chemicals Corp. then distributes the stock in Prussic Corp. to its existing stockholders. Which of the following forms of divestitures does this scenario exemplify?

The nature of work and the workflow in the animation department of Hanzel Talkies, a movie production company, completely differs from that of other departments in the company. Hence, Hanzel Talkies decides to branch the animation department out into a new company by selling the stock to outside investors. In this scenario, Hanzel Talkies is using a strategy called a(n):

FoodieGo, a catering company, is owned by foreign investors and local businessmen. Its earnings are equally divided among its members. It does not face the problem of double taxation as taxes are only levied on the personal income of the members. The owners of FoodieGo do not have personal liability for any debts incurred by the company. In the given scenario, FoodieGo is an example of a _____.

An owner of a C corporation is called a _____.

A(n)__________is a voluntary agreement under which two or more people act as co-owners of a business for profit.

Which of the following statements is true of the formation of general partnerships?

Francois is the sole owner of a photo studio and handles most of the work himself. All earnings from the studio become Francois's income. Given this information, Francois:

Glossamer Inc., a company owned by George and Alex, faces huge debts and is eventually shut down due to bankruptcy. The company's financial loss affects Alex personally, and his house and other personal assets are seized by the bank. However, George's personal assets are not affected. This is most likely because George is a(n) _____.

Clareese Trends, a clothing manufacturer, identifies twelve potential franchisees who would introduce the brand's outlets across eight major cities in the United States. Clareese Trends, however, has retained the production rights with itself, giving its franchisees only the right to sell the products they receive from the company at their various outlets. This scenario exemplifies a _____.

The owner of a sole proprietorship must share any after-tax profits with the company's shareholders.

The owners of limited liability companies (LLCs) are called members because:

Which of the following is an advantage of a C corporation?

Signing a franchise agreement exempts the franchisee from making any form of payments to use a franchisor's products.

Fabotels is a hotel aggregator that buys budget hotels that succumb to financial losses and then refurbishes them under the company's brand name. Fabotels recently purchased Ravine Comforts, a small lodge that was running into huge debts. The business deal between Fabotels and Ravine Comforts exemplifies a(n) _____.

CofBean Corp. and Coffeedust Inc. are leading producers and distributors of coffee beans. They join together to become the world's largest distributor of coffee. This association allows the amalgamated company to increase its size and market power within the coffee industry. This is an example of a(n) _____.

Albert is the owner of a car service center. As a sole proprietor, any profit that he earns is:

IFGI Life Insurance, an insurance company, is one of the stockholders of a pharmaceutical company. Given this information, IFGI Life Insurance is most likely a(n) _____.

A corporation is a separate entity from its owners where the: