Question 1

Which of the following best describes a business format franchise?

Accepted Answer

A) It is a broad franchise agreement in which a franchisee pays for the right to use the name, trademark, and production methods of a franchisor. 
B) It is a type of franchising arrangement in which a franchisor makes a product and licenses a franchisee to sell it. 
C) It is a type of franchising arrangement in which a franchisor shares ownership with a franchisee by selling a number of its shares. 
D) It is a broad franchising agreement in which a franchisee pays a franchisor for the right to use the production methods of the franchisor and functions under a different name and identity.

Question 2

Which of the following is a disadvantage of franchising?

Accepted Answer

A) The franchisee seldom receives any support or training from the franchisor about running the business. 
B) The franchisee faces the task of establishing brand recognition among customers. 
C) The franchisee has no flexibility as it is required to follow the franchisor's procedures to the letter. 
D) The franchisee faces funding challenges as bankers are often reluctant to fund franchisees.

Question 3

A limited partnership is different from a limited liability partnership in that, in a limited partnership:

Accepted Answer

A) all members have limited liability. 
B) only the members with unlimited liability are allowed to manage the firm. 
C) only the members who have the protection of limited liability actively participate in the management of the firm. 
D) all members actively participate in the management of the firm.

Question 4

It is possible to establish a corporation by a simple verbal agreement.

Accepted Answer

A) True 
 B)False

Question 5

Memphis is the owner of a car performance tuning business. As a sole proprietor, any profit he earns is:

Accepted Answer

A) taxed as the earnings of a sole proprietorship as a business. 
B) treated as Memphis's personal income. 
C) not subjected to any tax. 
D) taxed only when he withdraws the money from a bank.

Question 6

Which of the following is an advantage of sole proprietorship?

Accepted Answer

A) Unlimited financial resources 
B) Attraction of talented employees 
C) Ease of formation 
D) Shared workload and responsibilities

Question 7

Identify and explain two advantages and two disadvantages of sole proprietorships.

Accepted Answer

The answer of Identify and explain two advantages and two...

Question 8

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

Accepted Answer

A) The process of forming a C corporation is simple and inexpensive. 
B) The members are entitled to choose the mode of tax treatment. 
C) The firm is free from double taxation. 
D) The shareholders have limited liability in the firm.

Question 9

Which of the following is an advantage of limited liability companies?​

Accepted Answer

A) Limited liability companies can have any number of owners. 
B) The process of formation of limited liability companies is simple and fast. 
C) Limited liability companies have a limited number of owners. 
D) The foreign status in states other than the ones in which they are organized is not applicable to limited liability companies.

Question 10

The individuals who are elected by stockholders of a corporation to represent their interests are known as _____.

Accepted Answer

A) sole proprietors 
B) a board of directors 
C) limited liability partners 
D) conglomerates

Question 11

There is no limit on the number of partners who can participate in a general partnership.

Accepted Answer

A) True 
 B)False

Question 12

Choice of ownership determines the degree to which each owner has personal liability for the firm's debts and the sources of funds available to the firm to finance future expansion.

Accepted Answer

A) True 
 B)False

Question 13

One reason a firm would consider a _____ merger would be to increase size and market power in its industry.

Accepted Answer

A) hostile 
B) conglomerate 
C) vertical 
D) horizontal

Question 14

The owner of a single-person LLC can avoid paying self-employment taxes by electing to have the LLC treated as a corporation.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following aspects of a limited partnership differentiates general partners from limited partners?

Accepted Answer

A) Duration of the partnership in a company 
B) Sharing of profits of a company 
C) Financial contribution to a company 
D) Participation in management of a company

Question 16

The locals residing near a small chemical factory file a complaint against it for polluting the environment. The owner of the factory learns that if he loses the case, his personal possessions might also be confiscated.Which of the following types of ownership is the factory functioning under?

Accepted Answer

A) Limited liability company 
B) Corporation 
C) Partnership 
D) Sole proprietorship

Question 17

Red Tide Inc., an electronics manufacturer, merges with Dew Corp., a food brand, to make the firms less susceptible to unfavorable market conditions in any single market. This is an example of a _____ merger.

Accepted Answer

A) horizontal 
B) vertical 
C) conglomerate 
D) macro

Question 18

A partnership:

Accepted Answer

A)  is a form of business ownership with a single owner who usually actively manages the company. 
B) is a form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners. 
C) is a form of business ownership that offers both limited liability to its owners and flexible tax treatment. 
D) is a voluntary agreement under which two or more people act as co-owners of a business for profit.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

A _________ is a contractual arrangement between a franchisor and franchisee that spells out the duties and responsibilities of both parties.

Accepted Answer

A) Franchise Disclosure Document (FD
D)  
B) franchise agreement 
C) business format agreement 
D) dealership agreement

Exam 6: Business Formation: Choosing the Form that Fits

Which of the following best describes a business format franchise?

Which of the following is a disadvantage of franchising?

A limited partnership is different from a limited liability partnership in that, in a limited partnership:

It is possible to establish a corporation by a simple verbal agreement.

Memphis is the owner of a car performance tuning business. As a sole proprietor, any profit he earns is:

Which of the following is an advantage of sole proprietorship?

Identify and explain two advantages and two disadvantages of sole proprietorships.

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

Which of the following is an advantage of limited liability companies?​

The individuals who are elected by stockholders of a corporation to represent their interests are known as _____.

There is no limit on the number of partners who can participate in a general partnership.

Choice of ownership determines the degree to which each owner has personal liability for the firm's debts and the sources of funds available to the firm to finance future expansion.

One reason a firm would consider a _____ merger would be to increase size and market power in its industry.

The owner of a single-person LLC can avoid paying self-employment taxes by electing to have the LLC treated as a corporation.

Which of the following aspects of a limited partnership differentiates general partners from limited partners?

The locals residing near a small chemical factory file a complaint against it for polluting the environment. The owner of the factory learns that if he loses the case, his personal possessions might also be confiscated.Which of the following types of ownership is the factory functioning under?

Red Tide Inc., an electronics manufacturer, merges with Dew Corp., a food brand, to make the firms less susceptible to unfavorable market conditions in any single market. This is an example of a _____ merger.

A partnership:

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

A _________ is a contractual arrangement between a franchisor and franchisee that spells out the duties and responsibilities of both parties.

Which of the following is an advantage of limited liability companies?