Question 1

A significant disadvantage of owning a sole proprietorship is the:

Accepted Answer

A)   Possibility of limited liability.
B)   Heavy tax liability that must be assumed.
C)   Overwhelming time commitment often required of the owner.
D)   Lack of incentives to motivate the owner.E) None of the above
F) C) and D)

Question 2

The form of business ownership that usually requires the most detailed record keeping is the:

Accepted Answer

A)   Corporation.
B)   Partnership.
C)   Sole proprietorship.
D)   Limited partnership.E) B) and D)
F) None of the above

Question 3

Limited partnerships are just like general partnerships,except that they are partners for a limited time period.

Accepted Answer

A) True 
 B)False

Question 4

The most popular type of business for franchising is:

Accepted Answer

A)   Consumer wholesale firms.
B)   Restaurants.
C)   Specialty steel manufacturing.
D)   Medical services.E) A) and D)
F) A) and C)

Question 5

Sierra is interested in becoming a franchise owner,by opening and operating one of 50 Cactus Katie's Grills,a very successful fast food chain specializing in food dishes from the American southwest.Which of the following problems is Sierra most likely to encounter if she agrees to become a franchisee?

Accepted Answer

A)   High initial costs and fees
B)   Poor name recognition and visibility
C)   Lack of financing
D)   Lack of managerial assistanceE) C) and D)
F) None of the above

Question 6

"Double taxation" means:

Accepted Answer

A)   If stockholders decide to sell their shares,they are subject to paying twice the amount of taxes on any capital gains.
B)   As the owner of the company,you pay twice the amount in employment taxes on yourself,as you do on your employees.
C)   Corporations pay taxes on their profits.If they distribute after-tax profits to the stockholders,the stockholders also pay taxes on the distribution.
D)   If the corporation doubles its profits from the previous year,the firm's tax rate (the percentage it pays in taxes) will also double.E) A) and B)
F) All of the above

Question 7

States may levy special taxes on corporations that are not imposed on other businesses.

Accepted Answer

A) True 
 B)False

Question 8

Starting a new business as a sole proprietorship:

Accepted Answer

A)   Requires retaining the services of an attorney.
B)   Is simple,but the proprietorship fee is very expensive in some states.
C)   Is usually simpler and less expensive than starting other forms of ownership.
D)   Is very similar to starting a business as a corporation.E) A) and D)
F) B) and C)

Question 9

Jamie and Maria invested all their savings in a small pizzeria they opened outside the University of Western Kentucky.They operated the business as a general partnership.After 11 months,the business went broke and Jamie and Maria were left with outstanding bills of $37,500,which was more than their initial investment in the company.Jamie and Maria can:

Accepted Answer

A)   Lose their personal assets as the result of their company's financial problems.
B)   Lose only the funds they originally invested in their company.
C)   Lose only the total value of the assets actually used to operate the business.
D)   Avoid any liability for these debts since a partnership is considered to be a business entity that is separate and distinct from the partners who own it.E) A) and B)
F) B) and C) A

Question 10

The major differences between an S-Corporation and a Limited Liability Company are limits on the number of owners,and,the citizenship status of individuals who are owners.

Accepted Answer

A) True 
 B)False

Question 11

Global franchising is unlikely to experience major growth due to the high costs of operations in global markets.

Accepted Answer

A) True 
 B)False

Question 12

Joshua wants to run his own business.A friend suggested that an inexpensive way to get started is to buy a franchise,where he will have the freedom to run it exactly as he sees fit.As a recent student of business,you concur with this advice.

Accepted Answer

A) True 
 B)False

Question 13

The S corporation form of business would be particularly attractive to fast growing companies that want to attract thousands of new stockholders.

Accepted Answer

A) True 
 B)False  False

Question 14

A(n) _________ occurs when one company buys the property and obligations of another company.

Accepted Answer

A)   cooperative
B)   hostile takeover
C)   leveraged buyout
D)   acquisitionE) A) and C)
F) All of the above

Question 15

If firms wish to gain market share in their current market,they would consider a conglomerate merger.

Accepted Answer

A) True 
 B)False

Question 16

The Uniform Partnership Act is law in every state except Louisiana.

Accepted Answer

A) True 
 B)False

Question 17

The income generated by S-Corporations:

Accepted Answer

A)   Passes through to its owners,and each is taxed individually for this income.
B)   Is provided to non-profit organizations,so it is considered a tax-free source of funds.
C)   Is taxed separately from its owners.
D)   Must be reinvested in the business.Owners should not expect dividends.E) A) and B)
F) None of the above

Question 18

Nick wants to start his own business.Nick should consider a sole proprietorship if he:

Accepted Answer

A)   Expects rapid growth and want to be able to raise a large sum of money.
B)   Wants to make it easy to attract qualified employees.
C)   Wants to be his own boss and can accept unlimited liability.
D)   Wants to minimize the financial risk he must accept as the owner of a business.E) B) and D)
F) A) and C)

Question 19

One reason limited liability companies have become so popular is that they:

Accepted Answer

A)   Can be taxed either as a corporation or as a partnership,so owners can choose the tax treatment that is most advantageous for their situation.
B)   Allow owners to sell their interests in the company without requiring approval from other owners.
C)   Have unlimited life.
D)   Permit owners to avoid paying self-employment taxes on the company's profits.E) All of the above
F) C) and D)

Question 20

When two firms who do not participate in the same industries,for example a software company and a fast food restaurant company decide to merge,the result is called a ____________ merger.

Accepted Answer

A)   vertical
B)   horizontal
C)   linear
D)   conglomerateE) A) and D)
F) B) and C) D

Exam 5: How to Form a Business

A significant disadvantage of owning a sole proprietorship is the:

Correct Answer
verified

The form of business ownership that usually requires the most detailed record keeping is the:

Correct Answer
verified

Limited partnerships are just like general partnerships,except that they are partners for a limited time period.

Correct Answer
verified

The most popular type of business for franchising is:

Correct Answer
verified

Correct Answer
verified

"Double taxation" means:

Correct Answer
verified

States may levy special taxes on corporations that are not imposed on other businesses.

Correct Answer
verified

Starting a new business as a sole proprietorship:

Correct Answer
verified

Correct Answer
verified
A

The major differences between an S-Corporation and a Limited Liability Company are limits on the number of owners,and,the citizenship status of individuals who are owners.

Correct Answer
verified

Global franchising is unlikely to experience major growth due to the high costs of operations in global markets.

Correct Answer
verified

Joshua wants to run his own business.A friend suggested that an inexpensive way to get started is to buy a franchise,where he will have the freedom to run it exactly as he sees fit.As a recent student of business,you concur with this advice.

Correct Answer
verified

The S corporation form of business would be particularly attractive to fast growing companies that want to attract thousands of new stockholders.

Correct Answer
verified
False

A(n) _________ occurs when one company buys the property and obligations of another company.

Correct Answer
verified

If firms wish to gain market share in their current market,they would consider a conglomerate merger.

Correct Answer
verified

The Uniform Partnership Act is law in every state except Louisiana.

Correct Answer
verified

The income generated by S-Corporations:

Correct Answer
verified

Nick wants to start his own business.Nick should consider a sole proprietorship if he:

Correct Answer
verified

One reason limited liability companies have become so popular is that they:

Correct Answer
verified

When two firms who do not participate in the same industries,for example a software company and a fast food restaurant company decide to merge,the result is called a ____________ merger.

Correct Answer
verified
D

Exam 5: How to Form a Business

A significant disadvantage of owning a sole proprietorship is the:

Correct AnswerverifiedShow Answer

The form of business ownership that usually requires the most detailed record keeping is the:

Correct AnswerverifiedShow Answer

Limited partnerships are just like general partnerships,except that they are partners for a limited time period.

Correct AnswerverifiedShow Answer

The most popular type of business for franchising is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

"Double taxation" means:

Correct AnswerverifiedShow Answer

States may levy special taxes on corporations that are not imposed on other businesses.

Correct AnswerverifiedShow Answer

Starting a new business as a sole proprietorship:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

The major differences between an S-Corporation and a Limited Liability Company are limits on the number of owners,and,the citizenship status of individuals who are owners.

Correct AnswerverifiedShow Answer

Global franchising is unlikely to experience major growth due to the high costs of operations in global markets.

Correct AnswerverifiedShow Answer

Joshua wants to run his own business.A friend suggested that an inexpensive way to get started is to buy a franchise,where he will have the freedom to run it exactly as he sees fit.As a recent student of business,you concur with this advice.

Correct AnswerverifiedShow Answer

The S corporation form of business would be particularly attractive to fast growing companies that want to attract thousands of new stockholders.

Correct AnswerverifiedFalse

A(n) _________ occurs when one company buys the property and obligations of another company.

Correct AnswerverifiedShow Answer

If firms wish to gain market share in their current market,they would consider a conglomerate merger.

Correct AnswerverifiedShow Answer

The Uniform Partnership Act is law in every state except Louisiana.

Correct AnswerverifiedShow Answer

The income generated by S-Corporations:

Correct AnswerverifiedShow Answer

Nick wants to start his own business.Nick should consider a sole proprietorship if he:

Correct AnswerverifiedShow Answer

One reason limited liability companies have become so popular is that they:

Correct AnswerverifiedShow Answer

When two firms who do not participate in the same industries,for example a software company and a fast food restaurant company decide to merge,the result is called a ____________ merger.

Correct AnswerverifiedD

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A

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False

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D