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Exam 5: How to Form a Business

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Question 1

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It is said that corporations have perpetual life.

A) True
B) False

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Question 2

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Once a business is established,it's almost impossible to change from one form of business ownership to another.

A) True
B) False

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Question 3

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Currently,AutoMotion Garage is operated as an) :

What is a limited liability company LLC)? How does it compare to an S corporation? What are the major advantages and disadvantages of an LLC?

Like stockholders of a C corporation,owners of a limited liability company LLC)are free to sell their ownership without the approval of other members.

A limited partner is an owner who assumes no management responsibility and has no liability for losses beyond the amount invested.

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

If a franchisee decides he wants out of the business,he is free to close-up shop or sell the business,just as if he were a sole proprietor or partnership outside of a franchise arrangement.

Hidden Valley Communications,Inc. ,located in a remote area of Utah,made a special device that was used in 4th generation cell phones.After three years of local operations,the company that employed 4,000 people was planning to close its Utah operation and move the assembly offshore.Under the direction of a financial services company that financed the deal,the employees agreed to become owners of the company and continue to operate the business.The business concept that describes this arrangement is:

Nutty Dough is a small chain of donut shops currently owned and operated by a group of seven partners.The owners think that their chain has the potential for rapid growth,but several of the partners are concerned about the growing financial risks that will accompany this growth.One way the partners could deal with this problem would be to incorporate their business.

Emily wants to open a chain of hair styling salons and hopes to attract investors to help finance growth.She considered forming a C corporation,but wants to have more flexibility about how the new business will be taxed.She also wants to offer investors/owners limited liability.Emily can satisfy her objectives by setting up an) :

A limited partnership consists of one or more general partners and one or more limited partners.

Although sole proprietors do not pay any special taxes,as the owner of the business you are also an employee of the business which requires you to:

Continental Foods is considering a conglomerate merger with a company that makes storage solutions.A likely reason is:

A horizontal merger refers to a merger between two companies in the same industry,and serving the same markets.

Trevor and Tyler own all the stock in the Double T Corporation.The stock of this corporation is not sold to the general public.Trevor and Tyler own a:

In a franchise arrangement,ownership remains in the hands of the franchisor.

Emma Pebble and Chase Stone formed a partnership in a landscape business.Under their arrangement,Emma actively manages the company and assumes unlimited liability for the firm's debts.Chase has invested several thousand dollars of his money with plans to share in the profits,but does not actively make management decisions,nor will he assume liability beyond his initial investment.Emma and Chase participate in a limited partnership.

The first step in starting a sole proprietorship is to fill out a proprietorship charter application form and file it with the state government.

The three major types of mergers are acquisition,joint,and connective.