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Exam 5: How to Form a Business

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Question 151

Multiple Choice

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____________ comprise about 20% of all businesses but account for about 81% of U.S.business receipts.

A) Corporations
B) Partnerships
C) Sole proprietorships
D) Limited liability companies

E) A) and B)
F) All of the above

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Question 152

True/False

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A cooperative consists of people with similar needs who pool their resources for mutual gain.

A) True
B) False

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Question 153

Multiple Choice

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A conglomerate merger will:

A ___________ is an arrangement whereby someone with proven idea for a business sells the rights to use the business model,to sell a product or service to others in a given territory.

When using social media to search for potential franchisees,companies:

Hidden Valley Communications,Inc. ,located in a remote area of Utah,made a special device that was used in 4^th 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:

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:

A disadvantage of farm cooperatives is that they are subject to higher tax rates than corporations.

At one time there were many farm cooperatives,but more recently,they have been replaced by other forms of business ownership.

The purpose of a farm cooperative is to:

Franchisees must follow more rules,regulations,and procedures than if they operated independently-owned businesses.

A merger between two businesses in different stages of related businesses is known as a vertical merger.

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.

After a successful five years,Peaceful Pastures,LLC (a retirement ranch for race horses)thinks it may be able to attract donations from animal activist groups and even the federal government if it becomes a non-profit corporation.As its business advisor,you explain that as a non-profit corporation,the owner(s)may earn a salary but the business should not seek after-tax profits.

A corporation can raise financial capital by selling shares of stock to interested investors.

Which of the following statements about buying a franchise is most accurate?

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

A partner (owner) who invests money in a business,does not take an active role in managing the operation,and is only subject to losing the funds he/she invested.

Franchisors give franchisees the right to use their name and product,with the understanding that franchisees obtain all financing and develop all marketing strategies on their own.

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