FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: How to Form a Business

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

True/False

Review LaterAdd Note

Review Later

An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities.

A) True
B) False

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

Khalid is a 39-year-old,married business owner who runs a dry cleaning service with three locations.His personal obligations are the home that he owns with his wife who works for a well-known insurance company;the health needs of his family;and his commitment toward saving for the future higher education needs of his three children.Khalid knows that two of his locations require a large infusion of cash to pay for new and expensive dry cleaning equipment.Although his wife's job provides the family with health insurance,it also places the family in a higher income tax bracket.Khalid would certainly like to minimize his taxes.Which of the following forms of business ownership would you suggest for Khalid? Khalid should consider:

A) A sole proprietorship due to the fact that it pays its own taxes and it has limited liability.
B) A sole proprietorship due to the fact that it has unlimited liability and it will protect the family's personal assets.
C) A corporation because he can avoid the negative aspect of limited liability.Corporations are always taxed at a lower rate than individuals.
D) A limited liability company because he will only be liable for what he has invested in the business.His personal assets will be protected,and he can be taxed like a sole proprietorship.

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

Correct Answer

verified

Show Answer

Question 53

True/False

Review LaterAdd Note

The corporation is the most common form of business ownership.

When two companies in the same industry agree to become one firm,the result is called a:

Liam owns a Far Horizons Travel Agency franchise.As a franchisee,Liam is guaranteed the right to retain all of his franchise's revenues and profits.

A closed corporation is one whose stock is held by a few people and is not available to the general public.

Dane is a stockholder in SmallWorld,Inc. ,a C-corporation that manufactures amusement park rides.The company recently lost a major court decision and will probably be forced into bankruptcy.In fact,the damages awarded are so great that,even if all company assets are sold and the proceeds are used to pay its debts,SmallWorld is likely to still owe money to its creditors.If SmallWorld go bankrupt,Dane and the other stockholders will:

Which of the following is an advantage of a partnership?

The strategy of a leveraged buyout is used when employee talent is at a minimum.

By filling out the correct paperwork annually,any corporation can qualify to be classified as an S corporation.

Compared to a sole proprietorship,which of the following is considered an advantage of a general partnership?

Hole In One Golf Company announced plans to purchase the property and assume the obligations of Champion Golf,Inc. ,one of its major competitors.Hole In One Golf Company's plans are an example of a merger.

Maya plans to open a shop specializing in foods and cultural items from the Middle East.She wants to be the firm's only general partner,but she is trying to get several friends to participate as limited partners.Apparently Maya wants to:

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 franchisee pays the franchisor a share of profits or a percentage commission on sales,known as a royalty.

A distinguishing feature of a cooperative is that it:

When two companies in completely unrelated industries agree to become one firm,the result is called a:

An owner of a corporation is known as a(n) :

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?

Maria has a lot of self-confidence and business knowledge.She recently opened a bakery as a sole proprietor.She is expecting a high level of profits and is looking forward to: