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Exam 5: How to Form a Business

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Question 141

True/False

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Stockholders in a corporation normally exert a significant degree of control over the company's daily operations.

A) True
B) False

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Question 142

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One drawback of franchises is that they have a higher failure rate than other types of business ventures.

A) True
B) False

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Question 143

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"Vermont Wants to be the Home of Your New Virtual Company" talks about:

The __________ is usually the easiest form of business to start and end.

According to the Legal Briefcase box,"Vermont wants to be the Home of Your New Virtual Company",a Vermont virtual LLC's profits are distributed to members according to their contribution of time,expertise,and money.

A general partner has unlimited liability for the debts of the partnership only if he or she personally approved the decisions that resulted in those debts.

Connie is a general partner in a retail cookie store.Her personal assets are legally protected from the debts of the business.

Javier is the sole proprietor of a golf shop.Because he is a sole proprietor,any profit Javier's business earns is:

One disadvantage of _________ is the initial cost of formation.

Which of the following is not a disclosure that should be part of a partnership agreement?

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.

Ramon lives in Mexico City and is a Mexican citizen.He has several friends in the United States who own shares in an S corporation.Ramon would like to invest in this company.Ramon:

One reason individuals incorporate is to obtain the advantage of limited liability.

Mini-Case For as long as she could remember,Jenna Raiter's passion was cars.As a teenager,she spent hours with her dad tinkering with the family car,learning to change the oil and making minor repairs.She got a job at a local garage while still in high school.A few years after graduating from high school and completing the auto mechanics degree at a local community college,Jenna decided she wanted to be her own boss.She quit her job,borrowed some money from her dad,and began her own repair shop,the AutoMotion Garage.Jenna's hard work gradually attracted a loyal clientele of satisfied customers.Her success has her thinking about opening garages in two other locations,but she lacks the financial resources needed for expansion.Furthermore,the success of her business is forcing Jenna to spend more time managing the business and less time doing the actual technical work she still enjoys.She wants to find business partners who can help her with management and provide additional financial resources.She has approached a couple of friends she met in high school: Al Ternator and Lew Banfilter,to see if they would like to join the business. -Currently,AutoMotion Garage is operated as a(n) :

The income generated by S-Corporations:

The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations.

A master limited partnership (MLP) is:

A franchise may be organized as a sole proprietorship,partnership,or corporation.

A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business.

If an established franchisor agrees to provide you the opportunity to become a franchisee in its franchise system,the franchisor may also be willing to serve as a source of financing for your operation.