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Exam 5: How to Form a Business

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Question 21

Multiple Choice

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Daggie's Sandwiches,Inc. ,sells the rights to use its name and sell its sandwiches in a given market area to aspiring business people who are willing to pay agreed upon fees and meet certain contractual terms.Daggie's:

A) Is offering investors the opportunity to form limited partnerships.
B) Is a franchisor.
C) Creates private subsidiary companies.
D) Offers a tax-free investment potential.

E) B) and C)
F) A) and D)

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Question 22

Multiple Choice

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Which of the following statements about partnerships is most accurate?

A) A partnership is a corporation with fewer than 100 owners.
B) A major advantage of a partnership is that it offers all owners limited liability.
C) A major drawback of a partnership is that it is difficult to terminate.
D) Partnerships are taxed at the lowest corporate tax rate.

E) A) and B)
F) B) and C)

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Question 23

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Unlike partnerships,if sole proprietorships find themselves in bankruptcy,they need not worry about a court of law requiring them to sell-off personal assets to pay for the debts of the firm.

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

Which of the following statements about the operation of a corporation is correct?

Many franchisors have rules that prohibit franchisees from sponsoring their own websites.

The most popular type of business for franchising is:

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

One difference between partnerships and sole proprietorships is that partnerships:

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

In recent years,firms found it easier to grow market share by:

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?

A merger involving a commercial bakery and a grocery retailer would be an example of a:

A disadvantage of corporations is that an owner must get the approval of all other owners before selling his or her interest in the firm to another investor.

If a partner in a limited partnership dies,the partnership ceases to exist.

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.

Corporations represent 20 percent of all the businesses in the U.S.and earn 81 percent of the total U.S.business receipts.

Zach and Mac own an auto repair business which they operate as co-owners.Both take an active role in the management of the business,and each accepts unlimited liability.Zach and Mac operate as a _________.

By law,providers of personal services such as doctors and lawyers cannot set-up their businesses as limited liability companies.

Unlimited liability means: