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Exam 5: How to Form a Business

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Question 171

True/False

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

A) True
B) False

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Question 172

Multiple Choice

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If a group of stockholders or management obtain all the stock of a previously publicly traded firm for themselves,this is referred to as:

A) Capitalizing.
B) Stock turning.
C) Turning the equity.
D) Taking the firm private.

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

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Question 173

Multiple Choice

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With respect to franchised operations,what is a "bust-out"?

In a limited liability partnership,each partner's risk of losing personal assets is:

Which of the following statements best summarizes the experience of American franchisors in foreign countries?

One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.

Franchised businesses are successful (both domestically and internationally) because:

A significant disadvantage of owning a sole proprietorship is the:

When two or more people legally agree to become co-owners of a business,the form of business is called a partnership.

Chad recently invented Wave-Aerobics,a next generation watercraft that can safely perform water stunts similar to an amusement park ride.As the founder of a fast growing business,you think his goal of incorporating,"to remain in steadfast control of the firm's operations for an indefinite number of years" is good strategy.

Trans Globe Airlines is in talks with Royal Blue Airlines,a financially troubled rival.The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations.This proposed merger is an example of a:

_____________ is by far the most popular target for American franchisors seeking to establish franchises in other countries.

Joshua wants to run his own business.A friend suggested that an inexpensive way to get started is to buy a franchise,where he will have the freedom to run it exactly as he sees fit.As a recent student of business,you concur with this advice.

The Uniform Partnership Act is law in every state except Louisiana.

A few years back,your three U.S.born friends that live in the State of Wyoming inherited a dude ranch that they plan to turn into a retirement haven for race horses.Peaceful Pastures wants to open its doors by spring,2011.After attending several small business seminars,the three friends are certain they need limited liability.The high-risk,labor-intensive business will require a sizeable investment including an air-conditioned barn,several fenced-in pastures and loads of animal feed.You recently heard that one form of business ownership requires owners to pay self-employment taxes on the entire amount of earnings.You are fairly certain this is one tax loophole your friends would like to avoid.You recommend:

The purpose of a farm cooperative is to:

Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership.

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

What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.

Delaware is a popular state to seek incorporation due to its reduced costs and other perks.