Question 1

According to the Spotlight on Small Business box,titled,"The Ties That Bind",attributes such as trust and integrity are not something you should get overly concerned about when selecting partners,due to the fact that this is a business decision,not a friendly game of golf.

Accepted Answer

A) True 
 B)False

Question 2

One advantage of an S Corporation is that the profits are distributed to the owners and taxed as each owner's personal income,thus avoiding the problem of double taxation.

Accepted Answer

A) True 
 B)False

Question 3

The S corporation is likely to be less popular in the future because:

Accepted Answer

A)  Congress repealed the limited liability protection of S corporations and limited them to companies with earnings of less than $3 million per year.
B)  Limited liability companies,which do not have the restrictive eligibility requirements of S corporations and offer greater flexibility in the choice of tax treatment,are now legal in all 50 states.
C)  Many states significantly increased the annual fee that S corporations must pay to maintain their tax status,thus eliminating the financial advantages of this form of ownership.
D)  S corporations have been made illegal in several states as a reaction to widespread abuse of the special benefits available to this type of business.E) B) and D)
F) B) and C)

Question 4

The limited liability company requires a minimum of 10 members.

Accepted Answer

A) True 
 B)False

Question 5

Greg plans to open up three Hottie Pata`tee franchises in the greater Denver are A.He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants.Greg is likely to learn that:

Accepted Answer

A)  The parent company will give him a start-up cost break for the same amount that it would have to pay for three of these signs.
B)  He is making a smart decision because it is not the sign that will bring customers to his potato bar.It is the wide-selection of toppings and six different ways he will cook potatoes.
C)  It is non-negotiable due to company rules.
D)  His failure rate will not increase or decrease because franchises traditionally have low failure rates.E) B) and C)
F) B) and D)

Question 6

The major differences between an S-Corporation and a Limited Liability Company are limits on the number of owners,and,the citizenship status of individuals who are owners.

Accepted Answer

A) True 
 B)False

Question 7

A type of partnership called a ___________ acts much like a corporation and is traded on stock exchanges,but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Accepted Answer

A)  limited partnership
B)  combined general partnership
C)  cooperative partnership
D)  master limited partnershipE) A) and B)
F) C) and D)

Question 8

Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

Accepted Answer

A) True 
 B)False

Question 9

A merger involving a software producer and a clothing manufacturer is an example of a:

Accepted Answer

A)  Vertical merger.
B)  Horizontal merger.
C)  Linear merger.
D)  Conglomerate merger.E) B) and D)
F) A) and D)

Question 10

Although Lew Banfilter,now a young attorney is impressed with AutoMotion and believes it could be a place to invest money,he informed Jenna that his professional position at a law firm prevents him from taking an active role in the business.He is also concerned about accepting more risk since he has a young family.He mentioned a preference for unlimited liability.If Lew joined Jenna and Al,the three might consider forming an) :

Accepted Answer

A)  Limited partnership.
B)  General partnership.
C)  Sole proprietorship.
D)  Master Limited Partnership.E) A) and D)
F) B) and C)

Question 11

A person who buys the right to use a business name and sell a product within a given territory is called a:

Accepted Answer

A)  Stockholder.
B)  Franchisee.
C)  Limited franchisor.
D)  Venture capitalist.E) C) and D)
F) A) and C)

Question 12

A legal entity with authority to act and have liability separate from its owners is called a partnership.

Accepted Answer

A) True 
 B)False

Question 13

"Double taxation" means:

Accepted Answer

A)  If stockholders decide to sell their shares,they are subject to paying twice the amount of taxes on any capital gains.
B)  As the owner of the company,you pay twice the amount in employment taxes on yourself,as you do on your employees.
C)  Corporations pay taxes on their profits.If they distribute after-tax profits to the stockholders,the stockholders also pay taxes on the distribution.
D)  If the corporation doubles its profits from the previous year,the firm's tax rate the percentage it pays in taxes) will also double.E) None of the above
F) A) and B)

Question 14

In order to establish a C-Corporation,it is a requirement that investors run the company,whereas in an S-Corporation,this is not the case.

Accepted Answer

A) True 
 B)False

Question 15

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as an) :

Accepted Answer

A)  General partnership.
B)  Limited partnership.
C)  Corporation.
D)  Sole proprietorship.E) A) and B)
F) None of the above

Question 16

In order to protect all parties and minimize misunderstandings among partners,all terms of the partnership should be spelled out in writing.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Kristen and her brothers and sisters decided to form a partnership that specializes in home design of all types.One their goals is to maintain the loving relationship they currently enjoy so they are following the Model Business Corporation Act recommendations as they write the partnership agreement.Which of the following is an accurate recommendation of the Act?

Accepted Answer

A)  The business should be actively operating for an extended period before the partners decide who is responsible for what business functions.
B)  Family businesses never take on outside partners,so no discussion of this need take place.
C)  There should be discussion and well-understood ways that the partners will handle disagreements.
D)  Due to the fact that they are all under 40 years old and expect to work until they are 65 there is no need to decide what will happen to the partnership if one decides to leave the business,retire,or die.E) C) and D)
F) B) and D)

Question 19

Alex's uncle recently passed away and left him an American Dream Real Estate franchise business.Alex is not a licensed agent or broker,nor does he know anything about the real estate business.He plans to sell his American Dream franchise to his friend,Derek who recently got his real estate license.One of the advantages of owning a franchise is that you can decide to sell-out to anyone you believe is suitable for the business.

Accepted Answer

A) True 
 B)False

Question 20

If a corporation distributes after-tax profits to its stockholders in the form of dividends,the government considers these distributions as part of each stockholder's personal income.Stockholders pay taxes on these distributions.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

A type of partnership called a ___________ acts much like a corporation and is traded on stock exchanges,but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Correct Answer
verified

In order to protect all parties and minimize misunderstandings among partners,all terms of the partnership should be spelled out in writing.

Correct Answer
verified

A person who buys the right to use a business name and sell a product within a given territory is called a:

Correct Answer
verified

Correct Answer
verified

According to the Spotlight on Small Business box,titled,"The Ties That Bind",attributes such as trust and integrity are not something you should get overly concerned about when selecting partners,due to the fact that this is a business decision,not a friendly game of golf.

Correct Answer
verified

One advantage of an S Corporation is that the profits are distributed to the owners and taxed as each owner's personal income,thus avoiding the problem of double taxation.

Correct Answer
verified

Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

Correct Answer
verified

Greg plans to open up three Hottie Pata`tee franchises in the greater Denver are A.He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants.Greg is likely to learn that:

Correct Answer
verified

If a corporation distributes after-tax profits to its stockholders in the form of dividends,the government considers these distributions as part of each stockholder's personal income.Stockholders pay taxes on these distributions.

Correct Answer
verified

A merger involving a software producer and a clothing manufacturer is an example of a:

Correct Answer
verified

The major differences between an S-Corporation and a Limited Liability Company are limits on the number of owners,and,the citizenship status of individuals who are owners.

Correct Answer
verified

The limited liability company requires a minimum of 10 members.

Correct Answer
verified

"Double taxation" means:

Correct Answer
verified

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

Correct Answer
verified

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as an) :

Correct Answer
verified

Correct Answer
verified

The S corporation is likely to be less popular in the future because:

Correct Answer
verified

In order to establish a C-Corporation,it is a requirement that investors run the company,whereas in an S-Corporation,this is not the case.

Correct Answer
verified

Correct Answer
verified

A legal entity with authority to act and have liability separate from its owners is called a partnership.

Correct Answer
verified

Exam 5: How to Form a Business

A type of partnership called a ___________ acts much like a corporation and is traded on stock exchanges,but it is taxed like a partnership with profits passing through to the owners and taxed as the owner's personal income.

Correct AnswerverifiedShow Answer

In order to protect all parties and minimize misunderstandings among partners,all terms of the partnership should be spelled out in writing.

Correct AnswerverifiedShow Answer

A person who buys the right to use a business name and sell a product within a given territory is called a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the Spotlight on Small Business box,titled,"The Ties That Bind",attributes such as trust and integrity are not something you should get overly concerned about when selecting partners,due to the fact that this is a business decision,not a friendly game of golf.

Correct AnswerverifiedShow Answer

One advantage of an S Corporation is that the profits are distributed to the owners and taxed as each owner's personal income,thus avoiding the problem of double taxation.

Correct AnswerverifiedShow Answer

Taking a firm private means turning a profit-seeking corporation into a nonprofit corporation in order to avoid a hostile takeover.

Correct AnswerverifiedShow Answer

Greg plans to open up three Hottie Pata`tee franchises in the greater Denver are A.He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants.Greg is likely to learn that:

Correct AnswerverifiedShow Answer

If a corporation distributes after-tax profits to its stockholders in the form of dividends,the government considers these distributions as part of each stockholder's personal income.Stockholders pay taxes on these distributions.

Correct AnswerverifiedShow Answer

A merger involving a software producer and a clothing manufacturer is an example of a:

Correct AnswerverifiedShow Answer

The major differences between an S-Corporation and a Limited Liability Company are limits on the number of owners,and,the citizenship status of individuals who are owners.

Correct AnswerverifiedShow Answer

The limited liability company requires a minimum of 10 members.

Correct AnswerverifiedShow Answer

"Double taxation" means:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Tess and Tijuana have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails.One way for Tess and Tijuana to avoid this risk would be to organize their firm as an) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The S corporation is likely to be less popular in the future because:

Correct AnswerverifiedShow Answer

In order to establish a C-Corporation,it is a requirement that investors run the company,whereas in an S-Corporation,this is not the case.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A legal entity with authority to act and have liability separate from its owners is called a partnership.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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Correct Answer
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