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Exam 5: How to Form a Business

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Question 161

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In a cooperative,members/customers:

A) Democratically control their businesses by electing a board of directors.
B) Are known as limited partners.
C) Each have unlimited liability for the debts of the firm.
D) Take turns serving on the board that manages the company.

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

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Question 162

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A limited partnership refers to a partnership set up for a temporary purpose,such as a real estate development project.

A) True
B) False

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Question 163

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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. -When Jenna confided in Lew and Al that she,too was concerned about adding additional risk,Lew suggested that they explore the possibility of one of the newest forms of business ownership,a(n) ___________,which has very flexible ownership rules and would give them more choices in how the company's earnings are taxed while still protecting all owners from high levels of risk.

Global franchising offers:

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:

Franchisees are not always pleased with management regulations handed down from the franchisor.In some cases,franchisees have been known to band together to express concern over marketing and management direction.

Although shares of master limited partnerships can be purchased on one of the national stock exchanges,these companies are taxed like partnerships.

A disadvantage of corporations is that they generally require extensive paperwork.

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. -With all these choice,Jenna's head is swirling with ideas.She knows that Al and Lew have expertise in business and management,but she also knows that she will need to read on her own for more information.Referring back to a textbook she had in her Introduction to Business class in College,she comes upon the following statement:

Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products.In a franchise arrangement,Midas would be the _________,and the buyer of the franchise is the _________.

If a firm is advertising that it is selling franchise opportunities,the prospective franchisee can be assured that the government has performed due diligence on this company,and has deemed it a safe investment.

Some __________ ask members/customers to work at the organization for a number of hours a month as part of their duties.

An acquisition is when one company buys the property and obligations of another company.

The limited liability company requires a minimum of 10 members.

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

Selma owns a roofing business.She enjoys being her own boss,but her satisfaction comes at a price.Her days are filled with organizing the activities of her employees and soliciting new customers.She often misses activities with friends and family because of the obligations of running her own business.She also knows that she has unlimited personal liability for any of her firm's debts.Selma's business is organized as a(n) :

A ______________ merger unites firms at different stages of related businesses.

Earnings of C (conventional) corporations can be:

A ___________ is an organization that is owned and controlled by the people who use it-producers,consumers and workers with similar needs pool their resources for mutual gain.

Compared to sole proprietorships,partnerships offer the advantage of shared management and pooled knowledge.