BUSI 1301 Ch. 6

Which of the following is a difference between a C corporation and an S corporation?

A C corporation is double taxed, whereas an S corporation is taxed as a partnership.

Which of the following is a difference between limited partnerships and limited liability partnerships?

In limited liability partnerships, all the partners actively participate in the management of the company, whereas in limited partnerships, only the general partners actively manage the company.

Which of the following is a difference between limited liability companies (LLCs) and corporations?

LLCs are subject to fewer reporting requirements than corporations.

In the context of limited partnerships, which of the following is an aspect that differentiates limited partners from general partners?

Participation in the management of a company

Which of the following is an advantage of a C corporation?

Shareholders have limited liability in the firm.

Which of the following is a disadvantage of franchising for a franchisee?

The negative halo effect

Which of the following is a characteristic of limited liability companies (LLCs)?

They are made to pay an annual franchise tax in many states.

Which of the following is an advantage of limited liability companies (LLCs)?

They can have any number of owners.

Glossamer Inc., a company owned by George and Alex, faces huge debts and is eventually shut down due to bankruptcy. The company's financial loss affects Alex personally, and his house and other personal assets are seized by the bank. However, George's personal assets are not affected. This is most likely because George is a(n) _____.

limited partner

Which of the following statements is true of a franchisor-franchisee relationship?

A franchisor limits the franchisee's territory from expanding into other areas.

Which of the following statements is true of the formation of general partnerships?

Expert legal assistance can be acquired when drawing up a partnership agreement.

Arocare International, a general hospital, converts its cancer unit into a new hospital called Miracle. Arocare then issues stock in the new hospital and sells the stock to outside investors. This helps Arocare raise additional funds. This scenario exemplifies:

a carve-out.

Razak's, a popular chain of fast-food restaurants in the Middle East, plans to expand its market in Asia and signs a contract with an Indian firm. The contract allows the firm to set up restaurants with Razak's name and trademark and use the supplies provided by Razak to make its products. Under the contract, the Indian firm is required to adhere to the same cooking procedures and use the same equipment that are used by other outlets of the restaurant. The given scenario exemplifies a _____.

business format franchise

A(n)__________is a combination of two firms that are in unrelated industries.

conglomerate merger

A premium brand of men's wear introduces a new range of dinner suits and licenses its franchisees to sell this product. However, the brand retains the production rights. This scenario exemplifies a(n) _____.

distributorship

A(n) _____ is a form of business ownership that offers both restricted responsibility to its owners and flexible tax treatment.

limited liability company

Three brothers of a family own a furniture showroom. Each of them is actively involved in handling the day-to-day business activities. However, when the business suffered huge losses at the end of the last fiscal year, the personal wealth and assets of the brothers did not get affected. This is most likely because the brothers have a:

limited liability partnership.

Green Haven is an organization whose earnings are exempt from federal and state income taxes. Individuals who contribute money to the organization can avail the benefit of tax deduction. However, the organization is barred from distributing dividends to its members. Given this information, Green Haven is most likely a(n):

not-for-profit corporation.

Yadira works for an organization whose earnings are exempt from federal and state income taxes. The organization is barred from funding any political campaign. Given this information, Yadira most likely works for a(n):

not-for-profit corporation.

Harvey, a shareholder in Braxwell Technologies, reinvests 10% of the dividends received from the company back into it, partly to evade taxes and partly to support the company. This scenario reflects the concept of _____.

retained earnings

In the case of C corporations, shareholders don't pay income taxes on__________.

retained earnings

Jovi's Corner, a toy store, abruptly closes down after the death of its owner. Without an heir or an experienced person to manage the store, Jovi's Corner is shut down, and the property is sold off to another party. The profits are donated to an orphanage. In the given scenario, Jovi's Corner is most likely an example of a _____.

sole proprietorship

A(n)__________, a type of divestiture, occurs when a company issues stock in one of its own divisions or operating units and sets it up as a separate company—complete with its own board of directors and corporate officers.

spin-off

Inkglot Technologies, a medium-sized corporation, is allowed to have only 35 stockholders at any point of time. However, all stockholders of the company can actively participate in the management of the company while still maintaining limited liability. Given this information, Inkglot Technologies is most likely a(n):

statutory close corporation.

Carla and Liang both have shares in HD&Z Corporation, a C corporation that offers limited liability to all its owners. In this context, Carla and Liang are the _____ of HD&Z Corporation.

stockholders