Chapter 04: Choosing a Form of Business Ownership

Jadyn wants to form a business that has very little government regulation. He has investigated different forms of business and determined that he will avoid forming a ____ because it is the most heavily regulated by the government.

corporation

How corporations are designated changes depending on where the corporation is doing business. When a corporation is in the state in which it is incorporated it is known as a(n) ____.

domestic corporation

A closed corporation is one that _____.

has a limited number of stockholders and sales and exchanges of the stock are restricted

Ismaya and Aditya have created a business together. The business was Ismaya's idea and he operates the business day-to-day. Aditya invested money in the business, but he doesn't have any management responsibilities. The main advantage for Aditya in this arrangement is _____.

he is only financially liable for the amount he invested in the business

If Mattel and Hasbro merged, this would be known as a ____.

horizontal merger

A _______ is a partnership formed to operate for a specific time period or to accomplish a specific purpose.

joint venture

One of the main advantages of corporations as a form of business is _____, or each owner's financial liability is equal to the amount of money that they have paid for the corporation's stock.

limited liability

Moe, Edita, and Hunter have been operating a business together as partners without a partnership agreement for several years. Hunter unexpectedly passes away, what will most likely become of the partnership?

Moe and Edita will be able to purchase Hunter's interest from his estate.

Jacques and Kelly would like to form a business that gives them protection from liability but is taxed like a partnership. They have investigated S corporations but rejected them as having too many government regulations. They should form a ____.

limited liability company (LLC)

If Spotify purchased Pandora, leaving only one company remaining at the conclusion of the purchase, this would be referred to as a(n) ____.

merger

Bongseon and Karim would like to form a corporation to provide string music education to children in their area. They want to form this business as a way to give back to the community and plan to have the children perform concerts in rest homes for older people who are unable to travel. Bongseon and Karim will most likely form a(n) ____.

not-for-profit corporation

After many months in business, Horatio decides that there are some negative aspects of having a sole proprietorship. All of the following are negatives except _____.

pride of ownership

If Citigroup, JPMorgan Chase, KeyCorp, and Deutsche Bank joined together to make an extremely large loan, this association would be referred to as a(n) ____.

syndicate

Karume starts his own business as a sole proprietor. This form of business has the advantage of ____.

the owner keeping all of the profits from the business

Serita and Tyler decide to form a partnership after discussing it for a few days. They have determined that a partnership has all of the following advantages except _____.

unlimited liability

Which of the following forms of business create a double taxation situation?

Corporation

When Marquesa began her business, she did not have sufficient personal funds to own the businesses she operated so she brought in friends and family members to help with the funding. The businesses she operated were formed with an agreement, but no formal filing was required, and taxes were passed through directly to the business owners. What business form did she use to create these businesses?

Partnership

When Mark Kalish and John Berthold formed their company, Envirotech, raising capital and tax implications were their biggest concerns. They wanted to avoid having the company's earnings taxed twice, but also realized that to expand Envirotech, they would need access to significant capital. Which form of business would meet the requirements for both the tax implication and access to capital for Envirotech?

S corporation

Imelda wants to form a business in the easiest way possible. What form of business should she use?

Sole proprietorship

Felicia and Bernard have decided to go into the quarry business together. They start by writing an agreement that explains the parameters of the business they will own and the responsibilities and roles each of them will have in the business. They have created a(n) ____.

article of partnership