BUSI 1301: CH. 4 Practice

An advantage to Ultra Motors business formation as a corporation is

perpetual life.

Doug is forming a Board of Directors to oversee Hardware House. Which of the following statements best represents a practice Doug should implement in order to insure that he attracts board members with adequate expertise and time to focus on the company?

Only allow board members to serve on one other board.

Which of the following is an advantage Doug should expect by sharing ownership with others?

access to additional knowledge and expertise

Which of the following is a disadvantage Doug should expect by sharing ownership with others?

additional government regulation

If one owner of partnership makes a bad decision that ends up in the business being sued, then

all partners face unlimited liability.

Prior to the acquisition, Whole Foods was receiving a lot of pressure from shareholders to make significant changes including an overhaul of the _________, which were the individuals elected to oversee the general operations of the corporation.

board of directors

A disadvantage of Ultra Motors' competitors business formation as a public corporation is

double taxation.

While Whole Foods CEO John Mackey was enthusiastic when he announced the merger, some argue that mergers can hurt companies by

forcing managers to focus on avoiding takeover rather than creating profitability.

Amazon and Whole Foods came to a mutual agreement on the purchase price, which is referred to as a _____ takeover.

friendly

Doug has determined that the most advantageous way to acquire cash is to sell stock to public markets. Doug will need to file which of the following?

initial public offering

In 1992, Whole Foods became a ______, selling shares of stock at $2.125 per share.

public corporation

If a corporation is formed, then the owners are known as

shareholders.

Which of the following business formations allow for the most secrecy and lack of public reporting requirements?

sole proprietorship

How will Ultra Motors file taxes?

the company will file taxes as a separate entity.

If a sole proprietor is found negligent of an action, then that person could face

unlimited liability.

Prior to the acquisition, Amazon did not own the food distributors or local grown produce. Now, Amazon has a distribution center and a company that has contracts in place for local, organic produce. This will significantly reduce transaction costs, drive down prices, and increase margins for these products, making it a __________ merger.

vertical

This activity is important because a company's legal form of ownership is one of the basic initial decisions every business owner must make. Each option has specific advantages and disadvantages to understand when starting and operating a business. The goal of this click and drag is to demonstrate your understanding of the risks and liabilities, formalities and expenses, and income tax rules when selecting a type of business formation.

SOLE PROPRIETORSHIP: Advantage | Ease of Formation Disadvantage | Limited Sources of Funds PARTNERSHIP: Advantage | Availability of Capital and Credit Disadvantage | Business Responsibility PRIVATE CORPORATION: Advantage | Limited Liability Disadvantage | Double Taxation

This activity is important because each structure of business offers different characteristics, regardless of whether the business is a traditional "bricks and mortar" company, an online-only one, or a combination of both. A company's legal form of ownership affects how it operates, income taxation, and liability and ownership control. The goal of this exercise is to demonstrate your understanding of the characteristics that influence the choice of business ownership formation.

Sole proprietorship: RT Taxes | Individual tax rate Partnership: Pet Perfect | No corporate tax Corporation: I Scream Inc. | Double taxation S corporation: Joypass Inc. | Owners taxed at individual rate LLC: Drs. O'Reilly | Taxed like a partnership

We have heard of electric cars, but electric bikes? The bicycle industry is finding new ways to be environmentally friendly with the introduction of bikes that allow riders to travel without releasing carbon emissions or even breaking a sweat. Electric bikes (e-bikes) are equipped with a motor and battery. With each pedal stroke, the motor provides additional power, allowing riders to pedal without expending as much energy as they do with conventional bicycles. Typical e-bikes have a maximum speed of 25 mph and cost from $500 to $3,000. E-bikes are more common in bicycle cultures like many in Asia and Europe, but they are also breaking into America. Americans bought 170,000 e-bikes in 2008 and around 200,000 in 2009, and sales are expected to continue to increase. Best Buy even introduced e-bikes in some of its stores. Schwinn has come out with the motto "Save the world without killing your knees" to advertise its line of e-bikes, playing up the e-bike's environmental friendliness and ease of use. Schwinn offers the high-end Tailwind, with batteries that charge in under 30 minutes. Other companies are focusing on e-bikes specifically. One such company is Ultra Motor Company Limited, a private corporation and developer of light electric vehicles. Its product, the A2B Metro, can go for 20 miles on a charge. This 100 percent electric vehicle resembles a mix of a scooter and a bicycle. Unlike motorcycles, this e-bike's motor is quiet, allowing for peaceful commutes. The e-bike could very well be the answer urban commuters are looking for. Its zero carbon emissions make it a good deal for those who care about the environment, those who have a hard time finding parking, and those who simply want to get more exercise. If Ultra Motors needs to raise funds to grow the business, they can

become a public corporation.

Doug Datner had an eclectic background. He completed his law degree from the University of Virginia, then went to work for a technology start-up in Dubai. After the start-up was purchased by a larger corporation, affording Doug a hefty sum of money, Doug and his spouse returned to the United States. While working with an architect and a designer to build their dream home, they realized that there was not a provider of high-quality custom-made door and window hardware at a reasonable price point in the United States. Even though Doug had no experience in the field, he decided to start a business manufacturing high-quality custom-made door and window hardware. He named the company Hardware House. Doug and his wife cleared space in their newly constructed garage, designed several basic prototypes, and hired a metalwork expert to replicate their prototypes. They decided to have a few designs in catalog as one component of their business, but have the capability to alter those designs to provide designers with custom hardware. The first few years were tough. Business was steady enough to hire a second metalwork expert, but cash flow challenges often made Doug worry whether he would be able to pay his metalwork experts on time. Still, the Hardware House had gained a number of consistent clients, and was able to move into an old warehouse space and expand operations. Ten years later, Hardware House has nearly 100 employees. While the majority of the employees work in manufacturing, there are also employees in marketing, design, accounting, and human resources. Doug structured the business to limit his liability in case of lawsuit, but still managed to maintain the business without sharing ownership. Which of the following best describes the ownership of Hardware House?

corporation