IBST (Chapter 6 HW)
Which of the following statements is a similarity between general partnerships and sole proprietorships?
Both allow owners to avoid double taxation.
Which of the following is an advantage of sole proprietorships?
Ease of formation
Which of the following is a drawback of franchising?
Restrictions on sale
Which of the following statements best describes a C corporation?
It is a legal business entity that offers limited liability to all of its owners, who are called stockholders
In the context of formation, which of the following is a similarity between limited liability companies (LLCs) and corporations?
Similar to the bylaws of a corporation, organizers of most LLCs draft an operating agreement.
Which of the following is a disadvantage of general partnerships?
Unlimited liability
In the context of corporate restructuring, which of the following is a common objective of a vertical merger?
Providing tighter integration of production and increased control over the supply of crucial inputs
Comfy Trend Inc., a clothing in the United States, licenses a garment manufacturing firm in Tokyo to operate under its name and trademark. The firm also buys the rights to use Comfy Trend Inc.'s production and business methods. This scenario is an example of a _____.
business format franchise
A key advantage of a C corporation is:
its ability to raise large amounts of financial capital.
Max and Lucio start a retail store. They take turns to manage the store, and they share the profits equally. Max and Lucio understand that they are personally liable for any debts or losses that the store may incur in the future. This type of business venture exemplifies a _____.
general partnership
In the context of franchising, a Franchise Disclosure Document (FDD):
must be provided to the franchisee at least 14 calendar days before the franchise agreement is signed.
Which of the following is a disadvantage of sole proprietorship?
The company legally ceases to exist if the owner withdraws.
In the context of C corporations, which of the following is a difference between preferred stockholders and common stockholders?
Unlike preferred stockholders, common stockholders normally have the right to vote in stockholder meetings.
Thiago has spent a long time working in various commercial establishments owned by some of his close relatives. He now wishes to establish his own business, a sporting goods retail store. Thiago plans to manage the store single-handedly. In the context of the various business ownership options, Thiago's store will be an example of a:
sole proprietorship
Which of the following statements best describes an S corporation?
It is a form of corporation that avoids double taxation by having its income taxed as if it were a partnership.
Which of the following statements is true of sole proprietorships?
Owner receives the entire share of the firms' profits.
In the context of corporate restructuring, which of the following is a common objective of a conglomerate merger?
Reducing risk by making a firm less vulnerable to adverse conditions in any single market
Unlike corporations, limited liability companies (LLCs):
cannot include owners who are foreign investors
In the context of corporations, the _____ and other corporate officers manage the company on a daily basis.
chief executive officer
Gerrilyn works for a business firm that manufactures breakfast cereal. The firm is owned by many individuals who are not personally responsible for any debts or losses incurred by it. Legally, the firm is considered a separate artificial person. In this scenario, Gerrilyn is working for a _____.
corporation
In the context of the various forms of operating a business, instant brand-name recognition is a benefit ensured by a:
franchise.
Daynon Inc. buys Leeston Corp., a firm that makes shipbuilding components, despite the opposition from Leeston's board of directors and its top management. This acquisition exemplifies a _____.
hostile takeover
Irina, Ron, and Benz want to start the business of designing the interiors of offices. All of them want to actively manage the company and do not want to be personally responsible for the debts and obligations of the company. Moreover, they do not want to hold regular board meetings. The three are most likely to form a _____.
limited liability company
Silva and Ron start a taxi service together. Ron only invests money in the venture and does not actively participate in managing the business. Silva, on the other hand, manages the venture entirely. According to the agreement between Silva and Ron, Silva is personally responsible for the debts and losses while Ron takes responsibility of the debts only up to a certain amount. The agreement also mentions that Ron cannot participate in the management of the business. In this scenario, Ron and Silva have formed a _____.
limited partnership
