Question 1

Karen loves to cook and receives unqualified praise whenever she prepares a meal for someone. Encouraged by these compliments and eager to put her culinary talents to good use, Karen decides to open a small neighbourhood restaurant. Because she plans to maintain complete ownership and control of the business, she will most likely organize it as which of the following?

Accepted Answer

Karen wants complete ownership and control of the business, which suggests that a sole proprietorship is the most appropriate organizational structure for her. As a sole proprietor, Karen will be personally responsible for all the debts and liabilities that the restaurant may incur, but she will also enjoy all the profits generated by the business.

Question 2

Sophia and Frederik are opening a landscape company. Although they will each own 50% of the business, Sophia will be doing more work. The plan is to give her 60% of the profits and give Frederik the remaining 40%. This relates to which key consideration for choosing ownership structure?

Accepted Answer

This relates to the taxation and division of profits key consideration as they have decided to divide the profits unequally between the two owners.

Question 3

Jerome is starting a solo business right now, but he hopes it will grow fast so that he can sell it in a few years. This relates to which key consideration for choosing ownership structure?

Accepted Answer

Jerome's desire to sell the business in a few years suggests that he values business control and transfer of ownership. This means that he may want to consider an ownership structure that allows for easy transfer of ownership, such as a limited liability company (LLC) or a corporation.

Question 4

Two dermatologists have created a skin care line to help with blemishes and wrinkles. They'd like to go into business selling their products. Which form of business would allow them to combine the benefits of a corporation and a partnership while avoiding some of the disadvantages?

Accepted Answer

A limited liability partnership (LLP) would allow the dermatologists to have the liability protection of a corporation while still maintaining the tax benefits and partnership structure of a traditional partnership. This would also allow them to avoid some of the disadvantages of a corporation, such as double taxation and more extensive legal requirements.

Question 5

Which of the following is a voluntary association of two or more people acting as co-owners of a business?

Accepted Answer

A partnership is a business model in which two or more owners share the profits and risks of running the business. It is a voluntary association because the owners choose to come together and operate as co-owners. Corporations, sole proprietorships, and conglomerates can also have multiple owners, but the term "voluntary association" specifically refers to a partnership.

Question 6

When Alyssa decides that she wants to sell her accounting business, which of the following will she discover to be a related benefit of a corporation?

Accepted Answer

Alyssa will find that a corporation allows for the ease of transfer of ownership, as shares can be sold to new owners without affecting the corporation's operations.

Question 7

After Leo graduates from college, he will be joining his father, uncles, and grandfather in the family business. His grandfather will be retiring soon and Leo isn't sure who will be running the business. This relates to which key consideration for choosing ownership structure?

Accepted Answer

The situation mentioned in the scenario relates to "business control and transfer of ownership." Leo is not sure who will be taking control of the business after his grandfather's retirement, which means that the ownership structure should be flexible and able to allow for a smooth transfer of ownership. This consideration is key in ensuring the seamless continuity of the family business.

Question 8

Isla is starting a medical consulting business that she'll own and operate by herself. She wants to ensure that making decisions about the business will be fast and easy. Which form of business should she most likely choose?

Accepted Answer

A sole proprietorship is the best choice for Isla as she wants to have complete control over the decision-making process since she is the only owner. This form of business is easy to set up and maintain, and the owner is personally responsible for all the business's profits and losses. Additionally, there is no need for complex legal formalities, making decision-making faster and more efficient.

Question 9

Brothers Marko and Ivan would like to start a landscaping business. They each plan to invest $5000 into the business for equipment and initial advertising and plan to split the profits evenly. This is an example of which of the following?

Accepted Answer

This is an example of a partnership, in which two or more individuals share ownership and profits of a business.

Question 10

Which of these Canadian companies started out as a sole proprietorship?

Accepted Answer

Cirque du Soleil began as a small troupe of performers in Quebec, founded by Guy Laliberté, who initially managed it as a sole proprietorship before it grew into the global entertainment company known today.

Question 11

Ramin is interested in starting his own business. He is concerned about how much it will cost to start and maintain this new venture. Which question should Ramin ask himself?

Accepted Answer

The answer of Ramin is interested in starting his own...

Question 12

Which form of business is the easiest to start?

Accepted Answer

Sole proprietorship is the easiest form of business to start because it does not require any formal registration or legal paperwork. The owner is the sole decision-maker and has complete control over the business. This form of business has the least amount of regulatory compliance and lowest cost of entry.

Question 13

Which of the following is one of the four key considerations when choosing business ownership structure?

Accepted Answer

Taxation and division of profits is one of the four key considerations when choosing business ownership structure. This is because different types of business structures have different tax implications and ways of dividing profits. It is important to consider this in order to choose the structure that will best suit your business needs and goals.

Question 14

Kayla is evaluating the ownership structure for her new business, which is in a high-risk industry where businesses are often sued. This relates to which key consideration for choosing ownership structure?

Accepted Answer

The high-risk industry and potential for lawsuits make it important for Kayla to consider legal and financial liability when choosing an ownership structure. She will want to limit her personal liability and protect her personal assets from potential lawsuits.

Question 15

Santino would like to start selling his homemade salsas and sauces. He figures his start-up costs will be low, and he has money saved, so he decides to start his business on his own and sell his products at a local farmers' market. This is likely an example of which of the following?

Accepted Answer

Santino is starting the business on his own, indicating a sole proprietorship.

Question 16

The Wilson Furniture Company has been in existence for 75 years and was started as a family business. However, all members from the original business have since passed away, and none of the current owners are part of the Wilson family. This business is most likely to be which of the following?

Accepted Answer

Since the original family members are no longer part of the business and the current owners are not part of the Wilson family, it is likely that the business has gone through a process of incorporation, where it becomes a separate legal entity from its owners.

Question 17

Which of the following is the simplest form of business, owned and operated by one person?

Accepted Answer

A sole proprietorship is a business owned and operated by one person. This is the simplest form of business organization as it requires no legal filings and the owner has complete control over all decisions and profits. Franchises, partnerships, and syndicates involve multiple owners or investors.

Question 18

Three college friends start a new mobile messaging service in the hope that venture capital investors will buy part of the company within a few years. Which form of ownership should they choose?

Accepted Answer

A corporation is the best choice for a new mobile messaging service hoping to attract venture capital investors because it offers the most flexibility for ownership and funding. Additionally, corporations have limited liability protection for their owners, which is important in a technology-based business where there is a higher risk of lawsuits. A partnership or limited partnership may limit the ability to attract investors or raise capital, while a joint venture is typically formed for a specific project and may not be the best structure for a long-term business.

Question 19

Amal and Nasim would like a form of business that combines the benefits of a corporation and a partnership while avoiding some of the restrictions associated with those forms of ownership. Which type of business should they form?

Accepted Answer

A Limited Liability Partnership (LLP) combines the benefits of a corporation (limited liability protection) and a partnership (flexible management, flow-through taxation). It also avoids some of the restrictions associated with those forms of ownership as the partners are not completely liable for each other's actions.

Question 20

Edward would like a form of business that is a separate legal entity, with most of the legal rights of a real person. Which form of business should he consider?

Accepted Answer

A corporation is a separate legal entity that has most of the legal rights of a real person, such as the ability to enter into contracts, own property, sue and be sued, and pay taxes. This offers greater protection of personal assets and limited liability for its shareholders. Sole proprietorship and partnership do not offer this level of legal protection and joint venture is a temporary business arrangement between two or more parties.

Quiz 4: Choosing a Form of Business Ownership