Question 1

Allison Peterson has opened a new downtown boutique.She wants to pay minimal taxes and she wants to remain in complete control of her company and be her own boss.What form of ownership should she choose?

Accepted Answer

A sole proprietorship is a business owned and operated by a single individual. It is the simplest and most common form of ownership, making it easy to set up and manage. The owner has complete control and decision-making power, and the profits are taxed as personal income, which can result in lower overall taxes for the business. This makes it a good choice for Allison Peterson, who wants to minimize her taxes and maintain complete control over her boutique.

Question 2

From the standpoint of an owner,what is a major advantage of a sole proprietorship?

Accepted Answer

As the sole proprietor of the business, the owner has complete control over all decisions and actions. This level of control is not available in other forms of business ownership, such as partnerships or corporations where decisions are often made by a board of directors or multiple partners.

Question 3

Justin Rolando decided to operate his own Web design firm and is leaning toward organizing it as a sole proprietorship.What is one factor Justin should realize in choosing this form of business?

Accepted Answer

By choosing to organize as a sole proprietorship, Justin will be personally liable for the debts and obligations of the business. This means that his personal assets could be at risk if the business incurs significant debt or legal issues. It is important for him to understand this potential risk before proceeding with this form of business.

Question 4

Sole proprietorships make up what percentage of all registered businesses?

Accepted Answer

The answer of Sole proprietorships make up what percentage of...

Question 5

One of the great success stories of franchising is that immigrants have a higher success rate.

Accepted Answer

The answer of One of the great success stories of...

Question 6

One drawback of operating a franchise is the greater risk of failure relative to independently owned businesses.

Accepted Answer

Franchises often have a lower risk of failure than independently owned businesses due to established brand recognition, proven business models, and ongoing support from the franchisor.

Question 7

How are most businesses in Canada formed?

Accepted Answer

Most businesses in Canada are formed as sole proprietorships because they are the simplest and least expensive form of business to establish and operate.

Question 8

Historically,what have been the three basic forms of business ownership in Canada?

Accepted Answer

Sole proprietorship, partnership, and corporation have been the three basic forms of business ownership in Canada. Full partnership, nominal partnership, and silent partnership are variations of partnership and not separate forms of ownership. Joint venture, cooperative, and holding company are also variations of ownership structures and not distinct forms. Monopoly, duopoly, and oligopoly refer to market structures rather than forms of business ownership.

Question 9

Individuals who want to be their own boss and use their own methods are likely to have difficulty accepting the terms of a typical franchise agreement.

Accepted Answer

Franchise agreements come with a set of guidelines and restrictions that must be followed, which can conflict with the desire to be in full control of one's own business.

Question 10

Which of the following is a disadvantage of sole proprietorships?

Accepted Answer

The unlimited liability of a sole proprietorship means that the owner is personally responsible for all debts and legal obligations of the business, which puts their personal assets at risk. This can be a significant disadvantage and a major reason why some people choose to form a different type of business entity. The other options listed are advantages of sole proprietorships.

Question 11

Which of the following is a disadvantage of a sole proprietorship?

Accepted Answer

Sole proprietorships often face challenges in attracting and retaining talented employees due to limited resources and growth opportunities compared to larger corporations.

Question 12

Lakesia Wiley is a bright,hard-working,and responsible young woman who has always wanted to own a business.However,she realizes that she lacks training and experience in some areas of running a business and doesn't have confidence in her ability to start a new company from scratch.She also is nervous about the amount of risk involved in business ownership.These concerns suggest that Lakesia might be interested in becoming a franchisee in a business format franchise.

Accepted Answer

Becoming a franchisee allows Lakesia to benefit from an established business model, receive training and support, and reduce some of the risks associated with starting a new business from scratch.

Question 13

Which of the following is a key advantage of a sole proprietorship?

Accepted Answer

A key advantage of a sole proprietorship is that it is easy and inexpensive to form compared to other forms of business ownership. However, the owner has unlimited liability for the debts of the business. The business also doesn't have a perpetual life as it is tied to the life of the owner, and it can be difficult to raise financial capital for this type of business.

Question 14

Which of the following is a serious drawback of sole proprietorships?

Accepted Answer

Sole proprietorships expose their owners to unlimited liability for the company's debts, meaning that they are personally responsible for any business debts or legal actions taken against the company. This can put the owner's personal assets at risk and make it difficult to obtain financing or attract investors.

Question 15

A franchise agreement is the contractual arrangement between a franchisor and franchisee that details the duties and responsibilities of both parties.

Accepted Answer

This statement is true. A franchise agreement is a legally binding contract that outlines the terms and conditions of the relationship between a franchisor and franchisee. It typically covers areas such as the use of the franchisor's trademark, the obligations of the franchisee, the fees and royalties to be paid, and the termination and renewal of the agreement.

Question 16

Under a business format franchise,the franchisees pay royalties for the right to sell the product of the franchisor,but otherwise they have complete freedom as to how they manage their businesses.

Accepted Answer

Under a business format franchise, while franchisees do pay royalties for the right to sell the product of the franchisor, they are typically required to follow a set of operating procedures and guidelines established by the franchisor. This limits their freedom in how they manage their businesses.

Question 17

The first recognized business format franchise arrangement was established in 1891 when Martha Matilda Harper began offering franchises in her hair salon business.

Accepted Answer

The statement is true. Martha Matilda Harper, a Canadian-American businesswoman, is known to have established the first business format franchise arrangement in 1891 for her hair salon business.

Question 18

Dana wants to open her own business after completing college.As a fine arts student,she is planning to provide services as a graphic artist.She wants the freedom to be her own boss and doesn't want to deal with a lot of rules and regulations.But she is nervous about risking her personal wealth.She is thinking about forming a sole proprietorship and asks you for your opinion about this form of business.Which of the following statements is most accurate?

Accepted Answer

Forming a sole proprietorship will give Dana the freedom to be her own boss, but it also means that she will have unlimited liability and her personal assets could be at risk. If she wants to protect her personal assets, she should consider other forms of ownership such as a Limited Liability Company (LLC) or a Corporation. These forms of ownership will provide her with limited liability protection.

Question 19

Which of the following is a key reason most sole proprietorships remain relatively small?

Accepted Answer

Sole proprietorships have limited ability to raise funds needed to finance growth because they rely on the personal savings of the owner, loans from family and friends, or small business loans. This limited access to capital makes it difficult for them to expand and grow beyond their current size.

Question 20

What type of liability do sole proprietors have for the debts of their companies?

Accepted Answer

Sole proprietors have unlimited liability for the debts of their companies, meaning that their personal assets can be seized to pay off business debts.

Quiz 5: Business Formation: Choosing the Form That Fits