Question 1

Which of the following people would be most interested in participating in a business organized as a co-operative?
A)Jeff wants to work for a government owned business because he believes government ownership ensures a more equitable distribution of income and wealth.
B)Joe is intrigued by the idea of combining his time and resources with many other people to operate a business providing a good or service that they all will use.
C)Joan wants to be an owner of a business and share in its profits,but has no desire to take an active role in managing the company or participating in its daily operations.
D)Jennifer prefers to work for a charitable organization that emphasizes helping people who are less fortunate than her.

Accepted Answer

Joe is interested in combining his time and resources with others to operate a business, which is exactly what a cooperative is designed for. Cooperative businesses are owned and controlled by the people who use its services, meaning that members all contribute to the success of the business and share in the profits. Jeff, Joan, and Jennifer all have different interests and priorities that are not necessarily aligned with the cooperative business model.

Question 2

Homer and Marge have decided to open a floral design shop,which they intend to run as co-owners.Both intend to take an active role in the management of their new business,and each will accept unlimited liability.Homer and Marge are planning to operate a:
A)general partnership.
B)limited partnership.
C)co-operative.
D)joint venture.

Accepted Answer

Homer and Marge's intention to run the business together as co-owners and both accepting unlimited liability indicate that they are starting a general partnership. In a general partnership, all partners are actively involved in the management of the business and accept unlimited liability for any debts or obligations incurred by the partnership. Limited partnerships, cooperatives, and joint ventures have different structures and requirements that do not seem to fit Homer and Marge's situation.

Question 3

A(n)__________is someone who has a good idea for a business and who sells the right to use the business name and sell a product or service within a given territory.
A)franchisor
B)intrapreneur
C)venturist
D)limited partner

Accepted Answer

A franchisor grants the right to use their business name, brand, and system to a franchisee in exchange for fees and royalties. The franchisor provides support, training, and guidance to help the franchisee operate the business successfully within a specific territory. In contrast, an intrapreneur is an employee who creates a new venture within a company, a venturist is someone who invests money in risky business ventures, and a limited partner is a passive investor in a partnership who is not involved in the day-to-day operations of the business.

Question 4

A person who buys the right to use a business name and sell a product within a given territory is called a: A)limited franchisor. B)venture capitalist. C)stockholder. D)franchisee.

Accepted Answer

A person who buys the right to use a business name and sell a product within a given territory is called a franchisee. Option A and B are not related to this concept, while option C refers to someone who owns a portion of a company's stock.

Question 5

The earnings of corporations are taxed:
A)as if the business were a partnership.
B)at twice the going rate of a partnership or proprietorship.
C)by the federal government,but they are exempt from provincial taxes if the corporation owns any facilities within that province.
D)as income to the corporation,then again as income to the stockholders on earnings that are distributed as dividends.

Accepted Answer

The earnings of corporations are taxed as income to the corporation, and then again as income to the stockholders when they receive dividends. This double taxation is a disadvantage of the corporate form of business.

Question 6

Midas Muffler sells its business name and the rights to its products to prospective business persons who want to use the Midas name and offer Midas products.In this arrangement,Midas would be the __________,and the buyer of these rights is the ____________.
A)owner;limited partner
B)wholesaler;retailer
C)co-signer;co-signee
D)franchisor;franchisee

Accepted Answer

This scenario describes a franchising arrangement, in which Midas Muffler is the franchisor (owner of the business name and product rights) and the buyer is the franchisee (who pays for the right to use the Midas name and sell its products). This is a common business model in many industries, including restaurants and retail stores.

Question 7

Mehdi operates a sole proprietorship,but he is in poor health and may be unable to continue running the business.If Mehdi becomes incapacitated,his business:
A)automatically continues under new management as a sole proprietorship.
B)automatically converts into a public corporation with stock sold to interested investors.
C)becomes the property of the most senior employee who wishes to continue operating the firm.
D)ceases to exist unless sold or taken over by Mehdi's heirs.

Accepted Answer

As a sole proprietorship, the business is not a separate legal entity from its owner. Therefore, if the owner becomes incapacitated, there is no one who can legally continue to operate the business without the owner's consent. The business will terminate upon the owner's death or incapacitation, unless it is sold or taken over by the owner's heirs.

Question 8

The board of directors for a corporation is elected by its:
A)Shareholders.
B)managers.
C)employees.
D)creditors.

Accepted Answer

The board of directors for a corporation is elected by its shareholders. Shareholders have voting rights on important decisions, such as the election of the board of directors, which has a significant impact on the direction and management of the corporation.

Question 9

A __________is a federally or provincially chartered legal entity with authority to act and to have liability separate from its owners.
A)non-profit organization
B)limited partnership
C)general partnership
D)corporation

Accepted Answer

Only a corporation has the legal authority to act and have liability separate from its owners, which means that shareholders are protected from personal liability for the company's debts and legal obligations. Non-profit organizations, limited partnerships, and general partnerships do not have this legal separation from their owners.

Question 10

The authorization from the federal or provincial/territorial government for a company to use the corporate format is known as what?
A)resolution of the board of directors.
B)management agreement.
C)shareholders agreement.
D)articles of incorporation.

Accepted Answer

The authorization from the government for a company to use the corporate format is known as the articles of incorporation. The other options listed - resolution of the board of directors, management agreement, and shareholders agreement - are internal documents that may be created by the company itself, but they do not specifically provide the necessary authorization from the government.

Question 11

Mara plans to open a shop specializing in foods and cultural items from the Middle East.She wants to be the firm's only general partner,but she is trying to get several friends to participate as limited partners.Apparently Mara wants to:
A)limit her personal liability to the amount she personally invests in the company.
B)obtain a strong financial base for the firm while maintaining personal control over the firm's management.
C)be the only person allowed to share in the firm's profits.
D)meet the legal requirements of the Uniform Partnership Act.

Accepted Answer

Mara wants to be the only general partner, which means she will have control over the firm's management, while her friends as limited partners will provide financial support without being involved in management decisions.

Question 12

The form of business ownership that usually requires the most detailed record keeping is the:
A)limited partnership.
B)sole proprietorship.
C)partnership.
D)corporation.

Accepted Answer

Corporations are required by law to keep detailed records and meet strict financial reporting requirements, which often involve professional assistance from accountants and lawyers. The other forms of business ownership may also require record keeping, but not to the same extent as a corporation.

Question 13

Ellen wants to start a business.She is leaning toward setting up her company as a sole proprietorship,but she is also looking at other possibilities.Ellen has two major goals.First,given her limited personal wealth and eagerness to get started,she wants to get her business up and running with the least possible hassle and expense.Second,she wants to minimize her personal risk in the event that her company experiences difficulties.If Ellen chooses a sole proprietorship,she would:
A)achieve her second goal,since the owners of sole proprietorships are legally protected from losing more than the amount they invest in their company.However,she would find that the start-up costs would be higher than if she had incorporated her business.
B)not achieve either goal since proprietorships are both costly to set up and subject to unlimited liability.
C)be able to achieve both goals since this form of ownership is both the easiest to form and the least risky.
D)meet her first goal since sole proprietorships are easy and inexpensive to form.However,she would expose herself to a high level of personal risk because owners of sole proprietorships have unlimited liability.

Accepted Answer

Ellen's two major goals are to start the business with least possible hassle and expense and to minimize her personal risk in case of difficulties. Sole proprietorships are easy and inexpensive to form, which helps her achieve her first goal. However, the owners of sole proprietorships have unlimited liability, which means that Ellen would be personally responsible for any debts or legal issues her business faces. Therefore, Ellen would not achieve her second goal if she chooses a sole proprietorship.

Question 14

Franchisors will sometimes send reverse royalties to franchisees who:
A)desire to streamline their communication with employees,customers,and vendors.
B)have not yet created their own web site.
C)are using e-commerce to expand their sales territory.
D)feel their sales have been hurt by the franchisor's Internet sales.

Accepted Answer

Reverse royalties are payments made by the franchisor to the franchisee as a form of compensation when the franchisor engages in activity that is detrimental to the franchisee's business. If a franchisee feels that their sales have been hurt by the franchisor's internet sales, they may be eligible for a reverse royalty.

Question 15

A significant disadvantage of owning a sole proprietorship is the:
A)overwhelming time commitment often required of the owner.
B)possibility of limited liability.
C)lack of incentives to motivate the owner.
D)heavy tax liability that must be assumed.

Accepted Answer

Sole proprietors are responsible for all aspects of their business, including operations, finances, and management. This can require a significant amount of time and effort from the owner, which can be a downside for those who value work-life balance. As the sole proprietor is also personally liable for any debts or legal issues that arise from the business, there is also a potential risk to personal assets, making it a disadvantage in terms of liability. However, there is no heavy tax liability that must be assumed, and there can be incentives to motivate the owner as they have complete control over the business.

Question 16

A separation between ownership and management is most likely to occur in a:
A)limited liability partnership.
B)general partnership.
C)sole proprietorship.
D)corporation.

Accepted Answer

A corporation is the most likely type of business entity to separate ownership from management. Shareholders own the corporation through the purchase of stock, while a board of directors and executive officers manage the day-to-day operations of the company.

Question 17

The__________ is usually the easiest form of business to start and end.
A)co-operative
B)corporation
C)sole proprietorship
D)limited partnership

Accepted Answer

Sole proprietorship is usually the easiest form of business to start and end because it involves only one owner who has complete control over the operations and decision-making of the business. There are no formal legal requirements or paperwork to set up a sole proprietorship, and the business can be dissolved easily if the owner decides to close it down. Co-operatives, corporations, and limited partnerships, on the other hand, usually require more formalities and legal processes to establish and dissolve.

Question 18

Which of the following is normally considered a major disadvantage of the corporate form of business?
A)difficult transfer of ownership.
B)unlimited liability of owners.
C)limited life.
D)double taxation of earnings.

Accepted Answer

Double taxation of earnings is a major disadvantage of the corporate form of business. This means that the corporation pays taxes on its earnings, and then shareholders also pay taxes on any dividends received, resulting in the same earnings being taxed twice.

Question 19

Mary is interested in becoming a franchisee in Katie's Grill,a very successful fast food chain from the Canadian West.Which of the following problems is Mary most likely to encounter if she agrees to become a franchisee?
A)Lack of managerial assistance.
B)High initial costs and fees.
C)Lack of financing.
D)Poor name recognition and visibility.

Accepted Answer

Becoming a franchisee typically requires a significant amount of money upfront in the form of initial costs and fees, as well as ongoing royalties and marketing expenses. This can be a significant barrier to entry for many aspiring franchisees, and Mary is likely to encounter this problem if she decides to become a franchisee of Katie's Grill. While other problems such as lack of managerial assistance, lack of financing, and poor name recognition may also arise, they are less commonly associated with becoming a franchisee.

Question 20

In a sole proprietorship,the equipment and profits of the business are:
A)taxed at the lowest corporate rate.
B)the property of the owner,except for taxes owed to the government.
C)taxed as income for the business,but are exempt from the personal income tax paid by the owner.
D)tax-free if the appropriate exemption is filed with the local government.

Accepted Answer

In a sole proprietorship, the equipment and profits of the business are owned by the owner and not separate from their personal assets. Therefore, they are taxed as personal income for the owner, and any taxes owed to the government are the responsibility of the owner.

Quiz 6: Forms of Business Ownership

Which of the following people would be most interested in participating in a business organized as a co-operative?

Homer and Marge have decided to open a floral design shop,which they intend to run as co-owners.Both intend to take an active role in the management of their new business,and each will accept unlimited liability.Homer and Marge are planning to operate a:

A(n) __________is someone who has a good idea for a business and who sells the right to use the business name and sell a product or service within a given territory.

A person who buys the right to use a business name and sell a product within a given territory is called a:

The earnings of corporations are taxed:

Midas Muffler sells its business name and the rights to its products to prospective business persons who want to use the Midas name and offer Midas products.In this arrangement,Midas would be the ,and the buyer of these rights is the __.

Mehdi operates a sole proprietorship,but he is in poor health and may be unable to continue running the business.If Mehdi becomes incapacitated,his business:

The board of directors for a corporation is elected by its:

A __________is a federally or provincially chartered legal entity with authority to act and to have liability separate from its owners.

The authorization from the federal or provincial/territorial government for a company to use the corporate format is known as what?

Mara plans to open a shop specializing in foods and cultural items from the Middle East.She wants to be the firm's only general partner,but she is trying to get several friends to participate as limited partners.Apparently Mara wants to:

The form of business ownership that usually requires the most detailed record keeping is the:

Franchisors will sometimes send reverse royalties to franchisees who:

A significant disadvantage of owning a sole proprietorship is the:

A separation between ownership and management is most likely to occur in a:

The__________ is usually the easiest form of business to start and end.

Which of the following is normally considered a major disadvantage of the corporate form of business?

Mary is interested in becoming a franchisee in Katie's Grill,a very successful fast food chain from the Canadian West.Which of the following problems is Mary most likely to encounter if she agrees to become a franchisee?

In a sole proprietorship,the equipment and profits of the business are: