Question 1

A limited partnership is different from a limited liability partnership in that, in a limited partnership:

Accepted Answer

In a limited partnership, there are general partners with unlimited liability who manage the firm, while limited partners have limited liability and typically do not participate in management.

Question 2

A disadvantage of a general partnership is that:

Accepted Answer

In a general partnership, one of the disadvantages is that partners may have difficulty withdrawing or leaving the company due to the shared responsibilities and liabilities. This can lead to conflicts and issues in the management and decision-making of the partnership.

Question 3

A Franchise Disclosure Document:

Accepted Answer

A Franchise Disclosure Document is a legal document that provides detailed information about every aspect of the franchise agreement, including the franchise fee, royalties, training programs, territorial rights, marketing and advertising requirements, and any other obligations or restrictions imposed on the franchisee. This document is designed to help potential franchisees make informed decisions and avoid any surprises or misunderstandings down the line.

Question 4

Which of the following is a difference between a C corporation and an S corporation?

Accepted Answer

The main difference between a C corporation and an S corporation is their tax treatment. C corporations are subject to double taxation, meaning the corporation pays taxes on its profits and then shareholders pay taxes on the dividends they receive. Meanwhile, S corporations are not subject to double taxation and are instead taxed as a partnership. Therefore, answer choices A and B are incorrect. Option D is also incorrect as it suggests that C corporations are taxed as a partnership, which is not the case.

Question 5

Which of the following is an advantage of a C corporation?

Accepted Answer

One advantage of a C corporation is that the shareholders have limited liability in the firm, meaning that their personal assets are protected from any financial losses or liabilities incurred by the business. This is important for investors who want to minimize their risk and protect their personal wealth.

Question 6

Which of the following is an advantage of general partnerships?

Accepted Answer

General partnerships allow for partners to share the burden of running the business, which can help alleviate stress and workload for individual partners. This can lead to a more balanced and efficient operation of the business. Option B is incorrect as general partnerships do not offer limited liability protection for partners. Option C is incorrect as a withdrawing partner would generally take their investment with them. Option D is incorrect as any type of business, including partnerships, have the potential for disagreements.

Question 7

Beany Corp. and Kaffe Inc.are leading producers and distributors of coffee beans and have joined together to become the world's largest distributor of coffee. This is an example of a(n)_____.

Accepted Answer

This is a horizontal merger, as both companies are in the same industry and are joining together to increase their dominance in that industry.

Question 8

Which of the following is an advantage of limited liability companies?​

Accepted Answer

Limited liability companies (LLCs) can have any number of owners, from single-member LLCs to multi-member LLCs. This flexibility allows for greater ease in adding or removing owners as business needs and circumstances change. Furthermore, each owner's personal assets remain protected from any financial liability the company incurs. This is known as limited liability protection, which is a key advantage of LLCs.

Question 9

One reason a firm would consider a _____ merger would be to increase size and market power in its industry.

Accepted Answer

A horizontal merger occurs when two companies in the same industry and with similar product lines merge together. The purpose of a horizontal merger is to increase market share and decrease competition. This would allow the new merged firm to have more bargaining power, economies of scale, and potentially higher profits.

Question 10

Which of the following is a characteristic of limited liability companies (LLCs)?

Accepted Answer

Limited liability companies (LLCs) are often required to pay an annual franchise tax in many states, which is a fee paid to the government to operate as a business entity in that state. Options B, C, and D are not characteristic of LLCs. LLCs are not subject to double taxation, which is a characteristic of corporations. LLCs are not required to hold timely board meetings, and they actually produce less paperwork than corporations.

Question 11

Which of the following aspects of a limited partnership differentiates general partners from limited partners?

Accepted Answer

General partners have the right to participate in the management of the company while limited partners do not. The other options are common aspects of any type of partnership.

Question 12

The individuals who are elected by stockholders of a corporation to represent their interests are known as _____.

Accepted Answer

The individuals elected by stockholders of a corporation to represent their interests are known as a board of directors. Sole proprietors are individuals who own and operate their own business. Limited liability partners are individuals who form a partnership where their liability is limited to their investment in the business. Conglomerates are large corporations that operate in multiple industries.

Question 13

Which of the following is a disadvantage of franchising?

Accepted Answer

The franchisee is required to follow the franchisor's procedures and has limited flexibility to make independent decisions, which can be a disadvantage for some entrepreneurs who prefer more control over their business. A, B, and D are not accurate disadvantages of franchising as most franchisors offer training, support, and established brand recognition, and there are financing options available for franchisees.

Question 14

Red Tide Inc., an electronics manufacturer, merges with Dew Corp., a food brand, to make the firms less susceptible to unfavorable market conditions in any single market. This is an example of a _____ merger.

Accepted Answer

The merger between Red Tide Inc. and Dew Corp. is an example of a conglomerate merger, where two companies from unrelated industries merge to diversify their portfolio and reduce the risk of exposure to unfavorable market conditions in any single market.

Question 15

Cella, a clothing manufacturer, has licensed Crux Corp. to market and sell its products. This is an example of a _____.

Accepted Answer

The answer of Cella, a clothing manufacturer, has licensed Crux...

Question 16

In a carve-out, a firm:

Accepted Answer

In a carve-out, a firm creates a new entity from a division or part of its existing business and distributes the stock of the new company to outside investors. This allows the parent company to raise capital and receive strategic benefits while also giving investors a chance to invest in a focused or specialized company. Option A is incorrect as the stock is not distributed to existing shareholders, but rather outside investors. Options C and D are also incorrect as they involve purchasing a company in a new industry, which is not a characteristic of a carve-out.

Question 17

Which of the following best describes a business format franchise?

Accepted Answer

In a business format franchise, the franchisee pays for the right to use the name, trademark, and production methods of the franchisor. This allows the franchisee to operate under the branding and operational guidelines of the franchisor, but with some degree of independence in terms of day-to-day decision-making. This is in contrast to a product distribution franchise (B), which involves a franchisor licensing a franchisee to sell a specific product or line of products, and a share ownership franchise (C), which involves a franchisor and franchisee sharing ownership in the business. Option D describes a hybrid model that does not fit the category of a "broad franchising agreement," which makes option A the best choice.

Question 18

A _____ is a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.

Accepted Answer

Distributorship is a type of franchising where the franchisor creates a product and permits franchisees to distribute it. The franchisee conducts business under their name while following certain guidelines established by the franchisor. This differs from a business format franchise in which the franchisor provides the franchisee access to all aspects of their business, including operational systems and procedures, branding, and training. Divestiture and conglomerate merger, on the other hand, are not related to franchising.

Question 19

Which of the following statements is true of formation of general partnerships?

Accepted Answer

It is safer to get everything in writing and seek expert legal assistance when forming a general partnership to ensure that all terms and conditions are clear and agreed upon by all partners. A verbal agreement can lead to misunderstandings and disputes in the future.

Question 20

The nature of work and the work schedule in the animation department of a movie production company differ from that of other departments of the company. Hence, the company decides to branch this department out into a new company by selling the stock to outside investors. In this scenario, the company is using a strategy called a(n):

Accepted Answer

A carve-out strategy is when a company separates a division or department into a new, independent company. This allows the new company to have its own management and focus on its specific needs and characteristics. In this scenario, the animation department has a unique nature and work schedule that differs from the other departments, so separating it out into a new company would make sense. A conglomerate merger involves merging two or more companies that have unrelated business activities, while an acquisition is when one company takes over another company. Telecommuting is not relevant to this scenario.

Quiz 6: Business Formation: Choosing the Form that Fits

A limited partnership is different from a limited liability partnership in that, in a limited partnership:

A disadvantage of a general partnership is that:

A Franchise Disclosure Document:

Which of the following is a difference between a C corporation and an S corporation?

Which of the following is an advantage of a C corporation?

Which of the following is an advantage of general partnerships?

Beany Corp. and Kaffe Inc.are leading producers and distributors of coffee beans and have joined together to become the world's largest distributor of coffee. This is an example of a(n) _____.

Which of the following is an advantage of limited liability companies?

One reason a firm would consider a _____ merger would be to increase size and market power in its industry.

Which of the following is a characteristic of limited liability companies (LLCs) ?

Which of the following aspects of a limited partnership differentiates general partners from limited partners?

The individuals who are elected by stockholders of a corporation to represent their interests are known as _____.

Which of the following is a disadvantage of franchising?

Red Tide Inc., an electronics manufacturer, merges with Dew Corp., a food brand, to make the firms less susceptible to unfavorable market conditions in any single market. This is an example of a _____ merger.

Cella, a clothing manufacturer, has licensed Crux Corp. to market and sell its products. This is an example of a _____.

In a carve-out, a firm:

Which of the following best describes a business format franchise?

A _____ is a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.

Which of the following statements is true of formation of general partnerships?

Quiz 6: Business Formation: Choosing the Form that Fits

A limited partnership is different from a limited liability partnership in that, in a limited partnership:

A disadvantage of a general partnership is that:

A Franchise Disclosure Document:

Which of the following is a difference between a C corporation and an S corporation?

Which of the following is an advantage of a C corporation?

Which of the following is an advantage of general partnerships?

Beany Corp. and Kaffe Inc.are leading producers and distributors of coffee beans and have joined together to become the world's largest distributor of coffee. This is an example of a(n) _____.

Which of the following is an advantage of limited liability companies?​

One reason a firm would consider a _____ merger would be to increase size and market power in its industry.

Which of the following is a characteristic of limited liability companies (LLCs) ?

Which of the following aspects of a limited partnership differentiates general partners from limited partners?

The individuals who are elected by stockholders of a corporation to represent their interests are known as _____.

Which of the following is a disadvantage of franchising?

Red Tide Inc., an electronics manufacturer, merges with Dew Corp., a food brand, to make the firms less susceptible to unfavorable market conditions in any single market. This is an example of a _____ merger.

Cella, a clothing manufacturer, has licensed Crux Corp. to market and sell its products. This is an example of a _____.

In a carve-out, a firm:

Which of the following best describes a business format franchise?

A _____ is a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it.

Which of the following statements is true of formation of general partnerships?

Which of the following is an advantage of limited liability companies?