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Exam 5: Business Formation: Choosing the Form That Fits

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Question 41

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If an oil company merged with a company that produced motion pictures,the result would be a vertical merger.

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Question 42

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A franchisee is the business entity in a franchise relationship that pays for the right to use resources supplied by the franchisor.

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Question 43

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Successful franchisors are particularly vigilant in avoiding situations where the behaviour of an incompetent or irresponsible franchisee harms the reputation of the franchisor and other franchisees.What is the term for this effect?

The earnings of not-for-profit corporations are exempt from federal and provincial income taxes.

The owner of a sole proprietorship must share any after-tax profits with the company's shareholders.

A closed corporation is also known as a not-for-profit corporation.

The first step in forming a sole proprietorship is filing the appropriate paperwork and paying the necessary filing fees.

Franchisors seldom succeed in their attempts to move into foreign markets.

Marco Valez is comparing forms of business structure in order to make the best decision for the business he plans to form next month.He plans to be the only investor/owner,and he will also actively manage the business.He is convinced that the company will be profitable,so he wants to keep all of the after-tax earnings for himself.Which of the following forms of business ownership is Marco likely to choose?

A general partnership is a voluntary partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm.

Owners of sole proprietorships are personally responsible for any debts incurred by their business.

Identify and describe the advantages of general partnerships.

List and define the advantages and disadvantages of forming a general corporation.

Sole proprietorships are in every sector of the economy,but they are most common in professional and technical services,construction,and retail trade.

Hennie Hanks has a great idea for a new business-one he is sure will make a ton of money.He's eager to get started,so he wants to form his business with a minimum of hassle,expense,and red tape.He also wants to be his own boss and have complete control over the company.Hennie's goals suggest that he should seriously consider operating his business as a sole proprietorship.

Which of the following is a disadvantage of sole proprietorships?

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.

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?

Basil Pappas spent his youth working in the restaurants of several of his close relatives.Now,he wants to venture into his own business and has decided that he will open his own restaurant.Basil needs more money than he can come up with on his own,so he plans to ask his two brothers to put up some money in exchange for a share of ownership.Such an arrangement means that the company can't be formed as which of the following?

The formation of a corporation requires filing a special form with the provincial or federal government.