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Exam 5: How to Form a Business

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Question 91

Multiple Choice

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A ____________ is two firms combining to form one company.

A) joint tenancy
B) tenancy in common
C) merger
D) leveraged buyout

E) A) and D)
F) A) and C)

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Question 92

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Ted and Mark are partners in a dry cleaning business.They would like their brother Todd to join them.Unfortunately,partnership law states that only two partners can participate in a partnership.

A) True
B) False

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Question 93

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Few people today start their own business.

Corporations represent 20 percent of all the businesses in the U.S.and earn 81 percent of the total U.S.business receipts.

The franchisee pays the franchisor a share of profits or a percentage commission on sales,known as a royalty.

The financial advantage to the parent company the franchisor)in a franchise arrangement is the upfront franchise fee and the collection of royalties if franchisees are successful.

Franchising is popular in the United States,but legal barriers have limited its popularity in foreign countries.

A good reason why partners should spell-out the details of their partnership arrangements in writing is:

Delaware is a popular state to seek incorporation due to its reduced costs and other perks.

The organization structure of a corporation allows for stockholders to exert a significant degree of control over the company's daily operations.

The reason a professional such as a lawyer or doctor would incorporate his/her business is

At one time there were many farm cooperatives,but more recently,they have been replaced by other forms of business ownership.

Javier is the sole proprietor of a golf shop.Because he is a sole proprietor,any profit Javier's business earns is:

What is a C corporation? What are the major advantages and disadvantages of this form of business ownership?

A ____________ is the share of profits or percentage of sales a franchisee pays to a franchisor.

Trans Globe Airlines is in talks with Royal Blue Airlines,a financially troubled rival.The firms believe the merger will create a stronger company that can offer travelers more flights to a wider variety of destinations.This proposed merger is an example of a:

The strategy of a leveraged buyout is used when employee talent is at a minimum.

An entrepreneur who wishes to start a business with little delay or hassle,and who wants to be his or her own boss,should organize the business as a:

Which of the following statements about buying a franchise is most accurate?

Maria is already a successful franchisee with Nite Lite,a chain of "no frills" motels that provide clean rooms and good service at affordable rates.The motel she currently operates is located in Texas,but she is considering an opportunity to open another Nite Lite motel in Canad A.Although her costs of operating in a foreign nation may be higher,she has the benefit of an expanding market and less competition.