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Exam 5: How to Form a Business

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Question 41

Multiple Choice

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Global franchising offers

A) few opportunities for American investors.
B) opportunities for large franchise systems, but not small ones.
C) opportunities for both large and small franchises.
D) American firms the opportunity to market goods overseas without any need to adjust for cultural differences.

E) None of the above
F) All of the above

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Question 42

True/False

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Harper has always disliked the concept that the customers, managers, and workers of a business are separate individuals with competing goals. She joined with many other people in her community who share this view to become a member, and part owner, of a childcare center. Harper and the other members operate the center for their own benefit, and each is expected to work at the center at least 12 hours each month. The type of organization Harper belongs to is known as a joint venture.

A) True
B) False

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Question 43

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Ravi wants to be his own boss and run his own business. His friend, Josh, suggested that an inexpensive way to get started is to buy a franchise. Therefore he can limit his risk and he will have the freedom to run it exactly as he wants. After reading this chapter, you concur with this advice.

A foreign corporation is chartered in a country outside the U.S.

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

In a partnership, a(n) ________ partner (owner) actively manages the company and has unlimited liability for claims against the firm.

Franchisors give franchisees the right to use their name and product, with the understanding that franchisees obtain all financing and develop all marketing strategies on their own.

Stockholders in a corporation accept unlimited liability for the corporation's debts.

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

If you want to sell your ownership in a publicly traded corporation, you find someone willing to buy your shares.

It is impossible to run a franchise completely from home.

Huong is opening an international food store. Though her products will span the globe, she wants to focus on 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. It's apparent Huong wants to

Mackenzie's dream is to open a chain of salons. She hopes to attract investors to help finance growth. Having once considered forming a C corporation, Mackenzie wants to have more flexibility about how the new business will be taxed. She also wants to offer investors/owners limited liability. Mackenzie can satisfy her objectives by setting up a(n)

To qualify as an S corporation, a company must

The limited liability company requires a minimum of 10 members.

Like stockholders of a C corporation, owners of a limited liability company (LLC) are free to sell their ownership without the approval of other members.

Franchisors may send reverse royalties to franchisees who

One reason individuals incorporate is to obtain the advantage of limited liability.

When two of Mercedes's friends approached her about starting a business, Mercedes's was sure she did not want to risk any amount beyond her initial investment or be involved with the day-to-day management. However, she was willing to invest in the business. Mercedes's preferences suggest that she prefers a general partnership form of business ownership.

According to the Uniform Partnership Act, the three key elements of any general partnership are (1) shares of stock to represent ownership, (2) limited liability, and (3) ease of ownership transfer.