Deck 5: Forms of Business Ownership

Question 1

Sanford Lee is planning to open a pizza parlour.He has a secret tomato sauce recipe that he does not want to divulge to anyone.Lee also wants to have sole responsibility for all business decisions.What sort of organization should Lee form?

A) a limited cooperative
B) a joint venture
C) a sole proprietorship
D) a limited partnership

Answer 1

C

Question 2

Oscar Patel and Jon O'Keefe own and operate a janitorial cleaning service.Patel bought a new computer,which he plans for the company to use to track its customers,its suppliers,and for making business forecasts.Patel plans on using an installment plan to pay for the computer.O'Keefe was not asked if he thought the company needed a computer and was unhappy when he learned that he and Patel are both liable for the payments for the computer.Patel and O'Keefe have which of the following type of business?

A) a general partnership
B) a private corporation
C) a joint partnership
D) a limited partnership

Answer 2

A

Question 3

Which form of business ownership is easiest to dissolve?

A) a cooperative
B) a subsidiary
C) a sole proprietorship
D) a limited partnership

Answer 3

C

Question 4

Al Tomlin and Wilson Nkata recently closed their frame shop because they could not pay the outstanding business debts.Since Tomlin and Nkata are both liable for the debts,what sort of business do they have?

A) a general partnership
B) a private corporation
C) an open corporation
D) a limited partnership

Question 5

Faye Adkins had a relish that her family and friends raved about.As a result of moral and financial support from her family,Adkins began her own business and sells it in local supermarkets and on the Internet.Faye Adkins is an example of which of the following?

A) a sole partnership
B) a sole proprietorship
C) an S corporation
D) a limited partnership

Question 6

Which form of business ownership has the most difficulty in raising capital?

A) a sole proprietorship
B) a general partnership
C) a limited partnership
D) a corporation

Question 7

Which of the following statements about a general partnership is most accurate?

A) General partnerships are usually double-taxed.
B) A general partnership is an entity separate from its owners.
C) Partners in a general partnership co-own the company's assets.
D) A general partnership is the most popular form of business ownership.

Question 8

Tara Bartek owns and operates the Singing Pig Food Company.Bartek makes and markets 20 different gourmet mustards,salsas,marinades,and dip mixes using its crooning pig logo.As a sole proprietorship,the company would have experienced which of the following?

A) It would have had limited liability.
B) It would have had no trouble finding qualified employees.
C) It would have found it easy to raise capital.
D) It would have been easy and inexpensive to form.

Question 9

Thom Georges wants to open a store to sell antique architectural features that he can salvage from old houses being torn down.He has an eye for the kind of doors,windows,mantels,and so forth that decorators want,but he does not have all the funding he needs.He has invited his parents to invest $40,000 in the enterprise.He has told them that if they do invest,they would have liabilities in the firm equal to but no greater than their investment.Georges is trying to get them to form which of the following?

A) a limited partnership
B) a joint venture
C) a cooperative
D) a general partnership

Question 10

In 1984,Suzanne Pogell wanted to learn to sail,but she could find no one to teach her.She finally did convince someone to teach her to sail and,after mastering sailing,she started an all-woman sailing school called Womanship as a sole proprietorship.Which of the following represents the meaning of unlimited liability to Suzanne?

A) She usually has to put in an unlimited number of hours.
B) She is fully liable for all business debts.
C) She must have liability insurance.
D) She has unlimited access to funds.

Question 11

Which of the following is a disadvantage of sole proprietor ownership?

A) ease of dissolution
B) no special taxation
C) ease of formation
D) difficulty in raising capital

Question 12

What type of liability means that business damages and/or debts can also be attached to the personal assets of the owners?

A) informal liability
B) limited liability
C) unlimited liability
D) funding liability

Question 13

Sole proprietorships experience which of the following tax situations?

A) They are double taxed.
B) They are neither a legal nor a taxable entity.
C) They are exempt from taxation.
D) They are usually taxed higher than individuals.

Question 14

Pete Yankin and Ken Lowery established a company that markets fishing expeditions.Yankin and Lowery share responsibilities for booking the trips,gathering supplies,and guiding groups into locations where they can fish for salmon.Since the two share any profit equally,what sort of business do they have?

A) a sole partnership
B) a general partnership
C) a limited cooperative
D) a general cooperative

Question 15

Which type of business organization experiences the least governmental regulation?

A) a limited partnership
B) a public corporation
C) a private corporation
D) a sole proprietorship

Question 16

In 1984,Suzanne Pogell wanted to learn to sail,but she could find no one to teach her.She finally did convince someone to teach her to sail and,after mastering sailing,she started an all-woman sailing school called Womanship as a sole proprietorship.When she dies,which of the following will occur?

A) The government takes over and sells the assets.
B) The business dies with her.
C) The business continues with the employees running it.
D) The business can be continued by any blood relative.

Question 17

Which of the following is an advantage of sole proprietor ownership?

A) ease with which qualified employees can be found
B) ease with which capital can be raised
C) limited liability
D) freedom from government regulation

Question 18

What is the most common form of business organization?

A) a general partnership
B) a cooperative
C) a sole proprietorship
D) a corporation

Question 19

Karl Metzger plans to invest $5,000 in a partnership with his brother to produce and sell handcrafted violins,zithers,and other string instruments.Metzger does not plan to work in the business and wants no more liability than his investment.What should he be?

A) a limited partner
B) a general partner
C) a joint partner
D) a temporary partner

Question 20

Which of the following is a disadvantage of sole proprietor ownership?

A) all profits to the owner
B) ease and low cost of formation
C) freedom from government regulation
D) unlimited liability

Question 21

What does the fact that a corporation has limited liability mean?

A) Owners' liabilities are limited to the amount invested.
B) It can earn a limited amount.
C) Some of the owners are limited in earnings.
D) The life of the corporation is limited.

Question 22

Sam Beauvois has invested $10,000 in his son's pizza restaurant,but takes no part in its management.What is Beauvois?

A) a limited partner
B) a general partner
C) a nonworking partner
D) a entrepreneur

Question 23

Which of the following is a disadvantage associated with a partnership?

A) unlimited liability
B) flexibility
C) diversity of management
D) possibility of more available credit

Question 24

Ralston Smythe owns Heritage Inn with four other people.All of the owners have limited financial risk.Smythe's inn is which of the following business structures?

A) a general partnership
B) a corporation
C) a cooperative
D) a limited partnership

Question 25

Which of the following statements about the taxation of partnerships is MOST accurate?

A) Partnerships are limited in taxes depending on number of partners.
B) Both the partnership and the individuals are taxed for any profits earned.
C) Partnerships file tax returns but pass profits and losses on to partners who report them on their tax returns.
D) Partnerships use corporate tax rates in filing returns.

Question 26

Which of the following statements about the partnership as a form of business ownership is MOST accurate?

A) Disagreements between partners are rare.
B) Termination of the partnership is simple.
C) Formation of the partnership is simple.
D) Liability for the partners is limited.

Question 27

A corporation can BEST be described by which of the following statements?

A) It cannot be sued.
B) It is subject to federal laws only.
C) It is a taxable entity.
D) It cannot own land but can own buildings.

Question 28

What is the first step in incorporating a company?

A) Write the articles of incorporation.
B) Hold an organizational meeting.
C) Select the company's name.
D) Buy necessary licences and pay required taxes.

Question 29

If Alonzo Bajalia were to become a limited partner in a landscaping company,which of the following would occur?

A) He will agree not to participate in day-to-day management of the firm.
B) He will be limited in the number of hours he can work each month.
C) He will limited in the amount he can invest.
D) He will qualify for a limited income tax rate.

Question 30

Who owns a corporation?

A) its employees
B) its board of directors and major shareholders
C) everyone who owns a share of stock in the corporation
D) its board of directors

Question 31

What do a firm's shareholders have the right to do?

A) Elect the board of directors.
B) Help recruit top management.
C) Get discounts on the company's product or service.
D) Offer suggestions and expect to have them accepted.

Question 32

How is a corporation's board of directors formed?

A) It is appointed by the company executive.
B) It is elected by the shareholders.
C) It is selected by the agency that chartered the corporation.
D) It is appointed by the Toronto Stock Exchange.

Question 33

Rama Singh and Allie Jordan are opening a business where they will create and sell packaged assortments of flavoured vinegars with recipe booklets.Since they are planning to operate as a partnership,which of the following represents the best course of action for them?

A) Hire a manager to operate the business.
B) Seek government assistance.
C) Borrow as much as possible.
D) Agree to share the business's profits and losses.

Question 34

Which of the following provides the legal and managerial guidelines for operating the firm?

A) the constitution
B) the articles of incorporation
C) the corporate structure
D) the bylaws

Question 35

Tara Brtek owns and operates the Singing Pig Food Company.Brtek makes and markets 20 different gourmet mustards,salsas,marinades,and dip mixes using its crooning pig logo.If Tara decides to incorporate her business to make it easier to find investors,what would be her first step?

A) Elect a board of directors.
B) Sell stock to her customers.
C) Write the articles of incorporation.
D) Hold an organizational meeting with shareholders.

Question 36

Aaron Medford has invested $600 in the corporate stock of a manufacturer of offshore oil drilling equipment.If the company goes bankrupt,what is the most Medford could lose?

A) half of his investment
B) the par value of his stock
C) $600
D) $600 plus foreclosure costs

Question 37

A corporation can BEST be described by which of the following statements?

A) It cannot sue or be sued.
B) It ends when the owner of the corporation charter dies.
C) It does not have a life separate from its owners.
D) It does not have a size limitation.

Question 38

What do partnership agreements generally specify?

A) the methods of taxation of each partner
B) the contributions of each partner
C) the percentage of revenue to be generated by each partner
D) the provisions for spouses and family to work in the partnership

Question 39

Ease of formation,flexibility,and diversity of management are advantages of which of the following forms of business ownership?

A) a cooperative
B) a partnership
C) a conglomerate
D) a joint venture

Question 40

Why do most large companies have outside directors on their boards?

A) to meet federal government requirements
B) to provide independent benchmarks
C) to provide technology leadership
D) to bring a fresh view to all of the corporation's activities

Question 41

The development of new drugs is very expensive.For this reason Genentech,a large biotechnical company,has entered into a business arrangement with Swiss-owned Roche to develop a vaccine for tuberculosis.When the vaccine is developed or when the two biotechnical companies determine the vaccine cannot be developed using their current methodology,this relationship will dissolve.What type of relationship is it?

A) a joint venture
B) a general partnership
C) a cooperative
D) a limited-time partnership

Question 42

Which of the following is created when two or more companies form a special entity to undertake a specific project,usually for a specific period of time?

A) a cooperative
B) a limited-time partnership
C) a general partnership
D) a joint venture

Question 43

What is a disadvantage of franchising to the franchisee?

A) national name recognition
B) restricted operating freedom
C) assistance in site location
D) ongoing management training program

Question 44

What is the headquarters,seller,and supplier of the service or method of operation of a franchise called?

A) a franchisor
B) a contractee
C) a direct seller
D) a franchisee

Question 45

AT&T and British Telecom,two of the largest communications companies in the world,allied to create a company called Concerts to investigate the profitability of providing telecommunications services for multinational companies.Concerts was an example of which of the following?

A) a general partnership
B) a cooperative
C) a limited-time partnership
D) a joint venture

Question 46

A corporation has which of the following characteristics?

A) continuity of life
B) difficulty attracting financing
C) unlimited liability
D) difficulty transferring ownership

Question 47

The franchise agreement is BEST described by which of the following?

A) It guarantees that the franchisor will make a profit.
B) It must be approved by the Toronto Stock Exchange.
C) It guarantees that the franchisee will make a profit.
D) It is the contract that details the terms of the franchise.

Question 48

A corporation's earnings are taxed as corporate earnings and as dividends to the shareholders.What is this known as?

A) double jeopardy
B) double indemnity
C) double taxation
D) primary and secondary taxation

Question 49

Isadore Alfonse is considering the purchase of a Bonus Building Care franchise.Alfonse is NOT likely to get assistance from the commercial cleaning franchisor in which of the following areas?

A) start-up costs
B) accounting procedures
C) permission to use company logo in advertising
D) site selection

Question 50

Jayson Tully is contemplating the purchase of a Subway restaurant franchise.Tully has made a list of the disadvantages that he faces.Which of the following is actually an advantage?

A) assistance in building plans
B) defined territory
C) royalty fees
D) conformity to operating procedures

Question 51

Which of the following are organizations formed by individuals or businesses with similar interests to achieve greater economies of scale and economic power through collective ownership?

A) franchises
B) joint ventures
C) limited partnerships
D) cooperatives

Question 52

Which of the following statements about cooperatives is the most accurate?

A) Cooperatives have the same liabilities as partnerships.
B) Cooperatives have a limited life span.
C) Cooperatives cannot legally compete with taxable entities.
D) Cooperatives increase their members' buying power.

Question 53

David Dworkin is the founder of Swoozie's stores.The stores carry eclectic lines of wrapping paper,stationery,invitations,and gifts for affluent women.Dworkin supplied the product concept to other individuals who wanted to own and operate their own business without starting from scratch.Which of the following types of a business organization is Swoozie's?

A) a brand cooperative
B) a joint venture
C) a strategic alliance
D) a franchise

Question 54

Double taxation in a corporation is BEST described by which of the following?

A) Corporations must pay both provincial and federal taxes.
B) Corporations can double their earnings without higher taxes.
C) The corporation must pay taxes twice a year.
D) Earnings of the corporation and dividends of the shareholders both are taxed.

Question 55

Which of the following is a disadvantage associated with a corporation?

A) taxation rates compared to those of a sole proprietorship
B) cost of formation compared to a partnership
C) unlimited liability
D) limited life

Question 56

Which of the following is a disadvantage for the fast-food franchisee?

A) ongoing management training programs
B) short-term credit for buying supplies
C) a peer group for support
D) royalty fees

Question 57

Tiffany Worth is buying a Dairy Queen franchise.Which of the following is not normally expected of the franchise?

A) assistance in personal income tax preparation
B) set operating procedures
C) a proven track record
D) standard goods and services

Question 58

What is the purchaser of a franchise called?

A) a franchisee
B) a franchisor
C) a sole proprietor
D) a contractor

Question 59

Tara Brtek owns and operates the Singing Pig Food Company.Brtek makes and markets 20 different gourmet mustards,salsas,marinades,and dip mixes using its crooning pig logo.Brtek has been thinking about changing her sole proprietorship to a corporation so she can take advantage of which of the following?

A) Corporations have an enhanced ability to attract financing.
B) Corporations have fewer government restrictions and regulations.
C) Corporations pay lower and fewer taxes.
D) Corporations have guaranteed loans for expansion.

Question 60

The franchisor generally does NOT provide the franchisee with which of the following?

A) assistance in site selection
B) wholesale prices on supplies
C) use of company name and logo
D) help in employee selection

Question 61

EMC,a data storage company,took over a company called Documentation,which makes software designed to help companies organize data such as e-mails,medical records,and spreadsheets.This is an example of which of the following for EMC?

A) a joint venture
B) a merger
C) an acquisition
D) a voluntary union

Question 62

Miniature Precision Corporation,a microprocessor manufacturer,recently acquired Cameron-Price,a plastics mould manufacturer.Miniature Precision financed the transaction with 90 percent borrowed money and used Cameron-Price's assets as collateral.What is this type of merger commonly known as?

A) greenmail
B) a leveraged buyout
C) a institutional takeover
D) a hostile takeover

Question 63

The merger of McKesson,a leading drug wholesaler,and HBOC,a producer of health-care inventory software,is an example of which of the following type of merger?

A) a vertical merger
B) a horizontal merger
C) a functional merger
D) a acquired merger

Question 64

A local lumber company's purchase of a window and door manufacturer is an example of which of the following type of merger?

A) a combination
B) a conglomerate
C) a horizontal merger
D) a vertical merger

Question 65

In a limited partnership,all of the partners have limited liability.

Question 66

Which of the following are corporate takeovers financed by large amounts of borrowed money?

A) liquidity corporations
B) financed mergers
C) debt acquisitions
D) leveraged buyouts

Question 67

Articles of incorporation usually specify the life of a corporation as a certain number of predetermined years.

Question 68

Which of the following types of merger brings together companies in unrelated businesses to reduce risk?

A) a combination
B) a horizontal merger
C) a vertical merger
D) a conglomerate

Question 69

If the sole proprietorship acquires a legal business name,the owner then has limited liability.

Question 70

North American Van Lines and Allied Van Lines merged to create the world's largest moving company.Prior to the merger,North American was the leading company in moving high-end merchandise such as computer and hospital equipment,while Allied specialized in households.What type of merger is this?

A) a vertical merger
B) a combination
C) a conglomerate
D) a horizontal merger

Question 71

A disadvantage of a partnership is that any partner may have to pay all of the debts of the company regardless of who incurred the debts.

Question 72

What is the combination of two companies that join to form one company called?

A) a merger
B) a joint venture
C) a cartel
D) a conglomerate

Question 73

The sole proprietorship is considered a legal entity; therefore,it is taxed separately from the owner.

Question 74

The purchase and subsequent takeover of Marks Work Warehouse,by Canadian Tire,is an example of which of the following?

A) a merger
B) an acquisition
C) a voluntary union
D) a joint venture

Question 75

For partnerships to be legal,they must be established in writing.

Question 76

Scott Abrams was driving to Calgary from Edmonton,when he got off Highway 2 to have some lunch.Abrams was surprised to find a fast-food outlet that contained both a Tim Horton's and a Wendy's franchise.What is this new trend in franchising called?

A) a multiple franchise offering
B) a dual-franchise structure
C) cross-branding
D) a complete coverage franchise

Question 77

Which of the following is an innovation in franchising?

A) a leveraged franchise buyout
B) niche marketing
C) cross-border mergers
D) multiple-concept franchises

Question 78

Restricted operating freedom in franchising means that the franchisee must conform to which of the following?

A) obtaining permission before changing the product
B) hiring employees from select groups
C) operating in a specific,defined territory
D) advertising only online

Question 79

One of the disadvantages of the sole proprietorship is that the owner has unlimited liability.

Question 80

Dissolving a partnership is easier than dissolving a sole proprietorship.