Deck 8: Forms of Business Ownership

Question 1

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 her relish in local supermarkets and on the Internet. Adkins is an example of which of the following?

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

Answer 1

B

Question 2

An association of two or more individuals who agree to operate a business together for a profit is referred to as which of the following?

A) partnership
B) joint venture
C) association
D) strategic alliance

Answer 2

A

Question 3

Which of the following statements best describes a general partnership?

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.

Answer 3

C

Question 4

Which type of business organization experiences the least governmental regulation?

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

Question 5

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 6

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) less government regulation

Question 7

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 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 her 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

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 10

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

Question 11

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 12

What is the most common form of business organization?

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

Question 13

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 14

What is a business that is established, owned, operated, and often financed by one person?

A) sole corporation
B) sole proprietorship
C) solo proprietorship
D) singular corporation

Question 15

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

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

Question 16

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

A) direct control of the business
B) keeping 50 percent of the profits
C) limited liability
D) better terms from suppliers

Question 17

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 18

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

Question 19

Which form of business ownership is easiest to dissolve?

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

Question 20

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) general partnership
B) private corporation
C) open corporation
D) limited partnership

Question 21

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 22

Which of the following statements best describes the partnership as a form of business ownership?

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 23

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 24

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

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

Question 25

Which of the following statements best describes the taxation of partnerships?

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

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

Question 27

Thom Georges wants to open a store to sell antique architectural features that he can salvage from old houses being torn down. 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 company equal to but no greater than their investment. Georges is trying to get them to form which of the following?

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

Question 28

What is the biggest difference between a general partnership and a limited partnership?

A) amount of involvement
B) ownership percentage
C) liability
D) amount of investment

Question 29

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

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

Question 30

What are companies that are traded on a stock exchange or in the over-the-counter market?

A) trading companies
B) private companies
C) general companies
D) listed companies

Question 31

What is a legal entity with its own rights and responsibilities separate from its shareholders who are not liable?

A) association
B) co-op
C) general partnership
D) corporation

Question 32

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

A) unlimited liability
B) inflexibility
C) harder to terminate business
D) less credit available

Question 33

Tony inherited some money and he wants to invest it in the stock market. What type of corporation can he buy shares of on the stock exchange?

A) private corporation
B) open corporation
C) stock corporation
D) public corporation

Question 34

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 and 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) general partnership
B) private corporation
C) joint partnership
D) limited partnership

Question 35

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 36

Why do most private companies become public companies?

A) to diversify the shareholders
B) to raise extra money
C) to gain more exposure
D) so the owners can get out of the business

Question 37

What is a corporation whose number of shareholders is limited and whose shares are not traded on a stock exchange?

A) public corporation
B) private corporation
C) limited corporation
D) general corporation

Question 38

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 company.
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 39

What is one of the biggest concerns for the original owners when a company goes public?

A) more shareholders
B) less profits
C) financial information becoming public
D) loss of control

Question 40

What is the term for when a public company becomes a private corporation?

A) share buyback
B) private placement
C) leveraged buyout
D) hostile takeover

Question 41

To get personal liability protection doctors, lawyers, accountants, plumbers and electricians usually set themselves up as which of the following?

A) One-person corporation
B) Sole proprietorship
C) Limited partnership
D) Limited corporation

Question 42

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

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

Question 43

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 44

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 45

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 46

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 47

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 48

What do a company'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 49

What is a corporation that is owned by either the federal or provincial government?

A) civil corporation
B) government corporation
C) crown corporation
D) open corporation

Question 50

Which of the following statements best describes cooperatives?

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 51

Tara Brtek owns and operates the Singing Pig Food Company. Brtek makes and markets 20 different gourmet mustards, salsas, marinades, and dip mixes using her 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) an enhanced ability to attract financing
B) fewer government restrictions and regulations
C) lower and fewer taxes
D) guaranteed loans for expansion

Question 52

Tara Brtek owns and operates the Singing Pig Food Company. Brtek makes and markets 20 different gourmet mustards, salsas, marinades, and dip mixes using her crooning pig logo. If Brtek 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 53

A corporation has which of the following characteristics?

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

Question 54

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 55

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 56

What is double taxation in a corporation?

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 are both taxed.

Question 57

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 58

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 59

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 60

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 61

What is a disadvantage of franchising to the franchisee?

A) defined territory
B) restricted operating freedom
C) minimal assistance in site location
D) lack of management training

Question 62

What is the purchaser of a franchise called?

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

Question 63

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

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

Question 64

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

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

Question 65

What term is used if a takeover goes against the wishes of the target company's management and board of directors?

A) vertical merger
B) friendly takeover
C) horizontal merger
D) hostile takeover

Question 66

Jayson Tully is contemplating the purchase of a Subway restaurant franchise. Which of the following is an advantage?

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

Question 67

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 68

David Dworkin is the founder of Swoozie's stores. The stores carry diverse 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) brand cooperative
B) joint venture
C) strategic alliance
D) franchise

Question 69

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 70

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

Question 71

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

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

Question 72

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

Question 73

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 74

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 75

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

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

Question 76

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 is an example of which of the following?

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

Question 77

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 78

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

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

Question 79

What is the term for when a takeover is supported by the management and board of directors of the targeted company?

A) a friendly takeover
B) a hostile takeover
C) a horizontal merger
D) a conglomerate merger

Question 80

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