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Exam 5: How to Form a Business

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Question 141

Multiple Choice

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In a leveraged buyout,the managers of a firm,its employees,or other investors:

A) Move the company elsewhere and start over.
B) Obtain the assets of the company through bankruptcy proceedings.
C) Borrow funds to buy out the firm's stockholders.
D) Negotiate a merger with another firm to create a conglomerate.

E) A) and C)
F) B) and C)

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Question 142

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When one of the owners of a corporation dies,the corporation legally ceases to exist.

A) True
B) False

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Question 143

Multiple Choice

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An attempt by employees,management,or a group of investors to purchase an organization primarily through borrowing is called a(n) :

Which of the following statements about farm cooperatives is most accurate? Farm cooperatives have:

A recent study showed that partnerships are more likely to fail than sole proprietorships.

A few years back,your three U.S.born friends that live in the State of Wyoming inherited a dude ranch that they plan to turn into a retirement haven for race horses.Peaceful Pastures wants to open its doors by spring,2011.After attending several small business seminars,the three friends are certain they need limited liability.The high-risk,labor-intensive business will require a sizeable investment including an air-conditioned barn,several fenced-in pastures and loads of animal feed.You recently heard that one form of business ownership requires owners to pay self-employment taxes on the entire amount of earnings.You are fairly certain this is one tax loophole your friends would like to avoid.You recommend:

An S corporation has fewer ownership rules than a limited liability company.

Public utilities are examples of quasi-public corporations.

The limited liability provided to limited partners means that they are not responsible for the debts of the business beyond:

In order to establish a C-Corporation,it is a requirement that investors run the company,whereas in an S-Corporation,this is not the case.

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.

Continental Foods is considering a conglomerate merger with a company that makes storage solutions.A likely reason is:

The form of business ownership best suited to raising large amounts of money for expansion is the:

The stockholders of large,publicly traded corporations have a daily pulse on the operation of the business.

Unlike partnerships,if sole proprietorships find themselves in bankruptcy,they need not worry about a court of law requiring them to sell-off personal assets to pay for the debts of the firm.

Eric wants to start a business.He is attracted to the idea of being his own boss,and wants to get started with a minimum of expense and hassle.He is confident in his abilities,and the market he can draw from,so he is not particularly worried about financial risks.All of these factors suggest that Eric may favor starting his business as a sole proprietorship.

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

The "coattail effect" refers to the burden of corporate rules and regulations on franchisees.

It is said that corporations have perpetual life.

When two firms join together to form one company,it is called a merger.