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Exam 4: Choosing a Form of Business Ownership

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Question 101

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Tyler has been operating his business as a sole proprietorship but decides that it is too much work for him to do alone.He does not want to file a lot of government forms,but would like to bring in someone to own and operate it with him.Tyler needs a

A) partner.
B) wife.
C) merger.
D) limited-liability company.

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

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Question 102

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When the owner of a sole proprietorship dies,what becomes of the business?

A) The employees take over the business.
B) It ceases to exist unless the heirs take it over or sell it.
C) It is automatically auctioned to the highest bidder.
D) It ceases to exist,and no one may legally take it over.
E) It may continue existing but only under a new name.

F) A) and D)
G) B) and D)

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Question 103

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The ____ is a legal document that lists and explains the terms of the partnership.

A hostile takeover is a situation in which

Recently there have been several mergers involving Big Four accounting firms.One such merger involved the firms of Arthur Young and Ernst & Whinney,who combined to form Ernst & Young.This is an example of a

Your friend Nathaniel owns a considerable amount of common stock in Microsoft,a computer software company.He wants to cast his votes on various issues at the annual stockholders' meeting in Seattle,but he does not have the time to travel a great distance to the meeting.Instead of attending the meeting,Nathaniel decides to register his votes by

​What is the name given to the governing body of a corporation?

A corporation is an artificial person created by law.

Tiffany graduated from college and needed to decide where she wanted to work.She had several options.Her aunt Martha owned and operated a small business that she started about twenty years ago.Martha,an individual owner of her business,informed Tiffany that she could work for her.On one hand,Tiffany thought it would be a great opportunity to be able to work for her aunt,learn the business,and then run the business when her aunt retires.On the other hand,she also felt that she wanted something a little more challenging;a job where she could really use her education.Her other option would be to work for a company that a friend and her husband had started and jointly owned.It was a rapidly growing company with plenty of opportunity for advancement.However,Tiffany had some reservations about this choice because she was not sure she wanted to work for friends.Her last option was to work for a large retail company,headquartered in Maryland,which had stores across the United States. ​After much consideration,Tiffany decided she didn't want an opportunity and a job because someone knew her.She wanted to prove how motivated and hardworking she was.Once she weighed all the advantages and disadvantages of her different options,she decided to work for the large retail company so that she could gain the most experience for herself. -Refer to Tiffany's Dilemma.What type of company does Tiffany's friend operate?

Which of the following is a disadvantage of the corporate form of organization?

Every partnership must have at least one limited partner.

If Avon and Merck joined together to produce a cream that slows down the aging process,this would be called a(n)

In a limited partnership,a limited partner's name must be included in the partnership's name.

The form of business organization that accounts for 82 percent of all sales revenues in the United States is the

The person who assumes full co-ownership of a partnership,including unlimited liability,is a

Economists,financial analysts,corporate managers,and stockholders all agree that mergers are good for both the company and the economy.

What is the significance of the name preferred stock?

Phillip and Dwight's train store has grown to the point that they need more capital to expand the current location and to open stores in other cities.They do not want the liability of taking out a loan and are no longer concerned about government oversight but would still like to maintain limited liability.They would most likely form a

Amelia,Hannah,and Lucretia,who had been friends since high school,have a business they formed as a partnership.The business takes orders for parties and then provides all of the decorations to match the party theme,orders food,and contracts for entertainment for the party.They named the business Party On! They all majored in business in college and felt capable of running their business.Because they were in a hurry to get started,and were old friends,they did not put their articles of partnership in writing,but instead relied on mutual trust.To get the business started and operating its first year,Amelia contributed $200,000 to the business,Hannah contributed $40,000 to the business,and Lucretia contributed $20,000 to the business.They discussed how profits and losses would be divided,but never came to a solid conclusion;therefore,Amelia thought they would divide them according to the percentage of their contributions,but Hannah and Lucretia thought they would be divided equally.Six months into operating the business they had a disagreement about whether they should limit their business to children's parties or should expand to include adult and corporate events.Amelia wanted to expand to the adult and corporate market but Hannah and Lucretia wanted to remain focused on children's parties.By the end of the first year,the women were so divided that Hannah and Lucretia decided to quit working with Amelia and open their own business.They demanded that the business be sold and their contributions returned to them.Which of the following statements is true about the division of profits and losses?

To raise capital,Anna Moreno and Talia Black plan to sell stock to between 108 and 200 investors.They also want to avoid double taxation.Which type of business ownership would you recommend?