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Exam 5: How to Form a Business

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Question 71

True/False

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Originally,food cooperatives were formed to provide better prices for farmers.These groups now cooperatively buy farm equipment and other products,and realize economies of scales by banding together for these things.

A) True
B) False

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Question 72

Multiple Choice

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Randy and Mandy plan to pool their money and musical talents to form a general partnership and begin booking weekend gigs.One of the first things Randy and Mandy should do is:

A) Seal the deal with at least five night spots where they can book three months worth of gigs.
B) Consult an attorney and put their agreement in writing.
C) Pay the partnership formation fee to their state's commerce commission.
D) File the limited liability paperwork at the court house in the county in which their partnership will be formed.

E) All of the above
F) B) and C)

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Question 73

Multiple Choice

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Modern Screen Entertainment,Inc. ,recently bought Star Power Pictures,Inc. ,for an undisclosed amount of money.It now owns all of Star Power Picture's properties and obligations.This is an example of an) :

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

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

Mel,Tim,and Bill agreed to partner in a small rehab business.Initially,they were enthusiastic contributors until their first project took more work than Mel initially estimated;Tim wanted morning meetings and long lunch hours;and,Bill decided to go on vacation even though the project was not complete and ready to sell.As the Spotlight on Small Business box,titled,"The Ties That Bind" indicates,

Stock options are the right to purchase shares of the corporation for a fixed price.

An) _________ occurs when one company buys the property and obligations of another company.

A general partner has unlimited liability for the debts of the partnership only if he or she personally approved the decisions that resulted in those debts.

The sole proprietorship form of ownership tends to be attractive to people who want to invest in a company without taking an active role in management.

Jenna plans to invest in a cleaning service franchise called "Spare Time".At her first interview with the franchisor's selling agent,she learned that the parent company expects royalties of 5%.These are:

Maria recently purchased 100 shares of stock in Idle Time Gaming,Inc.Maria is an) _____________ of this company.

According to the Uniform Partnership Act,the three key elements of any general partnership are 1)common ownership,2)shared profits and losses,and 3)the right to participate in managing the operations of the business.

A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business.

In a general partnership,all partners are entitled to an equal share of the firm's profits.

Taking a firm private involves converting a firm from a corporation to a general partnership.

Farm cooperatives were originally established to help farmers increase their economic power by acting as a group rather than as individuals.

The purpose of a conglomerate merger is to diversify operations and investments.

The "coattail effect" refers to inevitable repercussions on your business if a fellow franchisee should fail.

A ___________ is a form of business that is owned,and usually managed,by one person.