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Exam 6: Forms of Business Ownership

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Question 1

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A sole proprietor's income and expenses flow through ________.

A) shareholders' tax returns
B) individual partners' tax returns
C) his or her personal tax returns
D) corporate tax returns

E) All of the above
F) None of the above

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Question 2

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Henry decides to become a member of a limited liability company (LLC). What will happen to the company if Henry withdraws his membership and invests in other businesses?

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If Henry decides to withdraw his members...

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Question 3

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A(n) ________ acquisition occurs when one company tries to take control over another company against its wishes.

What is a C corporation and what are the advantages of this type of business ownership?

A proxy fight occurs when a company attempts to persuade the target company's shareholders to replace the existing management with one that is ________ the goals of the acquiring company.

Many citrus farmers and growers in the United States have direct and low-cost access to packing houses. As such, they are able to directly process their harvest through these packing houses, limiting the cost of production of packed citrus products. What attribute of a cooperative is shown in this situation?

Lucia owns her own dog walking business and has several employees. She filed no legal paperwork and has no partners. Lucia's business is a ________.

Which of the following is the MOST compelling argument for incorporating a business?

At a meeting to announce a merger with another company, which of the following buzzwords is a business leader MOST likely to use to justify the decision?

Melissa and Claudia are considering becoming business partners and establishing a clothing boutique. They agree that they need to have a partnership agreement before they start the business. What factors should Melissa and Claudia consider when writing their partnership agreement?

Which of the following parts of a partnership agreement spells out the policy regarding partners entering into key financial or contractual agreements?

All mergers and acquisitions are mutually desired by both companies.

Compared to the C corporation, the limited liability company is an attractive form of business ownership because ________.

Not-for-profit organizations may NOT earn a profit.

An advantage of S corporations over C corporations is they avoid double taxation. Explain how this works.

As a shareholder of an S corporation, Dave is entitled to a profit proportionate to his interest in the corporation. How would Dave pay his taxes for the profits from his shares in the S corporation?

Jaden and Noel are starting a computer repair business together. Jaden insists on outlining rules for the departure of partners in the partnership agreement, although Noel does not think it is necessary. Which of the following statements might Jaden use to explain his insistence to Noel?

In September 2001, technology company Hewlett-Packard (HP)announced a proposal to acquire Compaq Computer Corporation for $25 billion in stock. It offered shareholders a deal whereby they could exchange one Compaq share for one HP share. At the time, HP shares were worth 18% more than Compaq shares. In March 2002, shareholders narrowly approved the takeover. What type of acquisition took place in this situation? Explain what happens in this type of an acquisition.

Companies MOST often resort to mergers and acquisitions when they want to expand their markets and product lines because ________.

In order to expand more quickly and remain competitive, companies integrate other established businesses through the process of mergers or acquisitions.