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Exam 5: How to Form a Business

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Question 111

Multiple Choice

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Which of the following statements is the most accurate? A foreign corporation:

A) Does business in one or more states,but is chartered in another state.
B) Is 50% owned by individuals or companies from another nation.
C) Is headquartered in another nation.
D) Is the same thing as a multinational corporation.

E) B) and D)
F) C) and D)

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Question 112

Multiple Choice

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Ramon lives in Mexico City and is a Mexican citizen.He has several friends in the United States who own shares in an S corporation.Ramon would like to invest in this company.Ramon:

A) Can invest in this company,but must pay both U.S.and Mexican taxes.
B) Cannot become a shareholder since he is not a citizen or permanent resident of the U.S.
C) Can become a shareholder but cannot become a manager,and his income must be paid in pesos.
D) Needs approval from the Mexican government before he can invest.

E) B) and D)
F) A) and B)

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Question 113

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If a sole proprietorship fails,the owner may lose whatever was invested in the business,however,the owner's personal assets are not at risk.

Some __________ ask members/customers to work at the organization for a number of hours a month as part of their duties.

In a partnership,an) __________ partner owner) actively manages the company and has unlimited liability for claims against the firm.

Double taxation is a phenomenon that occurs with corporations that pay dividends.Which of the following scenarios is an accurate example of double taxation?

A ___________ is an arrangement whereby someone with proven idea for a business sells the rights to use the business model,to sell a product or service to others in a given territory.

Franchising in global markets has demonstrated that high operating costs are counterbalanced by high profit opportunities.

When Jenna confided in Lew and Al that she,too was concerned about adding additional risk,Lew suggested that they explore the possibility of one of the newest forms of business ownership,an) ____________,which has very flexible ownership rules and would give them more choices in how the company's earnings are taxed while still protecting all owners from high levels of risk.

The owners of a limited liability company LLC)must pay self-employment taxes on any profits they earn,even if they did not obtain a salary from the company.

A disadvantage of corporations is that their charters are only valid for 99 years,so corporations are less permanent than other types of businesses.

Foreign investment in U.S.companies continues to be strong.When Belgian-based,In-Bev purchased the largest beer company in the U.S. ,Anheuser-Busch,this action constituted an) _________________ with a negotiated selling price of $52 billion.

A separation between ownership and management is most likely to occur in a:

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

Two competitors: Stanley's Food Mart and Bluejay Groceries recently issued a joint announcement stating their decision to merge.The announcement claimed that the new firm would have more financial resources,which would enable it to expand services and broaden offerings to consumers.This proposed merger is an example of a horizontal merger.

One advantage of corporations is that the initial cost of organization is usually lower than for other forms of business ownership.

Double taxation means that a corporation pays twice the amount of taxes as a sole proprietorship or partnership.

In a limited liability partnership,each partner's risk of losing personal assets is:

The board of directors for a corporation is elected by its:

One drawback of franchises is that they have a higher failure rate than other types of business ventures.