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Exam 4: Choosing a Form of Business Ownership

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Question 91

Multiple Choice

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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.Samantha's Dilemma

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

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Question 92

Multiple Choice

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Which of the following is an example of a vertical merger?

A) The purchase of TWA by American Airlines
B) The purchase of Marathon Oil Company by U.S.Steel
C) The purchase of Kentucky Fried Chicken by PepsiCo
D) The purchase of Malone's Cost-Plus Supermarkets by the Kroger supermarket chain
E) The purchase of Gulf Oil by Standard Oil Company of California

F) None of the above
G) C) and D)

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Question 93

Multiple Choice

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Darrell inherited a large amount of money from his uncle. Darrell wishes to start his own business, and his lawyers encourage him to make it a corporation. What disadvantage of a sole proprietorship are the lawyers trying to avoid?

A limited-liability company is

Before Troy can incorporate his advertising business in Champaign, Illinois, he must have a(n) ____ approved by the ____.

Samantha graduated from college and needed to decide where she wanted to work. She had several options. Her aunt Julie owned and operated a small business that she started about twenty years ago. Julie, an individual owner of her business, informed Samantha that she could work for her. On one hand, Samantha 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, Samantha 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, Samantha 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 Samantha's Dilemma. If Samantha worked for the large retail company in Philadelphia, what type of corporation would that be?

Sears Holding Corporation is incorporated in Delaware, but when it operates in Illinois and Texas, it is considered a(n) ____ corporation in those states.

A ____ is a form that enables stockholders to allow someone else to vote for them.

Which of the following statements is false?

A vertical merger is a merger between firms that operate at different but related levels in the production and marketing of a product.

​Maurice and Stanley have been operating a train store together for two years. After a patron slipped on some water on the floor and was injured, they began to think about their personal liability and decided to change the business form to one that would give them the same ability to pass-through profits and shared ownership and control but with little government interference. They would most likely form a

Samantha's Dilemma Samantha graduated from college and needed to decide where she wanted to work. She had several options. Her aunt Julie owned and operated a small business that she started about twenty years ago. Julie, an individual owner of her business, informed Samantha that she could work for her. On one hand, Samantha 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, Samantha 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, Samantha 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 Samantha's Dilemma. Based on the information provided, what type of business does Samantha's aunt operate?

A corporation is an artificial person created by law.

Why is a sole proprietorship the most flexible type of business?

Which form of business is the easiest to start?

What does it mean when someone says that a corporation is an artificial person created by law? In your answer, describe some things that an artificial person and a real person like you could both do.

Shareholders of an S-corporation are taxed as if they were owners in a partnership.

According to the text, which of the following statements is false?

All corporations operate primarily for profit.

The simplest form of business owned and operated by one person is called a(n)