In the U.S., which form of business ownership
1 CORRECT represents about 20% of all businesses and
accounts for about 80% of all business receipts?
D)limited liability partnership
Feedback: The almost 3.9 million
corporations in the United States comprise
only 19 percent of all businesses, but they
earn 89 percent of the total receipts.
2 INCORRECT Compared to sole proprietorships, partnerships:
A)require less red tape to organize
B)must have a board of directors
C)pay income tax according to the
partnership tax structure
D)enjoy more financial resources
Feedback: When two or more people pool
their money and credit, it’s easier to pay the
rent, utilities, and other bills incurred by a
Art and James decided to pool their talents and
3 INCORRECT form a partnership. In forming their new
partnership, Art and James:
A)are required by law to obtain a permit
from the state government.
B)would do well to consult an attorney
and put their agreement in writing.
C)must pay both individual and
partnership taxes on any income they
D)must divide their profits and losses
Feedback: One problem with a partnership is
the potential for disagreements and
misunderstandings among the partners.
Consulting an attorney and getting the
agreement in writing helps minimize the risk
of such problems.
Juanitra recently invested $4000 that her aunt
had left her in stock in the Micky Dee
Development Corporation. Juanitra has become
a(n)_____________ of Micky Dee Corporation.
Feedback: Stock represents shares of
ownership in a corporation.
The result of two firms combining to form one
company is called a:
B)tenancy in common.
Feedback: A merger is the result of two
firms forming one company.
A merger involving a major candy company and a
steel producer would be an example of a:
Feedback: A conglomerate merger involves
two firms from different industries.
Regarding the relationship between the basic
forms of business ownership and a franchise, a
franchise can not be formed as a
Feedback: A franchise can be formed as a
sole proprietorship, partnership, or
CarX is an organization that sells franchises to
prospective businesspersons. In a franchise
8 INCORRECT arrangement, CarX would be the_____________,
and the buyer of the franchise is the
Feedback: In a franchising arrangement, the
person or company that sells the right to use
the name and product is the franchisor, and
the person who buys the rights is known as
Twenty-six years ago, several small apple
growers in Illinois joined voluntarily to market
their apples in an attempt to get better prices.
Over the years they expanded the organization to
9 INCORRECT include other services such as buying and selling
farm supplies and equipment and providing
financial and technical services. The arrangement
established by these apple growers is an example
A)limited liability corporation.
Feedback: A farm cooperative is an
organization of farmers who have joined to
gain more economic power than they would
have as individuals. These organizations
often buy and sell supplies and equipment,
provide warehouses, offer insurance and
financial and technical services, and even
operate manufacturing facilities.
All of the following are advantages of franchises
A)management and marketing assistance
B)financial advise and assistance
C)complete freedom from rules,
regulations, and restrictions
D)historically lower failure rate than
Feedback: Management has a way of
becoming managerial orders, directives, and
limitations. Franchisees may feel burdened
by the franchisor's rules and regulations.