1. Juan wants to be involved in business. He has plenty of capital to invest, but he does not want to be involved in management. He also does not want to worry about fluctuations in the market prices of debt and equity instruments. Which form of business would be best for Juan?

• Sole proprietorship
• Corporation
• LLC
• General partnership

1. Which of the following roles best fits the situation?
2. Apol wants to start or join a business but is not sure which business organization would be best. She has alarge amount of capitalbutdoes not yet have any partnerswho can invest in or effectively manage the business.

• Neither a limited or general partner would be a good choice.
• Limited partner in a limited partnership.
• General partner in a limited partnership.

1. J-Chron's board of directors periodically meets with the CFO of the company. The CFO reports on the financial status of a company project. The board asks whether the project is compliant withlegally-required accounting principles, butasks no other questions about the project, such as how the project supports the company's mission and strategy. Which of the following is true?

• The board is fully meeting its duty of care to shareholders.
• The board is not meeting its duty of care to shareholders.
• The board is not legally required to meet any duty of care requirements.
• The board is meeting legal requirements but not its duty of care to shareholders.

1. What is the appropriate description for achain-stylefranchise?

• A franchisee produces and sells a franchisor's product using the franchisor's name.
• A franchisee sells a franchisor's product in a specific geographic area.
• A franchisee makes or sells a franchisor's product under their own business name or organization.

1. What is the correct order of events for the formation of a corporation?

• Business selects a state of incorporation; Novations are executed; Incorporators select a name for the corporation; Articles of incorporation are filed
• Business selects a state of incorporation; Incorporators select a name for the corporation; Articles of incorporation are filed; Novations are executed
• Novations are executed; Articles of incorporation are filed; Incorporators select a name for the corporation; Business selects a state of incorporation
• Incorporators select a name for the corporation; Articles of incorporation are filed; Business selects a state of incorporation; Novations are executed

1. Kara wants to build a business. She hasplenty of capitalandpotential investors and partners. She wants toavoid the burden of sole liabilityfor her business andwants to be able to close the business when she is no longer interested in it. Which of the following would lead Kara to choose asole proprietorshiporganization for her business?

• Many potential investors/partners
• Plenty of capital
• Avoidance of sole liability
• Ability to close the business easily

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3. What role best fits the following situation?
4. Manny wants to be involved in a business but is not sure which type of business to join or create.He has capital to invest. He has agood network of potential investors and partners. He hasno experience in management.

• General partner in a limited partnership.
• Limited partner in a limited partnership.
• Neither a limited or general partner would be a good choice.

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3. Noodleoo, a struggling restaurant chain, wants to enact a franchise agreement with Stephen to sell its product through a chain-style franchise. Stephen agrees and opens the store, and 6 months later Noodleoo goes bankrupt. Which is most likely true of this situation?

• If Noodleoo was not transparent with its financial data, it has broken the Franchise Rule.
• If Noodleoo was not transparent with its financial data, Stephen has no recourse.
• Stephen was not responsible for looking into the financial status of Noodleoo before making the agreement.
• The Franchise rule does not apply to struggling companies.

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3. Cadence works for WilderCorp. She meets with a team to make all-encompassing decisions concerning the direction of the business. She also personally supervises managers and conducts training for supervisors and plant managers. Cadence also buys stock in WilderCorp. What is Cadence's position in the company?

• Director
• Shareholder
• More than one option
• Executive

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3. Sandy works for RigorMart. She supervises regional managers and directs them based on orders from the board of directors. Sandy's position also entitles her to stock ownership in the company. What is Sandy's position in the company?

• Shareholder
• Executive and shareholder
• Executive
• Executive, shareholder, and director

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3. Lily wants to build a business. She has verylittle capital. She does, however, have apartnerwith which she could run a business. Lily wants to beable toavoid being held personally liablefor any problems the business has. Which of the following would lead Lily to choose a sole proprietorship organization for her business?

• Avoidance of personal liability
• None of the above
• Little capital
• Possession of a partner

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3. What is the appropriate description for adistributorship?

• A franchisee makes or sells a franchisor's product.
• A franchisee produces and sells a franchisor's product using the franchisor's name.
• A franchisee sells a franchisor's product in a specific geographic area.

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3. Which of the following roles best fits the situation?
4. Kevin wants to create a business but is not sure what role is best for him.He has capital to invest. He hasseveral partnerswith which he can begin a business. He hasthe most management experienceof all his potential partners.

• Limited partner in a limited partnership.
• General partner in a limited partnership.
• Neither a limited or general partner would be a good choice.

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3. What is the appropriate description for aplant-processingfranchise?

• A franchisee produces and sells a franchisor's product using the franchisor's name.
• A franchisee focuses on making a franchisor's product using the franchisor's manufacturing method or recipe.
• A franchisee sells a franchisor's product in a specific geographic area.

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3. Rita wants to be involved in business. She has afair amount of moneyto invest, but shedoes not want to be involved in management. She wants to form a business in thequickest way possibleunder her circumstances. Which form of business would be best for Rita?

• Limited partnership
• LLC
• Corporation
• Sole proprietorship

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3. Lenny organized his business in Delaware. He has customers in Delaware, other states in the U.S., and in foreign countries. Lenny's business is __________in Delaware.

• Alien
• Subchapter S
• Professional
• Closely-held
• Domestic

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3. Mario and Johnny want to start a business. They have verylittle capital. They are new partners and largelyunfamiliar with each other's management practices. They are happy, however, to be organizing a business together in order toavoid full liability for the business. Which detailof this situation is a good reason for Mario and Johnny to create ageneral partnership?

• Little capital
• Sharing profits
• Unfamiliar with each other's management practices
• Avoiding full liability

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3. Koffman Corporation is trying to raise capital. What method would be the least risky to raise capital if it has a less-than-favorable credit rating?

• Bond issuance, since additional debt can provide the company with more leverage.
• With low credit, Koffman doesn't have any options for raising capital.
• Stock issuance, since a credit rating won't negatively affect Koffman's ability to sell stock.
• Bond issuance, since nobody wants to buy shares of a company with a less-than-perfect credit rating.

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3. Piper is a manager in a corporation that was organized in Canada by one of his former coworkers. The company provides consulting services and training for architects employed by construction companies. The company recently went public, with shares being sold to hundreds ofinvestors. Piper's company would be a __________ corporation.

• Closely-held
• Subchapter S
• Professional

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3. Tucker works for a retail distribution company that was recently started. Tucker has invested a lot of his earnings into shares of the company. When quarterly earnings are posted, Tucker receives a check for 8% of the quarterly profit of the company. Tucker belongs to a __________ corporation.

• Closely-held
• Subchapter S
• Professional

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3. Hal organized his businessin Canada. Most of his customers are in Montana.In Montana, Hal's business would be considered a(n) __________ corporation.

• Domestic
• Alien
• Subchapter S
• Professional
• Closely-held

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3. Abigail is a manager at her company. The company just launched an initiative to improve its corporate citizenship practices. Abigail is responsible for all but which of the following areas?

• Integrity and ethical behavior
• Safeguarding shareholders' interests
• Disclosure and transparency
• Vigilance of the board of directors