Question

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 retired. 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 hard-working 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.

ABCDE

1.

Refer to Samantha's Dilemma. Based on the information provided, what type of business does Samantha's aunt operate?

a.	Incorporation
b.	Partnership
c.	Franchise
d.	Corporation
e.	Sole proprietorship

ABCDE

2.

Refer to Samantha's Dilemma. What type of company does Samantha's friend operate?

a.	Incorporation
b.	Partnership
c.	Franchise
d.	Corporation
e.	Sole proprietorship

ABCDE

3.

Refer to Samantha's Dilemma. If Samantha worked for the large retail company in Philadelphia, what type of corporation would that be?

a.	Foreign
b.	Alien
c.	International
d.	Domestic
e.	Global

ABCDE

4.

Refer to Samantha's Dilemma. What would not be an advantage of Samantha's aunt's business?

a.	Pride of ownership
b.	Retention of profits
c.	No special taxes
d.	Ability to be your own boss
e.	Unlimited liability

B&G, Inc.

A year ago, Kevin went to work for B&G, Inc. He has worked for the finance department ever since he started. He noticed that the corporation was only taxed as though it were a partnership. This was something that he found very odd when he first started working for the company, but he later realized it was a fairly common practice. He recognized that this was one of the advantages of this type of corporation.

While the job was challenging, Kevin was not happy. He wanted to work for a company whose main goal was to provide service to the community, not to make a profit. However, Kevin felt that, considering his present financial situation, he had to continue working for B&G, Inc. A week later, Kevin discovered there was going to be a merger between B&G, Inc. and one of its major competitors. Kevin's boss informed him that he would be getting a promotion and a raise. While he was excited about making more money, he still was not happy. He knew then that he would not be working for the company for long.

ABCDE

5.

Refer to B&G, Inc. What type of corporation is B&G, Inc.?

a.	Sole proprietorship
b.	Government-owned corporation
c.	S-corporation
d.	Not-for-profit corporation
e.	Cooperative

ABCDE

6.

Refer to B&G, Inc. Which of these features does not belong to this type of corporation?

a.	No double taxation
b.	Management flexibility
c.	Limited liability
d.	Personal asset protection
e.	Many Internal Revenue tax regulations

ABCDE

7.

Refer to B&G, Inc. What type of organization was Kevin considering switching to?

a.	Limited-liability corporation
b.	Government-owned corporation
c.	S-corporation
d.	Not-for-profit corporation
e.	Closed corporation

ABCDE

8.

Refer to B&G, Inc. B&G, Inc. was going through a ____ merger.

a.	vertical
b.	horizontal
c.	conglomerate
d.	hostile
e.	leveraged

ABCDE

9.

Refer to B&G, Inc. If the company had decided to let the managers have the opportunity to purchase the company and take it private with borrowed funds instead of this merger with a competitor, it would have been considered a

a.	leveraged buyout.
b.	proxy buyout.
c.	tender buyout.
d.	cooperative buyout.
e.	simple buyout.

Answer 1

1. e.) Sole Proprietorship

An enterprise that is owned and run by a single person is known as a sole proprietorship. Since her aunt's business is owned and run by her aunt, it is classified as a sole proprietorship.

2. b.) Partnership

A partnership is an enterprise that is owned and run by two or more (usually limited to 50). Since her friends' company is owned and run by her friend and her husband, it is classified as a partnership firm.

3.) d.) Domestic

A domestic corporation is a business enterprise that operates in its home country. The company that Samantha wishes to work for is based out of Maryland, and has operations only in the USA (retail stores all over the USA).

4.) e.) Unlimited Liability

Unlimited liability is a component of unincorporated businesses. This involves enterprises such as sole proprietorships, and partnerships not and their owners not recognized as separate legal entities, and therefore any loses suffered by the business can be attached to the personal belongings of business owner.