Question

5. The most dominant form of business organization is the a legal entity formed by selling shares of stock to investors who then become shareholders and the of the company. 6. ( True False) A corporation and its shareholders can be sued and can be held liable for the corporations debts. 7. (True False) A joint venture is a relationship created between two or more persons or corporations for a specific undertaking. 8. A business trust is a business organization governed by a group of

Answer 1

5. The most dominant form of Business Organization is the Corporation, a legal entity formed by selling shares of stock to investors who then become shareholders and the Owners of the Company.

* Reason for the most dominant form of Business Organization:

a) It is a Legal Entity and has a separate status from that of its owners.

b) The liability of owners is limited.

c) The ownership can be easily transferred, unlike in other forms of organization.

d) Since the capital is divided into shares, many investors can participate in the ownership of the company, hence capital raising is an easy task.

and various other reasons.

* Shareholders are the Owners of the Corporation. They invest in the company, they elect the Management, they vote on major decisions and finally they share the profits. All these characteristics are that of an owner, hence shareholders are also the owners of the corporation.

6. False

* The Liability of the shareholders are limited to the value of their shares. This is one of the important feature of a Corporate. However, the shareholder might be personally liable if he has personally guaranteed for the debts of the company.

7. True

* Joint Venture is an arrangement where in 2 or more parties such as individuals, firms, corporations or any such parties, come together and make agreement to pool their resources and ideas in undertaking a specific activity or a project.

8. A business trust is business organization governed by a group of Trustees, who operate the trust for the Beneficiaries.

Investors who invest in Business Trust receive Trust Certificates of Beneficial Interest. This certificate is freely transferable subject to the bye-laws of the trust. The Trustees manage the Business of the Trust. The Net Income earned from the operations or from the use of properties of the trust are then shared among the Beneficiaries.

9. Franchise is a business that exists because of an arrangement between an owner of the Trade Name or a Trademark and a person who sells goods/services under the Trade Name or Trademark. Example: McDonald's, KFC etc.

There are 2 parties to this arrangement. 1. Franchisor - The owner of the Trade Name or a Trade Mark. 2. Franchisee - The person who uses the Trade Name or a Trade Mark for his business.

The Franchisee will have to run the business on the terms and conditions of the Franchisor. Also, the Franchisee will have to pay Initial Fees and Annual License Fees to the Franchisor for using the Trade Name or Trade Mark.

10. False

The death of the general partner does not terminate the LLP. The Business shall be continued by the remaining partners. The Deceased Partners legal heir will get the units of such deceased partner, wherein the legal heir can become a partner or withdraw the capital belonged to the deceased partner.