Posted: February 7th, 2022
Methods of Transacting International Business
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IntroductionRead the overview below and complete the activities that follow.Methods of Transacting International Business
- When a United States firm deals with a foreign company, numerous considerations must be taken into account.
- Certainly, cost, time, expenditures, and legal risks must be analyzed. Therefore, when contemplating business decisions regarding foreign markets,
- it is important to recognize the options available when structuring the transaction.
- Your understanding of the methods of transacting international business is essential in the contemporary business world.
- CONCEPT REVIEW:The three (3) principle forms of transacting international business are: 1) foreign sales; 2) licensing; and 3) franchising and direct foreign investment. Each form provides a U.S. domestic corporation with options, allowing them to control business exposure.1. Read the statements. Drag and drop each item into the most appropriate section on the chart. Each category should contain only three (3) statements.2. To bring a claim under the Alien Tort Statute, it is not essential to prove that the acts committed violate the law of nations.True or False 3. The Foreign Corrupt Practices Act (FCPA) does not prohibit corrupt payments through intermediaries.True or False4. A number of organizations affiliated with the United Nations have authority over activities that directly affect international business.True or False 5. For a plaintiff to sue a foreign firm in the United States, the Supreme Court held that the plaintiff mustA. comply with the terms of the Convention of International Sale of Goods when filing suit B. establish minimum contacts between a foreign defendant and the forum courtC. demonstrate that exercise of personal jurisdiction over a defendant will be ineffectiveD. establish legal representation in the area of personal jurisdictionE. comply with the terms of the Foreign Services Immunities Act when serving notice of a lawsuit6. After World War II, 23 countries signed the _______ to liberalize trade through reduced tariffs and free markets, which is now administered by the World Trade Organization (WTO).A. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)B. Convention on Contracts for the International Sale of Goods (CISG)C. United States-Mexico-Canada Agreement (USMCA)D. General Agreement on Tariffs and Trade (GATT)E. Central America-Dominican Republic Free Trade Agreement (CAFTA-DR)7. The International Court of Justice (ICJ) is the judicial branch of the United Nations and consists of 15 judges who represent all of the world’s major legal systems.True or False 8. If a commercial seller in the United States contracts for the sale of goods with a company from a country that has adopted the Convention on Contracts for the International Sale of Goods (CISG), then the parties are not subject to local laws and customs.True or False 9. The World Bank, which promotes economic development in poor countries by making loans to finance necessary development projects and programs, was created under the auspices of the United Nations.True or False 10. Which of the following statements about resolving international disputes is true?IntroductionRead the overview below and complete the activities that follow.Business OrganizationsA general partnership is an agreement between two (2) or more persons to share a common interest in a commercial endeavor and to share profits and losses. When compared to other organizational forms, it is easy to form. A partnership is not a tax-paying entity. Instead, individual partners are taxed on their share of the partnership’s profits and losses. Each partner’s liability for the partnership’s debts is unlimited.A corporation is formed by the state approving the corporation’s articles of incorporation. The corporation is a taxable entity, with profits and losses reported on the corporation’s income tax returns. Losses cannot be distributed to the shareholders to reduce their personal tax liability. However, if a dividend is declared, the corporation pays tax on the profit and the individual shareholder reports the dividend income on his or her individual tax return. A corporate shareholder is not personally responsible for the corporation’s debts. One limited exception is when courts find that the corporate organization is being misused, and disregard the corporate form to impose personal liability on shareholders (piercing the corporate veil).CONCEPT REVIEW:One of the most important decisions in starting a business is selecting the proper organizational form. The most important factors to consider when selecting a business’s organization form are: (1) the cost of creating the organization; (2) the continuity or stability of the organization; (3) the managerial control; (4) the personal liability of the owners; and (5) the taxation of the organization’s earnings and its distribution of profits and losses. This exercise will focus on factors (1), (4), and (5) in the context of general partnerships and corporations.Case AnalysisRead the following scenario and answer the questions that follow.Cleo and Jenny are wealthy retirees who decide to open an antique furniture store, C&J Antiques, on Main Street. They take out a $100,000 small business loan at the bank to get the business started because they don’t want to tap into their savings. Cleo and Jenny use the money to travel to flea markets across the country to buy various antiques to sell in their store. Unfortunately, in their first year of business, they suffer a $50,000 loss as their inventory is too avant garde for the locals. Cleo and Jenny also default on their loan payments. To make matters worse, an antique bird cage falls on a customer, Billy’s, head and he brings a negligence lawsuit against the business11. If C&J Antiques is a corporation with Cleo and Jenny the sole and equal shareholders, which of the following best describes how the business’s losses will be reported to the Internal Revenue Service (IRS)?A. Cleo and Jenny would each report a $25,000 loss on their income tax return, and the corporation (C&J Antiques) would also report the $50,000 loss on the corporation’s income tax return.B. Cleo will report the $50,000 loss on her individual income tax return.C. The loss is passed through to Cleo and Jenny, and both Cleo and Jenny will each report a $25,000 loss on their individual income tax return.D. Only the chief executive officer (CEO) of the corporation would report the full $50,000 loss on her personal income tax return.E. The $50,000 net operating loss would be reported on the corporation’s income tax return.12. If C&J Antiques is a general partnership with Cleo and Jenny co-equal partners, which of the following best describes how the business’s losses will be reported to the Internal Revenue Service (IRS)?A. C&J Antiques will report a net loss of $50,000 on its partnership tax return and Cleo and Jenny will each report a $25,000 loss on their individual income tax return.B. Cleo and Jenny will each report a $50,000 loss on their individual income tax return.C. C&J Antiques will report a net loss of $50,000 on its partnership tax return.D. Cleo and Jenny will each report a $25,000 loss on their individual income tax return.E. Either Cleo or Jenny will report a $50,000 loss on her individual income tax return.13. If C&J Antiques is a corporation with Cleo and Jenny the sole and equal shareholders, and C&J Antiques has a $50,000 profit one year, which of the following best describes how the business’ profit would be reported to the Internal Revenue Service (IRS)?A. The profit is passed through to Cleo and Jenny, and both Cleo and Jenny will each report $25,000 in income on their individual income tax return.B. The corporation would report the $50,000 profit on its income tax return and both Cleo and Jenny would report any dividend income received based on the profit on their individual income tax return.C. Cleo and Jenny will each report a $50,000 profit on her individual income tax return.D. The $50,000 profit will be reported only on the corporation’s income tax return, regardless of whether a dividend is declared.E. Either Cleo or Jenny could decide to report the $50,000 profit on her individual tax return.14. If C&J Antiques is a general partnership with Cleo and Jenny co-equal partners, could the bank seek payment of the entire $100,000 small business loan from Cleo individually?A. No, Cleo’s personal liability for the partnership’s debts would be limited to her pro rata share in the partnership, or $50,000B. No, the bank could only seek payment from Jenny individuallyC. No, since a partner in a partnership has no personal liability for the partnership’s loansD. Yes, but the bank would also have to pursue reimbursement from JennyE. Yes, since all partners in a general partnership have unlimited liability for the organization’s debts15. If C&J Antiques is a corporation with Cleo and Jenny the sole and equal shareholders, could the bank seek payment of the entire $100,000 small business loan from Cleo individually?A. Yes, but Cleo could seek $50,000 in contribution from JennyB. Yes, but the bank would also need to jointly sue JennyC. Yes, since all shareholders in a corporation have unlimited liability for the corporation’s debtsD. No, since a corporate shareholder is generally not personally liable for the corporation’s debtsE. No, Cleo’s personal liability for the corporation’s debts would be limited to $50,00016. Assume C&J Antiques is a general partnership with Cleo and Jenny co-equal partners, and the jury awards Billy $10,000 for his birdcage injuries. If C&J Antiques declares bankruptcy, can Billy seek his $10,000 from Jenny individually?A. No, Jenny’s personal liability would be limited to her pro rata share in the partnership, or $5,000B. Yes, but Billy would also have to pursue $10,000 in contribution from CleoC. No, since Cleo and Jenny did not intentionally cause the birdcage to fall on Billy’s headD. No, since a partner in a partnership has no personal liability for court judgments against the partnershipE. Yes, since all partners in a general partnership have unlimited liability for the organization’s debts, which includes court judgments against the partnership17. The __________ may be used to pierce the corporate veil and impose personal liability upon corporate officers, directors, and stockholders.A. alter-ego theoryB. negligent conduct theoryC. Med-Arb theoryD. corporate envelopment theoryE. corporate doppelganger theory18. Which of the following organizational forms allows members to continue the business of the dissolved organization, rather than cease operations, in the event of a death or withdrawal of a member?A. S corporationB. Limited liability companyC. Sole proprietorshipD. Partnership E. Corporation19. Which of the following statements is true of corporations?A. They are exempt from double taxation on corporate income.B. They require a license to conduct business in foreign states.C. They can be created automatically, based on business conduct.D. They are dissolved whenever a member withdraws.E. They are totally controlled by the proprietor.20. Which of the following is true about a sole proprietorship?A. sole proprietorship is the most expensive business organization to create.B. Creating a sole proprietorship requires formal legal documentation.C. A sole proprietor only has a minimal amount of control over the business.D. A sole proprietor is personally obligated for the debt of the proprietorship.E. A sole proprietorship is taxed as an organization.
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