Question

which of the following best describes how a wholly owned subsidiary is formed?
answer

• it is formed as the result of an agreement in which a firms intangible property is sold or made available for a fee.
• it is formed when an investing firm purchases or establishes a foreign (or domestic) facility.
• it is formed when two or more firms join together to create a new business entity that is legally separate and distinct from its parents.
• it is formed when a firm sells the right to use its well - known brand name or business method in exchange for a fee and percentage of the profits of the business.
• i dont know yet

Explanation:

To determine the correct option, we analyze each choice:

• The first option describes licensing (intangible property for a fee), not a wholly - owned subsidiary.
• The second option: A wholly - owned subsidiary is formed when an investing firm (parent company) purchases or establishes a foreign (or domestic) facility and has full ownership. This matches the definition of a wholly - owned subsidiary.
• The third option describes a joint venture (two or more firms creating a new entity).
• The fourth option describes franchising (selling the right to use a brand/method for a fee and profit share).

Answer:

B. It is formed when an investing firm purchases or establishes a foreign (or domestic) facility.