Deck 3: Selecting a Form of Business Ownership

Question 1

A partnership is a business that is jointly owned by two or more people.

Answer 1

True

Question 2

Corporations are limited to large,well-known companies.

Answer 2

False

Question 3

Ben Cohen and Jerry Greenfield started Ben & Jerry's as a corporation.

Answer 3

False

Question 4

A limited partnership is restricted to joint ownership by two people.

Question 5

Jane,Karla,and Brenda have set up an accounting firm.An essential part of their partnership agreement is the division of the business income.

Question 6

A _____ is a business owned and operated jointly by two or more people.

A)sole proprietor
B)limited partnership
C)corporation
D)general partnership

Question 7

Which of the following is not true for a sole proprietor?

A)you have complete control over your business
B)you get all the income earned by the business
C)you have limited liability
D)any profits earned are taxed as personal income

Question 8

About what percent of U.S.businesses are partnerships?

A)1%
B)10%
C)30%
D)50%

Question 9

In a corporation,all of the owners help run the business.

Question 10

Which statement is true about partnerships in the United States?

A)about 10% of U.S.businesses are partnerships
B)most partnerships are very large
C)setting up a partnership is easier than setting up a sole proprietorship
D)it is possible to form a partnership without the help of a lawyer or an accountant

Question 11

Many people are reluctant to enter into partnerships because of _____.

A)limited liquidity
B)long work days
C)poor survival rates,especially compared to sole proprietorships
D)unlimited liability

Question 12

Teeth for Life would be better suited for a _____ than a sole proprietorship.

A)LLC
B)corporation
C)partnership
D)S corporation

Question 13

Sole proprietorships account for about 72% of all U.S.businesses.

Question 14

A sole proprietorship is a legal form of business ownership.

Question 15

Studies show that partnerships are more successful than sole proprietorships.

Question 16

Jerry Foster is a sole proprietorship who owns a canoe renting business. Jerry’s
employee, Terry Gibbs, greets customers at the company’s office, loads the
customers and their rented canoes onto a van, provides them with safety
instructions and drives them upstream. Once unloaded the canoers are on their
own to float back to the company’s office to check in. Although there have been
minor accidents, no one has drowned in the nine years the business has been in
operation. Jerry plans to add kayaks and rubber rafts next year. The scenery is
beautiful and each day people see wild animals come down to the water.


-If someone does drown this year,who will be held liable?

A)Terry Gibbs
B)Jerry Foster
C)Terry and Jerry
D)the customer and/or his canoe partner

Question 17

With a sole proprietorship,you -- the owner -- are,in effect,the business.

Question 18

The major problem with general partnerships is:

A)shared decision making
B)unlimited liability
C)continuity
D)disputes among partners

Question 19

Which of the following statements is not true about sole proprietors?

A)they are willing to risk their own resources to start a business
B)they need a lot of money from others to start their business
C)they want to minimize the costs of getting started
D)they risk their personal assets for the business

Question 20

The board of directors of a corporation sets the company's policies,goals and decisions,and approves the distribution of dividends.

Question 21

Who is considered hostile in a hostile takeover?

A)the targeted company's management
B)the company that is trying to acquire the other company
C)the targeted company's board of directors
D)a and c

Question 22

Realizing more efficient economies of scale is not practical through mergers or acquisitions.

Question 23

The most important benefit of incorporation is the limited liability to which the owners are exposed.

Question 24

The Bill and Melinda Gates Foundation is an example of a _____.

A)cooperative
B)limited liability company
C)not-for-profit organization
D)partnership

Question 25

Pat Smith and George Johnson own five flower shops in Manhattan. They want to open a wholesale flower business to supply their shops as well as others in their geographical area. They currently operate as a partnership but are considering changing their legal form of organization. One reason for doing this is to increase the likelihood that they will be able to raise the funds needed to expand


-The partners should consider converting to a corporation.

Question 26

In Ben and Jerry's hostile takeover they feared that their _____ would end.

A)excellent business reputation
B)above-average industry profits
C)company's social mission
D)high employee morale

Question 27

A _____ is entirely separate from the parties who own it.

A)corporation
B)limited partnership
C)general partnership
D)unlimited proprietorship

Question 28

Which of the following is not a requirement of an S-corporation?

A)maximum of 100 stockholders
B)each stockholder must be a U.S.citizen or resident
C)revenues must be less than $1 million annually
D)all stockholders must concur with the decision to form the S-corporation

Question 29

Kraft and Heinz were an example of a(n)_____.

A)merger
B)acquisition
C)hostile takeover
D)joint venture

Question 30

A disadvantage of a corporation is that managers and shareholders may have goals that conflict.

Question 31

They would most likely form a public corporation.

Question 32

If George Johnson died,the company would cease to exist.

Question 33

Limited liability company (LLC)owners must be U.S.citizens.

Question 34

Which industry has the highest percentage of cooperatives?

A)outdoor gear
B)housing
C)agriculture
D)insurance

Question 35

A disadvantage of the S-corporation is unlimited liability.

Question 36

The combination of Adidas and Reebok was an example of a(n)_____.

A)merger
B)acquisition
C)hostile takeover
D)joint venture

Question 37

_________are earnings distributed to shareholders by a corporation.

A)dividends
B)distributions
C)earned income
D)stock

Question 38

Who were the original shareholders in Ben and Jerry's?

A)Ben Cohen and Jerry Greenfield only
B)anyone interested in buying the stock
C)residents of Vermont only
D)only employees of Ben & Jerry's

Question 39

Which of the following is not true about not-for-profit corporations:

A)formed to serve some public purpose rather than financial gain
B)exempt from paying income taxes if its purpose is religious,educational, scientific or literary and its revenues are less than $1 million
C)those who contribute to not-for-profit corporations can take a tax deduction
D)there are more than 1.5 million not-for-profit organizations in the U.S.

Question 40

Scuffy the Tugboat is a family-run business that makes tugboats. It is owned by three brothers, Jack, Frank, and Bob. Their first tugboat is still towing ships in Boston Harbor, and over the years, success has allowed them to grow the company by plowing money back into it. Now, however, they want to expand but they are not sure how they should do this. They are also unsure about which legal form of organization is best for them.

-Scuffy the Tugboat could not operate as a sole proprietorship.