Deck 4: Options for Organizing Business

Question 1

A business's legal form of organization has no effect on how much taxes it pays.

Answer 1

False
Explanation: A business's legal form of ownership affects how it operates,how much taxes it pays,and how much control its owners have.

Question 2

One of the most popular and easiest to establish forms of business in the United States is the

A) partnership.
B) sole proprietorship.
C) corporation.
D) joint venture.
E) cooperative.

Answer 2

B
Explanation: Forming a sole proprietorship is easy and inexpensive because of the simple management structure,the low cost of permits,and the lack of lawyer involvement.

Question 3

Which of the following is an advantage of a sole proprietorship?

A) Limited sources of funds
B) Profits are not shared
C) Limited liability
D) Ease of hiring qualified employees
E) Owner's role as a generalist

Answer 3

B
Explanation: A sole proprietorship is easy and inexpensive to form;it has the greatest degree of secrecy;all profits belong to the owner;it has complete control;it has the most freedom from government regulation;the owner pays one income tax;and the business can be easily dissolved.

Question 4

Ruji has realized that she does not like working for others.She wants to open a business in which she will have maximum control and the least interference from government regulation.Which business form might be best for her to use?

A) Joint venture
B) Cooperative
C) Corporation
D) Partnership
E) Sole proprietorship

Question 5

Lack of control is a disadvantage of sole proprietorships.

Question 6

In the U.S. ,men are twice as likely as women to start their own business.

Question 7

The income earned by sole proprietorships is

A) taxed twice.
B) not taxable.
C) taxed as personal income.
D) taxed too high.
E) audited less often than others.

Question 8

Barber shops,dog kennels,and independent grocery stores are typically

A) franchises.
B) nonprofit agencies.
C) sole proprietorships.
D) partnerships.
E) limited liability partnerships.

Question 9

Which of the following requires owners to perform many functions and possess diverse skills to make decisions?

A) Corporation
B) Partnership
C) Sole proprietorship
D) Cooperative
E) Holding company

Question 10

About three-quarters of all businesses in the United States are sole proprietorships,and they account for 10 percent of total business income.We may conclude that

A) the average corporation is small,but earns little income.
B) the average corporation hires many people,but makes little income.
C) the average sole proprietorship is large,but earns little income.
D) there are many sole proprietorships,but their average income is small.
E) there are few sole proprietorships,and their average income is small.

Question 11

Most sole proprietorships focus on manufacturing.

Question 12

Which of the following forms of business ownership is directly limited by the life of its owner?

A) Sole proprietorships
B) Limited partnerships
C) Corporations
D) Holding companies
E) Subsidiaries

Question 13

If you want to go into business for yourself,the easiest way is with a sole proprietorship.

Question 14

All of the following are advantages of a sole proprietorship except

A) ease of formation.
B) secrecy.
C) unlimited liability.
D) control of the business.
E) limited government regulation.

Question 15

Sole proprietorships have the least degree of secrecy.

Question 16

Sole proprietorships are taxed

A) as partnerships.
B) as the owner's personal income.
C) as shareholders.
D) as corporations.
E) depending on the kind of sole proprietorship formed.

Question 17

Sole proprietorships typically employ fewer than 50 people.

Question 18

A sole proprietorship has limited sources of funds,which may affect the growth of the business.

Question 19

Which characteristic of a sole proprietorship can be considered both an advantage and a disadvantage?

A) Taxation
B) Fund sources
C) Liability
D) Continuity
E) Secrecy

Question 20

Which of the following is not a source of funds for a sole proprietorship?

A) Bank loans
B) Family members
C) Personal funds
D) Selling stock or issuing bonds
E) Small Business Administration

Question 21

A limited partnership involves a complete sharing in the management of a business.

Question 22

Which of the following is not a disadvantage of forming a partnership?

A) All partners are responsible for all other partners
B) Unlimited liability
C) Fewer regulatory controls than in a corporation
D) The partnership ends when a partner withdraws or dies
E) Sources of funds are limited

Question 23

Partnerships have fewer regulatory controls than corporations.

Question 24

Selling an interest in a partnership may be difficult because

A) partnerships are subject to unlimited liability.
B) partnerships can't issue bonds.
C) regulatory controls are strict.
D) it is difficult to place a value on a share of a partnership.
E) double taxation occurs.

Question 25

Articles of partnership are required by many states for businesses that have two or more co-owners.The issues covered usually include all of the following except

A) a statement of what each partner contributes.
B) how the profits and losses will be divided.
C) what duties the partners will have.
D) provisions for leaving the partnership.
E) classes of stock to be issued.

Question 26

All states require partnerships to have articles of partnership.

Question 27

In a general partnership,each partner is liable only for the debts he or she incurs.

Question 28

What are the advantages of sole proprietorships over other forms of business organization?

Question 29

It is easier to raise funds in a partnership than in a sole proprietorship because

A) more people means greater earning power and credit.
B) partners have better organizational control.
C) banks know them better.
D) partners have more combined experience.
E) they can issue stock.

Question 30

A limited partnership always has at least one general partner,who assumes unlimited liability.

Question 31

In a partnership,all partners are equally liable.

Question 32

When are limited partnerships generally used?

A) When one partner has more money than the others
B) They are used most of the time for many reasons
C) In law,accounting,and architecture firms
D) When all partners wish to share liability equally
E) When the project is risky and the chance of loss is great

Question 33

What are sole proprietorships? Provide an example.

Question 34

Why is taxation considered both an advantage and a disadvantage of the sole proprietorship organizational form?

Question 35

Which form of business organization is the least used in the U.S.?

A) S-corporation
B) Franchise
C) Sole proprietorship
D) Corporation
E) Partnership

Question 36

The decision-making process in a partnership tends to be faster when the partnership is

A) multifaceted.
B) small.
C) foreign.
D) domestic.
E) large.

Question 37

Anand has been asked to join a new partnership that is developing wind energy technologies.Because the business is high risk,he does not want to be liable for the firm's debts if the project should fail.He could still participate as a

A) general partner.
B) limited partner.
C) silent partner.
D) working partner.
E) contributor.

Question 38

A sole proprietorship is a popular form of business because

A) it is heavily regulated by the government.
B) it is taxed more than other forms.
C) it is hard to dissolve.
D) the proprietor does not have direct control.
E) it is easy to form.

Question 39

The legal documents that identify the basic agreements between partners are called

A) proposals of partnership.
B) a partnership charter.
C) agreements of partnership.
D) articles of partnership.
E) a partnership contract.

Question 40

In a partnership,if the goals of one partner change,the result may be friction and even legal disputes.

Question 41

In creating a corporation,once the articles of incorporation are filed with the appropriate state office,the state may then issue a corporate

A) chapter.
B) contract.
C) charter.
D) collaboration.
E) commentary.

Question 42

Which of the following is an advantage of a partnership?

A) Unlimited liability
B) Life of partnership
C) Selling a partnership
D) Limited funding sources
E) Ease of formation

Question 43

Which stockholders usually have the right to vote and control the board of directors?

A) Preferred
B) Common
C) Cumulative preferred
D) Preemptive
E) Favorite

Question 44

The type of corporation represented by organizations such as the National Aeronautics and Space Administration (NASA)and the U.S.Postal Service is called

A) private.
B) quasi-private.
C) public.
D) quasi-public.
E) private-public.

Question 45

Corporations distribute profits to their owners in the form of

A) tax-free dividends.
B) interest.
C) retained earnings.
D) dividends.
E) bribes.

Question 46

Preferred stockholders receive dividends before common stockholders and have principle voting rights as well.

Question 47

Taking a company public means announcing its creation to the public.

Question 48

The right of common stockholders to have the opportunity to purchase new shares of stock is called a

A) first offer right.
B) preemptive right.
C) stock split right.
D) profit sharing right.
E) secondary right.

Question 49

The biggest advantage of the corporate form of ownership may be the limited liability of its owners.

Question 50

In most states,corporations must have "corporation," "incorporated," or "limited" in their names to show that their owners have limited liability.

Question 51

While corporations account for the majority of businesses in the United States,they represent a small percentage of profits.

Question 52

Define the partnership form of business organization.What are its advantages?

Question 53

S Corporations are more flexible than traditional "C corporations."

Question 54

How does the taxation of partnerships work? How is this different than with a corporation?

Question 55

Corporations cannot be sued.

Question 56

A private corporation is one that

A) is owned by only a few people and not traded in public markets.
B) does not pay taxes on its income.
C) does not hire employees.
D) can be purchased on the New York Stock Exchange.
E) does business outside the nation in which it is incorporated.

Question 57

Which of the following is a disadvantage of a partnership?

A) Difficulty of selling ownership
B) Difficulty of forming business
C) Specialization of partners
D) Relatively slow decision making
E) Limited government regulation

Question 58

Why is it more difficult to value a partnership share than a share of stock in a corporation,for example?

Question 59

According to the Internal Revenue Service,

A) profitable partnerships pay taxes before distributing profits.
B) partners report their share of profits as personal income.
C) partners pay no taxes.
D) partners have the most advantageous tax structure.
E) partnerships do not have to report their income on a tax return.

Question 60

A corporation doing business outside the state in which it is chartered is known as a(n)

A) private corporation.
B) multi-state corporation.
C) domestic corporation.
D) alien corporation.
E) foreign corporation.

Question 61

The organizational form that many consider to be a blend of the best characteristics of corporations,partnerships,and sole proprietorships is the

A) joint venture.
B) cooperative.
C) C corporation.
D) S corporation.
E) limited liability company.

Question 62

How do preferred stockholders differ from the common stockholders of a corporation?

Question 63

Shark repellant is a method of thwarting a corporate takeover in which management requires a large majority of stockholders to approve the takeover.

Question 64

Which of the following forms of business organization restricts the number and type of shareholder?

A) Sole proprietorship
B) Co-op
C) Limited liability company
D) S-corporation
E) Partnership

Question 65

Companies of all sizes grow and improve profitability by

A) choosing the right kind of organizational structure.
B) sticking to domestic markets.
C) not utilizing new technologies as they become available.
D) expanding their operations.
E) creating franchises.

Question 66

Joint ventures are popular in situations that call for

A) reduced regulations.
B) cooperation among farmers or ranchers.
C) unlimited liability.
D) large investments.
E) small investments.

Question 67

All of the following are advantages of a corporation except

A) limited liability.
B) lower frequency of taxation.
C) perpetual life of organization.
D) ease of transfer of ownership.
E) external funding sources.

Question 68

Common stockholders do not have the right to

A) vote for the board of directors.
B) share in profits.
C) attend the stockholders' meetings.
D) exercise preemptive rights.
E) receive dividends before preferred stockholders.

Question 69

A merger occurs when one company buys another by buying its stock.

Question 70

When firms that make and sell similar products to the same customers merge,it is known as a horizontal merger.

Question 71

A written authorization assigning a stockholder's voting privilege to another is a

A) stock sale.
B) stock certificate.
C) stock split.
D) dividend restructuring.
E) proxy.

Question 72

The type of ownership that has the ability to raise capital most easily is a

A) public corporation.
B) private corporation.
C) sole proprietorship.
D) general partnership.
E) limited partnership.

Question 73

The group of individuals elected by the stockholders to oversee the general operation of a corporation are known as the

A) middle managers.
B) top managers.
C) board of directors.
D) shareholders.
E) owners.

Question 74

An important advantage of a corporation is its

A) single taxation.
B) limited liability.
C) ease of formation.
D) lack of bureaucracy.
E) double taxation.

Question 75

The government usually will scrutinize high-profile mergers and acquisitions to ensure that they are not creating monopolies.

Question 76

Which of the following organizational forms is most expensive to set up?

A) Sole proprietorship
B) Limited partnership
C) General partnership
D) Cooperative
E) Corporation

Question 77

A leveraged buyout is an organization composed of small businesses that have banded together to reap the benefits of belonging to a larger organization.

Question 78

Most tender offers are considered hostile.

Question 79

What is a limited liability company (LLC),and why do some consider it the best form of business ownership?

Question 80

A conglomerate merger results when two firms in unrelated industries merge.