Deck 20: Business Organizations

Question 1

The duty of loyalty means that a director has no legal or ethical obligation to administer to the affairs of the corporation with personal integrity, honesty, and candor.

Answer 1

False

Question 2

The major disadvantage of a corporation is the fact that the corporation is required to pay separate income taxes at a special corporate rate for any year during which a profit is earned.

Answer 2

True

Question 3

When individuals become partners for only a short period of time, or for only a single project, they are engaged in a joint venture.

Answer 3

True

Question 4

A business owned and operated by one person is called a(n):

A) limited partnership
B) sole proprietorship.
C) LLC.
D) 501(c) corporation.

Question 5

The major disadvantage of a corporation is the fact that the shareholders have shared personal liability for a corporation's obligations.

Question 6

All but one of the following organizational forms have limited liability. This exception is the:

A) sole proprietorship.
B) corporation.
C) subchapter S corporation.
D) limited partnership.

Question 7

Although limited liability companies provide all of the owners with limited liability, these owners are not permitted to participate in the management of the business.

Question 8

An advantage to a sole proprietorship is that the owner has complete authority, within the boundaries of the law, for the running of the business.

Question 9

Corporations are owned by shareholders, who purchase shares of stock in the corporation.

Question 10

In a sole proprietorship, the entrepreneur has to obtain a general ____________from his or her local municipality.

A) disclosure
B) release
C) business license
D) accounting

Question 11

There is one organizational form that is available for a business structure.

Question 12

The major disadvantage of a sole proprietorship is the fact that the owner of the establishment has limited liability.

Question 13

Duty of care means that a director has a legal and ethical obligation to act diligently and prudently in conducting the affairs of the corporation.

Question 14

When a partner acts with either actual or apparent authority, all other partners are not liable for his or her acts.

Question 15

Many people in the United States have an entrepreneurial spirit that encourages them to pursue the "American Dream" of:

A) traveling throughout the world.
B) having employment security.
C) having a leisurely life.
D) owning and operating their own business.

Question 16

Businesses are generally structured as one of the following: (1) sole proprietorship, (2) partnership, (3) corporation, or (4) limited liability company.

Question 17

Organizations that are referred to as not-for-profits may not include universities, political parties, and labor unions.

Question 18

A corporation drafts articles of incorporation that lists the liabilities of the company.

Question 19

Dissolution of a partnership is governed by a stockholders' agreement. .

Question 20

A business owned and operated by two or more persons is a(n):

A) partnership.
B) sole proprietorship.
C) corporation.
D) subchapter S corporation.

Question 21

Identify two reasons why a partnership may be dissolved.

Question 22

The company usually has_________, which provide rules for the meetings of the corporation.

A) common laws
B) articles of incorporation
C) bylaws
D) statutory laws

Question 23

In a corporation, directors and officers of the company in which they hold their positions have a _____________ to the company.

A) dependability
B) mandatory duty
C) time bound duty
D) fiduciary responsibility

Question 24

Which of the following organizational forms has in place a management team whose members share in the overall control of the business?

A) Charitable organization.
B) Sole proprietorship.
C) Religious organization.
D) Limited liability company.

Question 25

As is true for all small firms, the owners of a limited liability company frequently have difficulty in raising:

A) additional funds.
B) profits.
C) insurance.
D) losses.

Question 26

The death or disability of one of the partners in a business causes:

A) affirmation.
B) discharge.
C) investiture.
D) dissolution.

Question 27

A limited partner will be deemed by the courts to be a general partner if he or she:

A) constantly refuses to sign a proxy.
B) participates regularly in the duty of loyalty and duty of care.
C) participates in the overall management of the business.
D) unintentionally violates the duty of care owed to the corporation.

Question 28

In a partnership each partner shares in the profits of the business, as well as the ______ of the business.

A) stockB. assets
C) member units
D) shareholder's equity

Question 29

The not-for-profits organizations include all of the following, EXCEPT:

A) universities.
B) limited liability partnerships
C) political parties.
D) social clubs.

Question 30

At times, individuals can become partners for only a short period of time, or for only a single project. This activity is defined as a(n):

A) joint venture.
B) partnership.
C) LLC.
D) LLP.

Question 31

A director has a legal and ethical obligation to act diligently and prudently in conducting the affairs of the corporation. This is called the:

A) mandatory duty.
B) psychological duty.
C) legal responsibility.
D) duty of loyalty

Question 32

The major disadvantage of a corporation is the fact that the corporation is required to ___________for any year during which a profit is earned.

A) pay separate income taxes
B) pay separate dividends
C) pay separate interest
D) pay separate bonuses

Question 33

Organizational forms that are referred to as not-for-profits may include:

A) limited liability corporations.
B) charitable organizations.
C) joint ventures.
D) industrial corporations.

Question 34

The expense associated with forming and maintaining the company in a corporation serves as a(n):

A) stepping-stone.
B) disadvantage.
C) accounting strategy.
D) advantage.

Question 35

The limited liability company provides all of the owners with:

A) licensing authority.
B) limited liability.
C) limited profits.
D) limited reputation.

Question 36

In a business, there may be times when partners disagree on how the business should be run. This serves as a(n):

A) lead.
B) stepping-stone.
C) disadvantage.
D) advantage.

Question 37

The major advantage of a corporation is the fact of ____________to shareholders.

A) restricted authority
B) unlimited credibility
C) limited liability
D) unrestrained reliability

Question 38

The document that lists the general powers of a corporation is called the:

A) memorandum of hierarchy.
B) memorandum of association.
C) articles of entrepreneurship.
D) articles of incorporation.

Question 39

Shareholders vote for __________ who are responsible for managing the overall strategy and operations of the firm over the long term.

A) financiers
B) coordinators
C) directors
D) administrators

Question 40

The company must comply with tax regulations, such as the restriction that there are a limited number of shareholders, in order to qualify as a:

A) subchapter S corporation.
B) sole proprietorship.
C) limited partnership.
D) joint venture

Question 41

What is a limited liability company and what is a disadvantage of this business structure?

Question 42

Discuss the disadvantages of a corporation.