Question 1

A Sole proprietorship typically terminates on death or withdrawal of the sole proprietor.

Accepted Answer

A sole proprietorship is a type of business where a single individual owns and operates the business. It does not have a separate legal entity from the owner. Therefore, when the sole proprietor dies or withdraws from the business, the business is terminated.

Question 2

A partner may sue his or her partners during the operation of the partnership.

Accepted Answer

Partners can sue their partners for a variety of reasons such as breach of contract, negligence, or fraud during the operation of the partnership. However, it is always recommended to first try and resolve disputes through alternative means such as mediation or arbitration before resorting to legal action.

Question 3

A partner's ownership interest in a partnership is freely transferable.

Accepted Answer

A partner's ownership interest in a partnership is not freely transferable. It can only be transferred with the consent of the other partners and as per the terms of the partnership agreement.

Question 4

As a limited partner, one is empowered to act in the name of the firm.

Accepted Answer

As a limited partner, one does not have the authority to act on behalf of the firm. The general partner has this authority.

Question 5

General partners, as agents, are fiduciaries of the business.

Accepted Answer

General partners have a fiduciary duty to act in the best interests of the partnership, which includes duties of loyalty and care. As fiduciaries, they are held to a high standard of ethical and legal responsibility.

Question 6

In contrast to proprietorships and partnerships, it is necessary to get permission from the state to create a corporation.

Accepted Answer

This is because corporations are considered separate legal entities from their owners, which requires state recognition and approval through the process of incorporation.

Question 7

Most states require at least five incor?porators, each of whom must be an adult, and the payment of the necessary fees at filing time.

Accepted Answer

The number of incorporators required can vary by state, and not all states require a minimum of five incorporators. Some states allow a corporation to be formed by just one incorporator.

Question 8

A corporation is a person under the Constitution of the United States.

Accepted Answer

In the United States, corporations are recognized as legal entities and are afforded certain rights and protections under the Constitution, such as the rights to free speech and due process. This legal status allows corporations to conduct business and enter into contracts, among other things.

Question 9

A corporation pays federal income taxes on its income. Shareholders have personal income from the corporation only when the corporation makes a distribution of its income to them.

Accepted Answer

This is because a corporation is a separate legal entity from its shareholders, and its income is taxed separately. Shareholders only receive personal income when they receive dividends or other distributions from the corporation.

Question 10

The Limited Liability Company (LLC) is a hybrid form of business enterprise that offers the limited liability of the corporation but the disadvantages of a partnership

Accepted Answer

The statement is incorrect. The LLC generally offers limited liability protection to its owners and does not have the same disadvantages of a partnership. Instead, it has flexibility in terms of management, taxes, and ownership structure.

Question 11

Owners interest is freely transferable in what form of business?
A) Limited Partnership
B) Corporation
C) Partnership
D) Sole Proprietorship

Accepted Answer

The owners' interest in a corporation is freely transferable through stocks, allowing for ease of buying and selling ownership in the company.

Question 12

Which of the following is not one of the disadvantages of a sole proprietorship?
A) Unlimited liability
B) Limited size
C) Limited life
D) Lack of restrictions

Accepted Answer

Lack of restrictions is not a disadvantage of a sole proprietorship. In fact, sole proprietorships often have fewer restrictions compared to other forms of business ownership. Some of the disadvantages of a sole proprietorship include unlimited liability, limited size, and limited life.

Question 13

A sole proprietorship would not be an adequate form of business for what type of operation?
A) Painting contractor
B) Manufacturing business
C) Garden Store
D) Landscaping business

Accepted Answer

A manufacturing business typically requires a significant amount of capital investment, which may be difficult for a sole proprietor to obtain. Additionally, manufacturing involves greater potential liability risks that an individual may not want to assume alone.

Question 14

Individuals who want to invest in a partnership but who do not want to risk all of their assets can do so as:
A) Silent Partners
B) General Partners
C) Limited Partners
D) Dormant Partners

Accepted Answer

Limited partners are individuals who invest in a partnership but have limited liability. This means that they are not involved in the day-to-day running of the business and are only liable for the amount of their investment in the partnership. This is a good option for individuals who want to invest in a partnership but do not want to risk all of their assets. Silent partners, general partners, and dormant partners all have varying levels of involvement and liability in the partnership, which may not be suitable for individuals looking to limit their risk.

Question 15

A __________ is not known as a partner by the general public and does not play an active role in the operation of the business.
A) Nominal Partner
B) Dormant Partner
C) Silent Partner
D) Limited Partner

Accepted Answer

A Dormant Partner is not known to the public and does not take an active role in the business operations.

Question 16

A __________ is one who is known as a partner by the general public but who does not play an active role in the operation of the business.
A) Nominal Partner
B) Dormant Partner
C) Silent Partner
D) Limited Partner

Accepted Answer

A silent partner is one who is known as a partner by the general public but who does not play an active role in the operation of the business. A nominal partner is not a legal term and does not have a defined role in a partnership. A dormant partner is one who is not actively involved in the business but still has a financial interest in it. A limited partner is one who has limited liability and is not involved in the day-to-day operations of the business.

Question 17

A famous celebrity or business mogul granting use of their name for a business without investing money into the business would be an example of:
A) Nominal Partner
B) Dormant Partner
C) Silent Partner
D) Limited Partner

Accepted Answer

A nominal partner is someone who lends their name and reputation to a business without any real involvement in its operations or financial investment. This makes option A the correct answer, as the famous celebrity or business mogul is not investing money into the business but is only allowing the use of their name. A silent partner is someone who invests money into a business but does not participate in its day-to-day operations, while a limited partner is a type of investor in a partnership who has limited liability and no involvement in management. A dormant partner is someone who was once active in a partnership but is now inactive, and therefore it does not apply to this scenario.

Question 18

The limited liability partnership (LLP) offers the following benefits:
A) Tax benefits of a partnership without personal liabil?ity for the malpractice of other partners
B) Tax benefits of a sole proprietorship without personal liabil?ity for the malpractice of other partners
C) Tax benefits of a partnership with the liability structure of a corporation
D) Tax benefits of a corporation with the liability structure of a partnership

Accepted Answer

The LLP offers the tax benefits of a partnership, which means that the income is not taxed at the business level, but rather passed through to the partners and taxed at their individual tax rates. Additionally, the LLP offers personal liability protection for the malpractice of other partners, which is similar to the protection offered by a corporation, but without the double taxation.

Question 19

Which of the following is not an advantage of the corporate form of ownership?
A) Limited liability
B) Indefinite life
C) Growth potential
D) Limited Taxation

Accepted Answer

Limited taxation is not an advantage of the corporate form of ownership. In fact, corporations are often subject to double taxation, where profits are taxed at both the corporate level and again when distributed to shareholders as dividends. The other options, limited liability, indefinite life, and growth potential, are all advantages of the corporate form of ownership.

Question 20

Which is not one of the disadvantages associated with the corporate form of ownership?
A) High organizing expenses
B) Government restrictions
C) Lack of secrecy
D) Transfer of ownership

Accepted Answer

Transfer of ownership is not a disadvantage associated with the corporate form of ownership. In fact, the ease of transfer of ownership is one of the advantages of a corporation. The other options, on the other hand, are commonly cited as disadvantages of the corporate form of ownership.

Quiz 5: Legal Considerations: The Parameters

A Sole proprietorship typically terminates on death or withdrawal of the sole proprietor.

A partner may sue his or her partners during the operation of the partnership.

A partner's ownership interest in a partnership is freely transferable.

As a limited partner, one is empowered to act in the name of the firm.

General partners, as agents, are fiduciaries of the business.

In contrast to proprietorships and partnerships, it is necessary to get permission from the state to create a corporation.

Most states require at least five incor?porators, each of whom must be an adult, and the payment of the necessary fees at filing time.

A corporation is a person under the Constitution of the United States.

A corporation pays federal income taxes on its income. Shareholders have personal income from the corporation only when the corporation makes a distribution of its income to them.

The Limited Liability Company (LLC) is a hybrid form of business enterprise that offers the limited liability of the corporation but the disadvantages of a partnership

Owners interest is freely transferable in what form of business?

Which of the following is not one of the disadvantages of a sole proprietorship?

A sole proprietorship would not be an adequate form of business for what type of operation?

Individuals who want to invest in a partnership but who do not want to risk all of their assets can do so as:

A __________ is not known as a partner by the general public and does not play an active role in the operation of the business.

A __________ is one who is known as a partner by the general public but who does not play an active role in the operation of the business.

A famous celebrity or business mogul granting use of their name for a business without investing money into the business would be an example of:

The limited liability partnership (LLP) offers the following benefits:

Which of the following is not an advantage of the corporate form of ownership?

Which is not one of the disadvantages associated with the corporate form of ownership?