Question 1

Jonathan is upset, claiming that he is a victim of double taxation. What form of business is he involved in?

Accepted Answer

Jonathan is likely involved in a corporation, as corporations are subject to double taxation, meaning that both the corporation's profits and the shareholders' dividends are taxed separately.

Question 2

What is the difference between a public and private corporation?

Accepted Answer

Public corporations have shares that are traded on public stock exchanges and are available to a wide range of investors, while private corporations have shares that are not publicly traded and are typically held by a smaller group of investors.

Question 3

In the double taxation endured by some businesses, ________ is the first taxation and ________ is the second taxation.

Accepted Answer

In double taxation, the first taxation is the corporate tax on the profits earned by the company, and the second taxation is the tax levied on the dividends paid to the shareholders. Therefore, option C best describes the double taxation scenario.

Question 4

An organization designed to avoid paying corporate tax by distributing all or most of their earnings to their shareholders is

Accepted Answer

An income trust is an organization designed to avoid paying corporate tax by distributing all or most of their earnings to their shareholders. Shareholders in an income trust receive portions of the profits based on the number of shares they own, and these payments are usually taxed at the individual's personal tax rate instead of the corporate tax rate.

Question 5

A share of ownership in a corporation is referred to as

Accepted Answer

A share of ownership in a corporation is known as stock. This provides the shareholder with certain rights such as voting rights and entitlement to a portion of the company's profits. A partnership refers to a business arrangement in which two or more individuals own and operate a company. Principle, directorship, and debt are not related to ownership in a corporation.

Question 6

Which type of business is legally considered a separate entity from its owners and is liable for its own debts?

Accepted Answer

A corporation is a separate legal entity from its owners, known as shareholders, and is liable for its own debts. This means that shareholders are not personally liable for any debts or legal actions taken against the corporation. The other options listed do not provide the same level of protection to the owners.

Question 7

Gloria wants to turn her sole proprietorship into a business corporation. Among the things that she must consider are

Accepted Answer

The answer of Gloria wants to turn her sole proprietorship...

Question 8

Suzy is considering incorporating her financial consulting business. Of the items listed below, which one would not be a problem if she incorporates?

Accepted Answer

Incorporating would actually help Suzy avoid unlimited liability, as it would create a separate legal entity for the business. However, the other options listed (heavy regulation, double taxation, complex legal requirements, and high costs of incorporation) may be potential problems when incorporating.

Question 9

Start-up costs and complexities are among the main disadvantages of

Accepted Answer

Incorporating a business involves more formalities, paperwork, and legal obligations than starting a sole proprietorship or partnership, resulting in higher start-up costs and complexities.

Question 10

________ is defined as "an artificial being, invisible, intangible, and existing only in contemplation of the law."

Accepted Answer

The definition given is commonly used to describe a corporation, which is a legal entity created by law to conduct business. It is considered an artificial being because it is created by law and exists only in contemplation of the law. It is also intangible and invisible because it can operate without a physical presence and has no physical form.

Question 11

Shareholders are ________ of a company and profits are distributed among shareholders in the form of ________.

Accepted Answer

Shareholders are owners of a company and profits are distributed among them in the form of dividends.

Question 12

Due to his hard work and notable contributions as an employee of KB Electronics, Nori has just been elected to the board of directors of the company. He will now be expected to fulfill his obligations as both an employee and director. Nori is a(n)

Accepted Answer

Nori is an employee of KB Electronics, which makes him an inside director. He has been elected to the board of directors, so he will have dual obligations as both an employee and a director.

Question 13

Most new corporations start out as ________ corporations and then move to ________ corporations as they grow.

Accepted Answer

Most new corporations start out as private corporations (often referred to as closely held corporations) owned by a small number of individuals. As they grow, they may choose to become public corporations (offering shares to the public through the stock market) to raise more capital and increase their visibility.

Question 14

An outside director is

Accepted Answer

An outside director is a person who is not an employee of the company, but who serves on the board in order to provide an objective perspective and offer independent oversight.

Question 15

What is "double taxation" in the context of a corporation?

Accepted Answer

Double taxation in the context of a corporation means that the corporation must pay income taxes on its profits, and then shareholders must also pay personal income taxes on the dividends they receive from the corporation. This means that the same earnings are taxed twice - once at the corporate level and once at the individual level.

Question 16

The person or people responsible for the firm's overall performance is/are

Accepted Answer

The CEO, or Chief Executive Officer, is ultimately responsible for the overall performance of the firm. They oversee all operations and make strategic decisions that affect the company's success. While other positions such as directors, COOs, and CFOs also play important roles, the CEO is ultimately the highest-ranking individual responsible for the company's success. Option E is not the best choice as while all employees contribute to the firm's success, the ultimate responsibility falls on the executive leadership team.

Question 17

________ is the governing body of a corporation.

Accepted Answer

The board of directors is the governing body of a corporation. They are responsible for making major decisions affecting the corporation and appointing the CEO. Majority shareholders committee and audit committee are subcommittees of the board of directors. The CEO is responsible for the day-to-day operations of the corporation and is accountable to the board of directors. Shareholders' board is not a commonly used term in corporate governance.

Question 18

Bill is starting up a new business. In order to raise the capital needed for the business, Bill has sold shares of his company to a few close relatives. This type of structure is known as a

Accepted Answer

Selling shares of a business to a select group of individuals, such as close relatives, is characteristic of a private corporation. A sole proprietorship is a business owned and operated by a single individual, while a macroenterprise is not a recognized legal structure. Public enterprises and corporations involve selling shares to the general public through a stock exchange or other means, which is not the case in this scenario.

Question 19

For the first time, Liz has decided to sell shares of her company to the public in order to raise some capital to build a new factory. Liz is launching a(n)

Accepted Answer

Liz's decision to sell shares of her company to the public for the first time is an initial public offering (IPO) as it involves the company going public and offering its shares to the general public for the first time. B, C, D, and E do not accurately describe Liz's situation.

Question 20

The two most widely used methods to form a corporation include

Accepted Answer

The two most widely used methods to form a corporation are federal or provincial incorporation. This refers to whether the corporation is registered under federal or provincial laws. Federal corporations are incorporated under the Canada Business Corporations Act, while provincial or territorial corporations are incorporated under provincial or territorial legislation.

Quiz 4: Entrepreneurship, Small Business, and New Venture Creation