Deck 4: Options for Organizing Business

Question 1

Sole proprietorships are typically small businesses that:

A)are formed by two or more partners.
B)provide their owners the advantage of limited liability.
C)are managed by incorporators.
D)employ fewer than 50 people.
E)focus on providing a service rather than earning a profit.

Answer 1

D

Question 2

Judy 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 regulations.Which of the following forms of business is best suited for Judy's needs?

A)A joint venture
B)An S corporation
C)A sole proprietorship
D)A partnership
E)A C corporation

Answer 2

C

Question 3

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

A)Ease of dissolving the business
B)Equally shared profits among owners
C)Limited liability
D)Varied sources of funds
E)Increased life expectancy

Answer 3

A

Question 4

Most tender offers of corporate raiders are hostile.

Question 5

An acquisition occurs when one company purchases another company by buying most of its stock.

Question 6

Which of the following forms of business is associated with unlimited liability to the owners?

A)Cooperatives
B)Quasi-public corporations
C)S Corporations
D)Sole proprietorships
E)C Corporations

Question 7

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

A)It is heavily regulated by the government.
B)It has limited liability for the debts incurred by the business.
C)It is hard to dissolve.
D)It is unaffected by the death or withdrawal of its owner.
E)It is easy and inexpensive to form.

Question 8

The assets and liabilities of a corporation are separate from its owners.

Question 9

Catalina owns a small restaurant and is solely responsible for its debts and liabilities.She is also entitled to all the profits the restaurant makes after paying off taxes and other expenses.Her business is an example of a(n):

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

Question 10

Raj has a business idea and is willing to invest his savings in it.He wants to operate the business on his own and also be the only person entitled to receive the profits generated from the business.Which of the following forms of business is best suited for Raj?

A)A joint venture
B)An S corporation
C)A sole proprietorship
D)A partnership
E)A C corporation

Question 11

Which of the following forms of business ownership is the easiest to establish?

A)Partnerships
B)Sole proprietorships
C)S Corporations
D)Joint ventures
E)C Corporations

Question 12

Which of the following forms of business is owned by a single individual and is the easiest way to conduct business?

A)Partnerships
B)Sole proprietorships
C)S Corporations
D)Joint ventures
E)C Corporations

Question 13

Limited partners have no voice in the management of the partnership.

Question 14

A sole proprietor has limited liability in meeting the debts of his or her business.

Question 15

Identify a true statement about sole proprietorships.

A)Most sole proprietorships have limited liability for their debts.
B)Sole proprietorships are the least common form of business organization in the United States.
C)Most sole proprietorships focus on services rather than on the manufacture of goods.
D)Sole proprietorships net far more sales and income than corporations.
E)Sole proprietorships are typically small businesses employing fewer than 100 people.

Question 16

The income earned in sole proprietorships is:

A)taxed twice.
B)exempted from tax.
C)taxed as personal income.
D)quasi-taxable.
E)taxed as business income.

Question 17

Which of the following forms of business allows for the greatest degree of secrecy?

A)Partnerships
B)Joint ventures
C)S Corporations
D)Sole proprietorships
E)C Corporations

Question 18

In a(n)_____,the owner has complete control over the business and can make crucial decisions without anyone else's approval.

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

Question 19

Which of the following statements is true of sole proprietorships?

A)They are very difficult to start and maintain.
B)They are exempted from paying any taxes.
C)They give their owners limited liability.
D)They cannot be dissolved easily.
E)They have the most freedom from government regulations.

Question 20

Brenda runs a bookstore in her locality.She started the business with her own money and solely manages the day-to-day operations of the business.Which of the following is true in this scenario?

A)Brenda's business will be constantly regulated by federal and state laws.
B)Brenda must file articles of incorporation to start her business.
C)Brenda can easily dissolve the business whenever she wants.
D)Brenda will have to share her profits with stockholders.
E)Brenda's business will be subjected to double taxation.

Question 21

A _____ has been defined as "an association of two or more persons who carry on as co-owners of a business for profit."

A)partnership
B)sole proprietorship
C)C corporation
D)cooperative
E)quasi-public corporation

Question 22

Which of the following forms of business ownership is directly linked to the life of its owner?

A)A sole proprietorship
B)An S corporation
C)A C corporation
D)A cooperative
E)A franchise

Question 23

In sole proprietorships,owners:

A)have access to employees with a variety of skills.
B)have access to limited sources of funds.
C)do not have to pay any income tax.
D)have to share their profits.
E)cannot easily dissolve the business.

Question 24

Which of the following is a disadvantage of sole proprietorships?

A)Sharing of profits with major stockholders
B)Lack of continuity
C)Lack of business control
D)Stringent government regulations
E)Absence of a tax-exempt retirement account

Question 25

Which of the following statements is true of a partnership?

A)The partners will not be held responsible for the actions of each other.
B)All the partners will have limited liability.
C)The business will face fewer regulatory controls than a corporation.
D)All partners need to submit quarterly financial statements to stockholders.
E)The owners will tend to have lower earning power than sole proprietors.

Question 26

According to the U.S.Bureau of the Census (2012),which form of business ownership is least used in the United States?

A)S-corporations
B)Joint ventures
C)Sole proprietorships
D)C-corporations
E)Partnerships

Question 27

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

A)articles of proprietorship.
B)partnership charters.
C)articles of incorporation.
D)articles of partnership.
E)partnership bonds.

Question 28

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

A)An S corporation
B)A C corporation
C)A joint venture
D)A cooperative
E)A sole proprietorship

Question 29

Which of the following is an advantage of a partnership?

A)Unlimited liability
B)Unrestricted access to funds
C)Distribution of profits
D)Few regulatory controls
E)Lack of business responsibility

Question 30

Josh has been asked to be a part of a new business venture that develops wind energy technologies.Since the business involves high risk,he does not want to be held completely liable for the firm's debts if the project fails.In this case,Josh is most likely to prefer to participate as a(n):

A)member of a cooperative.
B)limited partner.
C)general partner.
D)owner of an S corporation.
E)sole proprietor.

Question 31

_____ can be considered as both an advantage and a disadvantage of a sole proprietorship.

A)Taxation
B)Transparency
C)Secrecy
D)Continuity
E)Liability

Question 32

Salma owns a pharmacy near a hospital.She started the business with a personal loan and is wholly responsible for repaying it.Salma also needs to pay personal income tax on the profits generated from the business.Her business is an example of a(n):

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

Question 33

Which of the following statements is true of taxation in partnerships?

A)They pay taxes before distributing profits.
B)They report their share of profits as partnership incomes.
C)They are exempted from tax.
D)They pay taxes at the income tax rate for individuals.
E)They are taxed based on the number of shareholders.

Question 34

It is easier to raise funds in partnerships than in sole proprietorships because:

A)several partners mean greater earning power and credit.
B)some of the partners will have unlimited liability.
C)partnerships have less regulatory controls than sole proprietorship.
D)all partners will have limited liability.
E)partnerships can issue public stock with much less difficulty than sole proprietorships.

Question 35

In a sole proprietorship,the owner has complete control over the business.This allows the owner to:

A)have limited liability in meeting the debts of the business.
B)have access to multiple sources of funds.
C)respond quickly to competitive business conditions or to changes in the economy.
D)match the wages and benefits offered to employees by a large competing corporation.
E)utilize all profits without paying any taxes.

Question 36

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

A)there are numerous partners,who all want to solely control the management of the business.
B)there are two partners and both of them are involved in the day-to-day activities of the business.
C)the partnership is a foreign corporation that conducts its business outside the state in which it was incorporated.
D)the partnership is a domestic corporation with numerous partners.
E)there are numerous partners and the firm has issued public stock.

Question 37

Michael Wong and Sanjay Patel,both lawyers,start a law firm together.Both of them have unlimited liability for the debts of the business,and the management of the firm is equally shared between them.This law firm is an example of a(n)_____.

A)general partnership
B)S corporation
C)sole proprietorship
D)limited partnership
E)C corporation

Question 38

Which of the following is a disadvantage of a partnership?

A)Difficulty of selling the partnership interest
B)Difficulty of forming the business
C)Limited liability faced by the partners
D)Insufficient capital and credit
E)Stringent government regulations

Question 39

Articles of partnership are legal documents that set forth the basic agreement between partners.The issues covered usually include:

A)criteria for recruiting and hiring employees.
B)demographic prerequisites for selecting a partner.
C)salaries of contract employees.
D)provisions for leaving the partnership.
E)classes of public stock to be issued.

Question 40

When are limited partnerships generally used?

A)When a firm sells its stock to the public
B)When a project is risky and the chance of loss is great
C)When articles of incorporation are mandatory
D)When all partners wish to share equal liability
E)When all partners want to participate in the management of a business

Question 41

Which of the following is an accurate description of dividends?

A)They indicate the money invested by sole proprietors in their business.
B)They refer to profits in a general partnership.
C)They indicate the capital invested by each partner in a limited partnership.
D)They are cash payments received through distribution of profits in a corporation.
E)They indicate the amount of tax the incorporators of a business need to pay annually.

Question 42

Which of the following statements is true of private corporations?

A)Their stock can be bought or sold by anyone.
B)They do not pay taxes on their income.
C)Their workforce usually consists of fewer than 50 employees.
D)They are owned and managed by just one or a few people.
E)They are required to disclose financial information publicly.

Question 43

Xavier starts an investment management firm along with his friend Abdul.They decide to equally share the profits and have unlimited liability for the debts of their business.This firm is an example of a(n)_____.

A)general partnership
B)S corporation
C)sole proprietorship
D)limited partnership
E)C corporation

Question 44

Which of the following is a difference between partnerships and sole proprietorships?

A)Partnerships have better access to diverse skills when compared to sole proprietorships.
B)Partnerships are subjected to fewer government regulations than sole proprietorships.
C)Partnerships make possible the greatest degree of secrecy,whereas sole proprietorships do not.
D)In sole proprietorships,the owners have access to more funds and resources than in partnerships.
E)In partnerships,the owners have complete control of the business,whereas in sole proprietorships they do not.

Question 45

Maria wants to start a new business in collaboration with her husband and brother-in-law.The features she is looking for in the business are as follows: least possible regulatory controls,faster decision making,and ease of organization.She also wants a business in which she will not be forced to pay off any business debts from her personal assets.Which type of business ownership will be best suited to her needs?

A)General partnership
B)S corporation
C)Sole proprietorship
D)Limited partnership
E)C corporation

Question 46

In a limited partnership:

A)the partners can operate the business only for limited time period.
B)the profits earned by the owners are limited by government regulations.
C)all the partners have limited liability.
D)at least one partner has unlimited liability.
E)the partners are free from any liability for the debts of the business.

Question 47

Partnerships are quasi-taxable organizations.This means that they:

A)do not pay taxes when submitting the partnership tax return to the Internal Revenue Service.
B)are completely exempted from paying taxes.
C)are subjected to double taxation.
D)need to pay a high rate of tax irrespective of whether or not a profit is made.
E)have to pay taxes only if they decide to adopt initial public offering.

Question 48

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

A)vertical corporation
B)horizontal corporation
C)domestic corporation
D)alien corporation
E)foreign corporation

Question 49

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

A)vertical corporation
B)horizontal corporation
C)domestic corporation
D)quasi corporation
E)alien corporation

Question 50

_____ are profits of a corporation that are distributed in the form of cash payments to stockholders.

A)Common stocks
B)Bonds
C)Retained earnings
D)Dividends
E)Preferred stocks

Question 51

A(n)_____ is a legal entity,created by the state,whose assets and liabilities are separate from its owners.

A)general partnership
B)unlimited partnership
C)corporation
D)proprietorship
E)strategic group

Question 52

_____ are typically owned by many individuals and organizations who own shares of the business,called stock.

A)General partnerships
B)Limited partnerships
C)Sole proprietorships
D)Corporations
E)Franchises

Question 53

Which of the following is true of the distribution of profits earned by a partnership?

A)They are distributed equally irrespective of the capital provided by each partner.
B)They are distributed based on the work each partner puts into the business.
C)They are distributed based on the credit rating of each partner.
D)They are distributed in the proportions specified in the articles of partnership.
E)They are distributed as per the guidelines in articles of incorporation.

Question 54

Which of the following is a disadvantage of partnerships over sole proprietorships?

A)Unlike sole proprietorships,partnerships do not face any regulatory controls that affect their activities.
B)In partnerships,all owners have unlimited liability,whereas in sole proprietorships they have limited liability.
C)In partnerships,profits have to be shared,whereas in sole proprietorships all profits belong exclusively to the owner.
D)In sole proprietorships,the owners have access to more funds than in partnerships.
E)Unlike a sole proprietorship,a partnership is terminated when a partner dies or withdraws.

Question 55

Which of the following is a defining characteristic of public corporations?

A)Their stock can be bought,sold,or traded by anyone.
B)They do not pay taxes on their income.
C)Their stockholders do not receive any dividends.
D)They are owned and managed by just one or a few people.
E)They are not required to disclose any financial information to their stockholders.

Question 56

Organizations such as the National Aeronautics and Space Administration and the U.S.Postal Service that are owned by the federal,state,or local governments are known as _____.

A)S corporations
B)sole proprietorships
C)private corporations
D)quasi-public corporations
E)limited liability companies

Question 57

Which of the following is an advantage of partnerships over sole proprietorships?

A)Partnerships are easy to form,whereas sole proprietorships are not.
B)In partnerships,all owners have limited liability,whereas in sole proprietorships they have unlimited liability.
C)Partnerships make possible the greatest degree of secrecy,whereas sole proprietorships do not.
D)In partnerships,the owners have access to more funds than in sole proprietorships.
E)In partnerships,the owners have complete control of the business,whereas in sole proprietorships they do not.

Question 58

Which of the following items is found in the Model Business Corporation Act issued by the American Bar Association?

A)Information about salaries of employees in a corporation
B)Guidelines for hiring new employees in a corporation
C)Information about the personal assets of a corporation's stockholders
D)Provisions for promoting an employee within a corporation
E)Provisions for the regulation of internal corporate affairs

Question 59

_____ are legal documents that the state issues to companies based on information the company provides in the articles of incorporation.

A)State bonds
B)Corporation contracts
C)Corporate charters
D)Articles of proprietorship
E)Articles of partnership

Question 60

A private corporation is one:

A)that can be bought,sold,or traded by anyone.
B)that does not pay taxes on its income.
C)whose stock is not traded in public markets.
D)whose stock can be purchased on the New York Stock Exchange.
E)that discloses proprietary information to the public.

Question 61

A written authorization that assigns a stockholder's voting privilege to another is called:

A)profit deed.
B)stock certificate.
C)preemptive right.
D)leveraged buyout.
E)proxy.

Question 62

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)cooperative right.

Question 63

Assure Pharma Corp.,a private corporation,sold its stock to raise the money it required for global expansion.As a result,anyone could buy,sell,or trade the stocks of the company.The process adopted by Assure Pharma Corp.to raise money is referred to as _____.

A)factoring
B)bartering
C)franchising
D)initial public offering
E)angel investment

Question 64

SunRay Foundation,a corporation owned and managed by volunteers,supplies medicines and vaccines to impoverished people in Asia and Africa.Its focus is not on earning a surplus but on serving the community.SunRay Foundation is an example of a(n)_____.

A)S corporation
B)domestic corporation
C)nonprofit corporation
D)quasi-public corporation
E)C corporation

Question 65

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

A)A sole proprietorship
B)A general partnership
C)A limited liability company
D)A limited partnership
E)A corporation

Question 66

Which of the following is an advantage that corporations provide as a form of business ownership?

A)The owners of corporations do not have to share their profits with stockholders.
B)The income earned by corporations is taxed only once.
C)Corporations have the most freedom from government regulations.
D)The process involved in forming corporations is very easy and inexpensive.
E)Corporations have access to external funding sources.

Question 67

Which of the following statements is true of joint ventures?

A)They enjoy reduced government regulations when compared to general partnerships.
B)They are mostly formed to last forever.
C)They are set up not to make profits but to provide service to the community.
D)They are popular in situations that call for large investments.
E)They restrict the number and types of shareholders in the organization.

Question 68

Which of the following statements is true of preferred stockholders?

A)They are eligible to vote by proxy.
B)They are the voting owners of a corporation.
C)They have the right to exercise preemptive rights.
D)They have a claim to profits before other stockholders do.
E)They are generally the decision-makers in the day-to-day running of an organization.

Question 69

The form of business ownership that has the ability to raise capital most easily is a:

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

Question 70

Which of the following is true of S corporations?

A)They are taxed twice.
B)They are very easy to form and operate.
C)They do not have any restrictions on the number of shareholders.
D)Their shareholders have unlimited liability.
E)Their shareholders can shift income and appreciation to others.

Question 71

Which of the following is a disadvantage of a corporation?

A)Lack of regulatory controls
B)Unlimited liability
C)Absence of perpetual life
D)Employee-owner separation
E)Lack of expansion potential

Question 72

A(n)_____ is elected by the stockholders of a corporation to oversee its general operation.

A)board of stockholders
B)preferred stockholder
C)board of directors
D)chief executive
E)silent partner

Question 73

Common stockholders within a corporation:

A)act as the board of directors.
B)are completely isolated from its operations.
C)have the right to make a cumulative claim to dividends.
D)are restricted from exercising preemptive rights.
E)receive dividends after preferred stockholders.

Question 74

A(n)_____ is a partnership established for a specific project or for a limited time.

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

Question 75

Which type of stockholders usually has the right to vote and elect the board of directors?

A)A preferred stockholder
B)A common stockholder
C)A capital stockholder
D)A perpetual stockholder
E)A proxy stockholder

Question 76

Which of the following is an advantage of corporations over sole proprietorships?

A)Unlike sole proprietorships,existence of corporations is unaffected by the death or withdrawal of any of the stockholders.
B)In corporations,all the owners have unlimited liability,whereas in sole proprietorships they have limited liability.
C)Corporations offer the greatest degree of secrecy,whereas sole proprietorships do not.
D)Corporations are easier and less costly to form than sole proprietorships.
E)Unlike sole proprietorships,corporations are not subjected to double taxation.

Question 77

Which of the following is a disadvantage of corporations?

A)The owners will have limited access to external funds in a corporation.
B)The owners will have unlimited liability for the debts of a corporation.
C)The formation of a corporation can be costly and it faces double taxation.
D)The transfer of ownership in a corporation is very difficult.
E)The life expectancy of a corporation is very short and it lacks continuity.

Question 78

Which of the following is a corporation that provides a service,but is neither owned by the government nor focuses on earning profits?

A)An S corporation
B)A government subsidiary
C)A nonprofit corporation
D)A quasi-public corporation
E)A C corporation

Question 79

A(n)_____ is a form of business ownership that is difficult to form and operate and it also restricts the number and types of shareholders.

A)worker cooperative
B)S corporation
C)C corporation
D)consumer cooperative
E)general partnership

Question 80

Who is responsible for setting the long-range objectives of a corporation?

A)Sole proprietors
B)Preferred stockholders
C)Board of directors
D)Customers
E)External auditors