Deck 4: Forms of Business Ownership

Question 1

In a limited partnership, all of the partners have limited liability.

Answer 1

False

Question 2

In 2004, Albertson's Inc.purchased Southern California's premier fresh, gourmet, and specialty food retailer, Bristol Farms.This was an example of an acquisition.

Answer 2

True

Question 3

When Addison Wilcox buys an H&R Block franchise, he becomes a franchisee.

Answer 3

True

Question 4

One of the disadvantages of the sole proprietorship is that the owner has unlimited liability.

Question 5

For partnerships to be legal, they must be established in writing.

Question 6

A person who buys a franchise has the same level of control as an entrepreneur who opens his or her own sole proprietorship.

Question 7

Corporations face many more government restrictions and regulations than sole proprietorships and partnerships.

Question 8

The corporation's board of directors elects the corporate officers.

Question 9

When Whole Foods Market, the world's largest natural foods supermarket, acquired Select Fish, a fish processing company, it was an example of a conglomerate merger.

Question 10

The sole proprietorship is considered a legal entity; therefore, it is taxed separately from the owner.

Question 11

Double taxation is a distinct advantage that corporations have over other forms of ownership.

Question 12

Dissolving a partnership is easier than dissolving a sole proprietorship.

Question 13

If the sole proprietorship acquires a legal business name, the owner then has limited liability.

Question 14

A disadvantage of a partnership is that any partner may have to pay all of the debts of the company regardless of who incurred the debts.

Question 15

Registration procedures for incorporation are uniform from state to state across the U.S.

Question 16

Cooperatives are regulated with the same tax laws and rates as corporations.

Question 17

When Ashland Plastics and Melamine Chemicals formed a joint venture to develop flame-resistant plastic sheeting, the relationship most likely ended as soon as the project was completed.

Question 18

Articles of incorporation usually specify the life of a corporation as a certain number of predetermined years.

Question 19

Changing demographics drive the franchise industry growth.

Question 20

The two types of cooperatives are wholesale and retail.

Question 21

Suzanne Pogell wanted to learn to sail, but she could find no one to teach her because men were the ones who sailed, and women were their crew.She finally did convince someone to teach her to sail, and after mastering sailing, she started an all-woman sailing school called Womanship as a sole proprietorship.When she dies, the:

A)business dies with her
B)business continues with the employees running it
C)government takes over and sells the assets
D)business can be continued by any blood relative
E)business must shut down until after her will is probated

Question 22

Paul Hyatt owns and operates DeepClean, a Florida-based company that cleans up mold and mildew in homes and businesses.As the sole proprietor of the business, he has unlimited liability, which means:

A)he has unlimited access to funds
B)he is fully liable for all business debts
C)he usually has to put in an unlimited number of hours
D)he must have liability insurance
E)he is free from government regulation

Question 23

Sole proprietorships:

A)are double taxed
B)have unlimited liability
C)are more difficult to dissolve than partnerships
D)find is easy to raise needed capital
E)are more closely regulated by the government than other forms of business

Question 24

Tonya Thomas is tired of working for other people.She wants to start her own administrative services businesses and control her own work schedule.She wants to have sole responsibility for all business decisions.Thomas should form a(n):

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

Question 25

Of all forms of business ownership, corporations account for the largest share of both:

A)number of firms and sales
B)sales and profits
C)income and employees
D)number of firms and employees
E)bankruptcies and employees

Question 26

Which of the following is an advantage of sole proprietor ownership?

A)Limited liability
B)Freedom from government regulation
C)Ease with which capital can be raised
D)Ease with which qualified employees can be found
E)None of the above

Question 27

Pete Yankin and Ken Lowery consider themselves to be experts on hunting in the mountains in North Carolina.As a result, the two men established a company that markets hunting expeditions.Yankin and Lowery share responsibilities for booking the trips, gathering supplies, and guiding groups of five to seven hunters into locations where they can hunt for deer and bear.Since the two will share any profit equally, this would be an example of a(n):

A)S corporation
B)cooperative
C)sole proprietorship
D)partnership
E)double proprietorship

Question 28

Jules Sylvester had always loved reptiles.When he was asked by a movie producer if he could locate some anaconda snakes for a movie, a business was born.Sylvester is the proud owner and operator of Reptile Rentals.The California-based business, which he started with no financial help from anyone, is often called on to provide "creepy, crawly" moments in the movies.Jules Sylvester is an example of a:

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

Question 29

When Linda McAnem began Stirya, a New York-based computer services company, she ran it as a sole proprietorship.As a sole proprietor, McAnem:

A)found it easy to raise capital
B)had no trouble finding qualified employees
C)found the business to be easy and inexpensive to form
D)had limited liability
E)was able to take advantage of various tax deductions

Question 30

A term that means that business damages and/or debts can also be attached to the personal assets of the owners is ______ liability.

A)limited
B)informal
C)funding
D)unlimited
E)asset

Question 31

When companies in the same industry merge to achieve economies of scale and to expand their product lines, it is called a horizontal merger.

Question 32

Which of the following is a disadvantage of sole proprietor ownership?

A)Difficulty in raising capital
B)No special taxation
C)Ease of dissolution
D)Ease of formation
E)Freedom from government regulation

Question 33

The most common form of business organization is the:

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

Question 34

What type of business organization generates the most total sales?

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

Question 35

Baby boomers are having a strong effect on the franchise industry.

Question 36

Stewed Tomatoes was an "all-girl power-pop trio." Its three members realized that many musicians feel stifled when making music in a sterile studio environment while the clock ticked away expensive hours, so the three girl band members created Materville Studios, a multimedia production house and recording studio in downtown Chicago.They share work responsibilities and profits equally.Materville Studios is a(n):

A)S corporation
B)cooperative
C)sole proprietorship
D)partnership
E)double proprietorship

Question 37

Eighty-two percent of boomers indicated that they will not retire at or before age 65.

Question 38

When Wachovia Bank, acquired First Union Bank Dim S.A., it was an example of a conglomerate merger.

Question 39

The form of business ownership that has the most difficulty in raising capital is the:

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

Question 40

Which of the following is a disadvantage of sole proprietor ownership?

A)Ease and low cost of formation
B)Freedom from government regulation
C)All profits to the owner
D)Unlimited liability
E)Ease of dissolution

Question 41

Ease of formation, flexibility, and diversity of management are advantages of the _____ form of business ownership.

A)partnership
B)joint venture
C)cooperative
D)conglomerate
E)corporation

Question 42

Fred Pittman has invested $10,000 in his son's motorcycle repair shop, but he takes no part in its management.Pittman is a(n):

A)limited partner
B)non-working partner
C)general partner
D)entrepreneur
E)unlimited partner

Question 43

Croutakie seemed like a great idea.Chef Leo Nyami and Sara Rice decided to take advantage of the popularity of shitake mushrooms and create some shitake mushrooms products that could be sold to restaurant patrons and other gourmets through their new company.Nyami and Rice have recently abandoned their business because they could not pay its outstanding business debts.Since Nyami and Rice are both liable for the debts, their business was a(n):

A)general partnership
B)private corporation
C)limited partnership
D)open corporation
E)quasi corporation

Question 44

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

A)Both the partnership and the individuals are taxed for any profits earned.
B)Partnerships file tax returns but pass profits and losses on to partners who report them on their tax returns.
C)Partnerships use corporate tax rates in filing returns.
D)Partnerships are limited in taxes depending on number of partners.
E)None of the above about the taxation of partnerships is true.

Question 45

When Linda McAnem began Stirya, a New York-based computer services company, she ran it as a sole proprietorship.As the business grew, she realized that she did not want to be personally liable for the business's debts and wanted her business accounts to be separate from her personal accounts.Therefore, she should have:

A)incorporated Stirya
B)found limited partners
C)created a general proprietorship
D)created an S proprietorship
E)franchised the business

Question 46

The first step to incorporating a company is to:

A)select the company's name
B)write the articles of incorporation
C)buy necessary licenses and pay required taxes
D)hold an organizational meeting
E)create a board of directors

Question 47

Which of the following is an example of a disadvantage associated with a partnership?

A)unlimited liability
B)possibility of more available credit
C)diversity of management
D)flexibility
E)ease of formation

Question 48

Partnership agreements generally specify all of following EXCEPT:

A)contributions of each partner
B)management responsibilities
C)provisions for senior partnership interests
D)methods of taxation of each partner
E)steps in dissolving the entity

Question 49

Which of the following statements about a general partnership is true?

A)A general partnership is an entity separate from its owners.
B)A general partnership is the most popular form of business ownership.
C)The partnership agreement must be in writing to be legal.
D)General partnerships are usually "double-taxed."
E)Partners in a general partnership co-own the company's assets.

Question 50

A corporation:

A)is a taxable entity
B)is subject to the laws of the state in which it was formed
C)can own property
D)can sue and be sued
E)is accurately described by all of the above

Question 51

Bob Nichol and Martha Bohner own and operate a small company that bakes and sells Thunder Muffins, gigantic muffins full of blueberries, blackberries, or raspberries.They sell the muffins at a local farm that is open to the public on weekends.Since they operate the business as a partnership, they should:

A)borrow as much as possible
B)hire an outside consultant
C)hire a manager to operate the business
D)seek government assistance
E)agree to share the business's profits and losses

Question 52

Which of the following statements about incorporation is true?

A)A corporation has to incorporate in the state in which it is based.
B)A corporation is not subject to the laws of the state in which it is formed.
C)Articles of incorporation may vary slightly from state to state.
D)Corporations are taxed the same regardless of the state in which they are chartered.
E)Corporations must register in each state in which they want to do business.

Question 53

Which of the following statements about the partnership as a form of business ownership is true?

A)Termination of the partnership is simple.
B)Liability for the partners is limited.
C)Disagreements between partners are rare.
D)Formation of the partnership is simple.
E)Stockholders in partnerships have voting rights.

Question 54

Thom Georges wants to open a store where he sells nothing but antique architectural features that he can salvage from old houses being torn down to make way for progress.He has an eye for the kind of doors, windows, mantels, and so forth that decorators want, but he does not have all the funding he needs to get started.He has invited his parents to invest $40,000 in the enterprise.He has told them that if they do invest, they would have liabilities in the firm equal to but no greater than their investment.Georges is trying to get them to form a _____ with him.

A)closely-held corporation
B)cooperative
C)general partnership
D)joint venture
E)limited partnership

Question 55

With its ease of registration and pro-corporate policies, _____ is called the "state of incorporation." About half of the Fortune 500 companies are incorporated there.

A)New York
B)Ohio
C)Delaware
D)Georgia
E)California

Question 56

Croutakie seemed like a great idea.Chef Leo Nyami and Sara Rice decided to take advantage of the popularity of shitake mushrooms and create some shitake mushrooms products that could be sold to restaurant patrons and other gourmets through their new company.The mushrooms are expensive, and there were other unexpected financial problems, so Nyami and Rice asked Bill Ng to become a limited partner.This means that Ng:

A)is limited in the number of hours he can work each month
B)is limited in the amount he can invest
C)qualifies for a limited income tax rate
D)agrees not to participate in day-to-day management of the firm
E)agrees to limit his expertise to a certain area, such as finance or marketing

Question 57

Three Sisters Specialty Foods, owned by Judith Coker, Millie Humphreys, and Jade Watson, sells eggless cake mixes for people on a restricted diet.Coker recently purchased an industrial grade mixer without conferring with her sisters who were upset when they learned that they were all three liable for the payments on the mixer.Three Sisters is an example of a:

A)general partnership
B)closely held corporation
C)limited partnership
D)joint partnership
E)private corporation

Question 58

The growing popularity of bread machines has become a new business opportunity for Shelly Clemins and Jan Schoenbarr.The women make and sell bread machine covers and fabric gift bags to hold the bread loaves made in the machines.The women share the responsibilities of running the business (called Bread & Butter) as well as its profits equally.Bread & Butter would be an example of a(n):

A)general partnership
B)general cooperative
C)limited cooperative
D)S-partnership
E)sole partnership

Question 59

A corporation:

A)does not have a life separate from its owners
B)cannot sue or be sued
C)does not have a size limitation
D)ends when the owner of the corporation charter dies
E)is one of the easy types of businesses to form

Question 60

Karl Metzger plans to invest $5,000 in a partnership with his brother to produce and sell handcrafted violins, zithers, and other string instruments.Metzger does not plan to work in the business and wants no more liability than his investment.He should be a:

A)stockholder
B)temporary partner
C)general partner
D)limited partner
E)joint partner

Question 61

Rebecca Siddoway own and operate Country Candies.Siddoway specializes in making rich, creamy toffees that she packages in attractive gift boxes and sells through the mail.What would her first step be if she decides to incorporate her business to make it easier to find investors?

A)to elect a board of directors
B)to write the articles of incorporation
C)to hold an organizational meeting with shareholders
D)to sell stock to her customers
E)to patent her products

Question 62

Rebecca Siddoway own and operate Country Candies.Siddoway specializes in making rich, creamy toffees that she packages in attractive gift boxes and sells through the mail.What would be the advantage to Siddoway if she decides to incorporate her business?

A)Corporations have fewer government restrictions and regulations.
B)Corporations have guaranteed loans for expansion.
C)Corporations pay lower and fewer taxes.
D)Corporations have an enhanced ability to attract financing.
E)Customers and suppliers would treat her with greater respect if she operated her business as a corporation instead of a sole proprietorship.

Question 63

Articles of incorporation do NOT include:

A)the name and address of the corporation
B)a list of all stockholders' names
C)the objectives of the corporation
D)the minimum capital requirements
E)the classes of stock

Question 64

A corporation has:

A)limited liability
B)ease of transferring ownership
C)continuity of life
D)ability to attract financing
E)all of the above

Question 65

Aaron Medford has invested $600 in the corporate stock of a manufacturer of offshore oil drilling equipment.If the company goes bankrupt, the most Medford could lose would be:

A)half of his investment
B)the par value of his stock
C)$600
D)$600 plus foreclosure costs
E)nothing--the company must reimburse him his investment

Question 66

To avoid double taxation, a new entrepreneur may elect to organize as a(n):

A)cooperative
B)multiple proprietorship
C)S corporation
D)conventional corporation
E)C corporation

Question 67

Which of the following provides the legal and managerial guidelines for operating the firm?

A)articles of incorporation
B)bylaws
C)constitution
D)corporate structure
E)annual report

Question 68

An S corporation is generally set up to:

A)take advantage of limited liability
B)reduce tax burdens
C)easy entry into an industry
D)implement an expansion strategy
E)attract capital

Question 69

A corporation's earnings are taxed as corporate earnings and as dividends to the stockholders.This is known as:

A)double taxation
B)double indemnity
C)double jeopardy
D)primary and secondary taxation
E)tax duplication

Question 70

A corporation's board of directors:

A)is appointed by the SEC
B)is selected by the agency that chartered the corporation
C)acts as organizational figureheads
D)sets major corporate goals and policies
E)should never have more than seven members

Question 71

An S corporation:

A)is taxed like a conventional corporation
B)does not have stockholders
C)does not make the owners of the corporation personally liable for its debts
D)is only a legal format for companies that have at least 1,000 stockholders
E)does not have a board of directors

Question 72

Before selling stock to the public, a corporation must register with the:

A)Internal Revenue Service
B)Securities and Exchange Commission
C)World Bank
D)U.S.Treasury Department
E)Federal Trade Commission

Question 73

Jack Smith and four other people own Persimmon Hill Farm, an agric-entertainment farm which provides corn mazes, bonfires, hay rides, and food treats to paying visitors.All of the owners have limited financial risk.Persimmon Hill Farm is a(n):

A)strategic alliance
B)general partnership
C)limited partnership
D)corporation
E)multiple proprietorship

Question 74

The fact that a corporation has limited liability means:

A)corporations can earn a limited amount
B)some of the owners are limited in earnings
C)owners' liabilities are limited to the amount invested
D)the life of the corporation is limited
E)the corporation's ability to expand is limited

Question 75

A firm's stockholders have the right to do all of the following EXCEPT:

A)share in company profits, in the form of dividends
B)elect the board of directors
C)attend annual meetings
D)get discounts on the company's product or service
E)sell or transfer their ownership

Question 76

Why do most large companies have outside directors on their boards?

A)to meet federal government requirements
B)to create globalization efforts
C)to provide independent benchmarks
D)to provide technology leadership
E)to bring a fresh view to all of the corporation's activities

Question 77

Who owns a corporation?

A)its employees
B)its board of directors
C)its president
D)its board of directors and major stockholders
E)everyone who owns a share of stock in the corporation

Question 78

Which of the following describes a disadvantage associated with a corporation?

A)double taxation
B)cost of formation
C)government regulations
D)complexity of formation
E)all of the above

Question 79

The C Corporation is another term for:

A)the conventional form of corporation
B)limited partnerships
C)multiple proprietorships
D)general partnerships
E)limited liability companies

Question 80

Double taxation in a corporation means:

A)the corporation must pay taxes twice a year
B)earnings of the corporation and dividends of the shareholders both are taxed
C)corporations can double their earnings without higher taxes
D)corporations must pay both state and federal taxes
E)none of the above