Question 1

S corporations and closed corporations' earnings are exempt from federal and state income taxes based on a commitment to reinvest in local communities.

Accepted Answer

S corporations and closed corporations are not exempt from federal and state income taxes based on a commitment to reinvest in local communities. However, they may qualify for certain tax benefits or deductions.

Question 2

One advantage of a general corporation is that it is easy and inexpensive to form.

Accepted Answer

This statement is false. Forming a general corporation requires filing articles of incorporation with the state, which can be a complex and expensive process. Additionally, ongoing maintenance of the corporation, such as holding regular board meetings and keeping accurate financial records, can also add to the cost and complexity.

Question 3

Ria owns 500 shares of stock in the Omnibux Corporation. She is pleased to learn that the company earned a very nice profit over the most recent operating period. The company has announced that it will pay each shareholder a dividend of $1 per share out of its after­tax profits. Because Omnibux has already paid taxes on this profit, this payment will represent tax­free income for Ria.

Accepted Answer

Dividends received by shareholders are typically considered taxable income, even if the company has already paid taxes on its profits.

Question 4

Melodies Heal, a nonprofit corporation based on the East Coast, must pay federal and state income tax on its earnings due to the fact that it hires musicians to perform at senior care facilities.

Accepted Answer

Nonprofit corporations like Melodies Heal are typically exempt from federal and state income taxes if they meet certain criteria, such as being organized for charitable purposes, even if they hire employees to carry out their mission.

Question 5

Corporations are more closely regulated than other forms of business ownership; they are required to file more paperwork than other forms of business.

Accepted Answer

Corporations are subject to more regulations and paperwork as they are considered separate legal entities from their owners. This includes filing taxes, annual reports, and adhering to corporate governance rules.

Question 6

A corporation must register as a foreign corporation if they wish to solicit sales through the mail in a state other than where their corporate home is located.

Accepted Answer

The answer of A corporation must register as a foreign...

Question 7

The earnings of S corporations and closed corporations are not exempt from federal and state income taxes.

Accepted Answer

S corporations and closed corporations are generally subject to federal and state income taxes, but S corporations pass income directly to shareholders who then report it on their personal tax returns, potentially avoiding double taxation.

Question 8

Unlike general corporations, nonprofit corporations have no stockholders and pay no dividends.

Accepted Answer

Nonprofit corporations exist for a specific charitable, educational, religious, or social purpose and do not issue stock or pay dividends to individuals or shareholders. Any profits earned by the organization are reinvested back into the organization to further its mission.

Question 9

One drawback of an S corporation is that its earnings are taxed by the IRS, which also taxes the dividends it pays to its stockholders. This results in the double taxation of an S corporation's earnings.

Accepted Answer

Unlike a regular corporation (C corporation), the earnings of an S corporation are not taxed at the corporate level. Instead, they "pass through" to the shareholders and are only taxed once on their individual tax returns. Therefore, there is no double taxation of earnings in an S corporation.

Question 10

S corporations cannot have more than 100 stockholders.

Accepted Answer

S corporations are limited to 100 or fewer shareholders.

Question 11

In order to qualify as an S corporation, a firm must meet several criteria, including limits on the number and type of stockholders.

Accepted Answer

This statement is true. To qualify as an S corporation, a firm must meet several criteria, including limits on the number and type of stockholders. Specifically, an S corporation can have no more than 100 shareholders and all shareholders must be U.S. citizens or residents.

Question 12

Nash Games Inc. is incorporated in Illinois but also does business in Missouri. Nash would be classified as a domestic corporation in Illinois and as a foreign corporation in Missouri.

Accepted Answer

A corporation is considered domestic in the state where it is incorporated and foreign in any state where it does business but is not incorporated. Therefore, Nash Games Inc. would be considered a domestic corporation in Illinois and a foreign corporation in Missouri.

Question 13

Individuals who contribute money or property to a nonprofit organization can take a tax deduction, making it easier for these organizations to raise funds from donations.

Accepted Answer

This is true. Nonprofit organizations are generally tax-exempt, meaning that they do not pay federal income taxes on their profits. Additionally, donors who contribute money or property can deduct the value of their donation from their taxable income, reducing their tax liability. This makes it more attractive for individuals to donate to nonprofits, which in turn can help these organizations to raise funds to support their activities.

Question 14

Mergers and acquisitions basically mean the same thing; the only difference is the size of the companies involved.

Accepted Answer

Mergers and acquisitions are not exactly the same thing. A merger is when two companies of roughly equal size come together to form a new company, whereas an acquisition is when one company buys another company.

Question 15

The earnings of a nonprofit corporation are exempt from federal and state income tax.

Accepted Answer

Income tax is a type of tax that individuals and businesses pay on their income, hence making the statement true.

Question 16

Large, publicly traded corporations are required to file detailed quarterly and annual reports with the Securities and Exchange Commission.

Accepted Answer

Large, publicly traded corporations are required to file detailed quarterly and annual reports, known as 10-Q and 10-K reports respectively, with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

Question 17

A closed corporation is also known as a not­for­profit corporation.

Accepted Answer

A closed corporation is a type of for-profit corporation that has a limited number of shareholders and does not offer its shares for sale to the public. A not-for-profit corporation, on the other hand, is a type of corporation that is organized for a charitable, educational, or other purpose that does not involve generating profits for its shareholders.

Question 18

Michael owns stock in an S corporation based in the U.S. He has told his friend Juan about the company, and now Juan wants to invest in the company. Juan is a Mexican citizen who lives in northern Mexico. In this scenario, Juan will be allowed to own stock in the company.

Accepted Answer

S corporations in the U.S. have restrictions on ownership, including that shareholders must be U.S. citizens or residents. Since Juan is a Mexican citizen living in Mexico, he would not be eligible to own stock in an S corporation.

Question 19

Unlike C corporations, members of S corporations have unlimited liability.

Accepted Answer

Members of S corporations have limited liability, just like in a C corporation.

Question 20

States cannot impose separate income taxes on C corporations because the dividends paid to stockholders are taxed as personal income.

Accepted Answer

States can impose separate income taxes on C corporations, even though the dividends paid to stockholders are taxed as personal income. The corporate income tax is a separate tax from the personal income tax.

Quiz 6: Business Formation: Choosing the Form That Fits

S corporations and closed corporations' earnings are exempt from federal and state income taxes based on a commitment to reinvest in local communities.

One advantage of a general corporation is that it is easy and inexpensive to form.

Melodies Heal, a nonprofit corporation based on the East Coast, must pay federal and state income tax on its earnings due to the fact that it hires musicians to perform at senior care facilities.

Corporations are more closely regulated than other forms of business ownership; they are required to file more paperwork than other forms of business.

A corporation must register as a foreign corporation if they wish to solicit sales through the mail in a state other than where their corporate home is located.

The earnings of S corporations and closed corporations are not exempt from federal and state income taxes.

Unlike general corporations, nonprofit corporations have no stockholders and pay no dividends.

One drawback of an S corporation is that its earnings are taxed by the IRS, which also taxes the dividends it pays to its stockholders. This results in the double taxation of an S corporation's earnings.

S corporations cannot have more than 100 stockholders.

In order to qualify as an S corporation, a firm must meet several criteria, including limits on the number and type of stockholders.

Nash Games Inc. is incorporated in Illinois but also does business in Missouri. Nash would be classified as a domestic corporation in Illinois and as a foreign corporation in Missouri.

Individuals who contribute money or property to a nonprofit organization can take a tax deduction, making it easier for these organizations to raise funds from donations.

Mergers and acquisitions basically mean the same thing; the only difference is the size of the companies involved.

The earnings of a nonprofit corporation are exempt from federal and state income tax.

Large, publicly traded corporations are required to file detailed quarterly and annual reports with the Securities and Exchange Commission.

A closed corporation is also known as a notforprofit corporation.

Michael owns stock in an S corporation based in the U.S. He has told his friend Juan about the company, and now Juan wants to invest in the company. Juan is a Mexican citizen who lives in northern Mexico. In this scenario, Juan will be allowed to own stock in the company.

Unlike C corporations, members of S corporations have unlimited liability.

States cannot impose separate income taxes on C corporations because the dividends paid to stockholders are taxed as personal income.

Quiz 6: Business Formation: Choosing the Form That Fits

S corporations and closed corporations' earnings are exempt from federal and state income taxes based on a commitment to reinvest in local communities.

One advantage of a general corporation is that it is easy and inexpensive to form.

Melodies Heal, a nonprofit corporation based on the East Coast, must pay federal and state income tax on its earnings due to the fact that it hires musicians to perform at senior care facilities.

Corporations are more closely regulated than other forms of business ownership; they are required to file more paperwork than other forms of business.

A corporation must register as a foreign corporation if they wish to solicit sales through the mail in a state other than where their corporate home is located.

The earnings of S corporations and closed corporations are not exempt from federal and state income taxes.

Unlike general corporations, nonprofit corporations have no stockholders and pay no dividends.

One drawback of an S corporation is that its earnings are taxed by the IRS, which also taxes the dividends it pays to its stockholders. This results in the double taxation of an S corporation's earnings.

S corporations cannot have more than 100 stockholders.

In order to qualify as an S corporation, a firm must meet several criteria, including limits on the number and type of stockholders.

Nash Games Inc. is incorporated in Illinois but also does business in Missouri. Nash would be classified as a domestic corporation in Illinois and as a foreign corporation in Missouri.

Individuals who contribute money or property to a nonprofit organization can take a tax deduction, making it easier for these organizations to raise funds from donations.

Mergers and acquisitions basically mean the same thing; the only difference is the size of the companies involved.

The earnings of a nonprofit corporation are exempt from federal and state income tax.

Large, publicly traded corporations are required to file detailed quarterly and annual reports with the Securities and Exchange Commission.

A closed corporation is also known as a not­for­profit corporation.

Michael owns stock in an S corporation based in the U.S. He has told his friend Juan about the company, and now Juan wants to invest in the company. Juan is a Mexican citizen who lives in northern Mexico. In this scenario, Juan will be allowed to own stock in the company.

Unlike C corporations, members of S corporations have unlimited liability.

States cannot impose separate income taxes on C corporations because the dividends paid to stockholders are taxed as personal income.

A closed corporation is also known as a notforprofit corporation.