Question 1

A sole proprietor has limited liability for the obligations of a proprietorship.

Accepted Answer

A sole proprietor is personally obligated for the debt of the proprietorship. Legally speaking, this owner has unlimited liability for the obligations of this type of business organization.

Question 2

The failure to consider how to overcome disputes involving managerial control can cause business activities to suffer and an organization to fail.

Accepted Answer

The failure to consider how to overcome disputes involving managerial control can cause business activities to suffer and an organization to fail. Therefore, consideration of potential conflict and mechanisms to resolve disputes are essential to consider when selecting a form for a business venture.

Question 3

The three basic forms of business organizations are limited partnerships,S corporations,and limited liability companies.

Accepted Answer

The law recognizes three basic forms of business organizations and several hybrid forms that contain attributes of two or more basic forms. The three basic forms include sole proprietorships, partnerships, and corporations.

Question 4

Jacob and his family own and operate a publishing firm.This is an example of a publicly held organization.

Accepted Answer

Some organizations are owned by only a few persons. Such organizations are said to be closely held. So, the firm owned by Jacob and his family is an example of a closely held organization.

Question 5

If a sole proprietorship retains its profits for business expansion purposes instead of distributing the money to a proprietor,that owner still must pay taxes on the income made by the proprietorship.

Accepted Answer

If a sole proprietorship retains its profits for business expansion purposes instead of distributing the money to a proprietor, that owner still must pay taxes on the income made by the proprietorship. A sole proprietorship is not taxed as an organization. All the proprietorship's income subject to taxation is attributed to a proprietor.

Question 6

A dissolution essentially terminates the business of a partnership.

Accepted Answer

A dissolution does not necessarily destroy the business of a partnership. Dissolution is not the same thing as terminating an organization's business activity.

Question 7

Usually,the cost of creation of a business entity is not a major factor in considering which form of business organization a person will choose to operate a business.

Accepted Answer

Usually, the cost of creation of a business entity is not a major factor in considering which form of business organization a person will choose to operate a business. The most significant creation-related issues are how long it will take to create a particular organization and how much paperwork is involved.

Question 8

Ownership of a sole proprietorship can be transferred.

Accepted Answer

Ownership of a sole proprietorship cannot be transferred. The fact that a proprietorship's business activity may be more stable than a proprietor's willingness to remain actively involved in a business indicates that the sole proprietorship is a less desirable organizational form.

Question 9

Examples of publicly held businesses include those whose stock is traded on a public exchange.

Accepted Answer

Examples of publicly held businesses include those whose stock is traded on a public exchange. Publicly held businesses are be owned by hundreds, if not thousands, of persons.

Question 10

A business is likely to shift away from the proprietorship form as it becomes more successful.

Accepted Answer

The ease of the steps used to create a proprietorship makes it an attractive alternative when beginning a new business venture. However, as the other factors might dictate, a business might shift away from the proprietorship form as it becomes more successful.

Question 11

In the corporate form of organization,the shareholders elect the officers.

Accepted Answer

In the corporate form of organization, the shareholders elect the members of the board of directors. These directors set the objectives or goals of the corporation, and they appoint the officers.

Question 12

Partnership is the most easily formed business organization compared to other forms of business organizations.

Accepted Answer

A sole proprietorship is the easiest and least expensive business organization to create. When compared to other forms of business organizations (other than the sole proprietorship), a partnership is easily formed. The cost of forming a partnership is relatively minimal.

Question 13

Family-owned and family-operated businesses are common examples of publicly held organizations.

Accepted Answer

Some organizations are owned by only a few persons. Such organizations are said to be closely held. Family-owned and family-operated businesses are common examples of closely held organizations.

Question 14

When a business is publicly held by a large number of owners,the form of organization usually is a corporation.

Accepted Answer

When a business is publicly held by a large number of owners, the form of organization usually is a corporation. The reason for this corporate form being used is that shareholders can transfer their ownership without interfering with the organization's management.

Question 15

The creation of a partnership requires permission from each state in which it does business.

Accepted Answer

The cost of forming a partnership is relatively minimal. In addition, the creation of a partnership is made easier since it does not need to get permission from each state in which it does business.

Question 16

If a partnership is called "Golden Consultants," then the partners would need to comply with any applicable assumed-name statute.

Accepted Answer

If the name of a partnership is other than that of the partners, the partners must give notice as to their actual identity under the state's assumed-name statute. Failure to comply with this disclosure requirement may result in the partnership being denied access to courts, or it may result in criminal actions being brought against those operating under the assumed name.

Question 17

All partners in a general partnership have unlimited liability for their organization's debts.

Accepted Answer

All partners in a general partnership have unlimited liability for their organization's debts. These partners' personal assets, which are not associated with the partnership, may be claimed by the partnership's creditors.

Question 18

A limited partnership is solely made up of limited partners.

Accepted Answer

A limited partnership basically has all the attributes of a partnership except that one or more of the partners are designated as limited partners. The management is left in the hands of one or more general partners who remain personally liable for the organization's debts.

Question 19

When two or more persons with a common interest in business share profits and losses,a partnership exists.

Accepted Answer

The key to a partnership's existence is satisfying the elements of its definition: two or more persons, a common interest in business, and sharing profits and losses. If the parties conduct their affairs in such a way as to meet these definitional elements, a partnership exists regardless of whether the persons involved call themselves partners or not.

Question 20

Although expensive to create in comparison with other forms of businesses,the use of sole proprietorships is becoming all the more common.

Accepted Answer

A sole proprietorship is the easiest and least expensive business organization to create. The use of sole proprietorship is very limited because multiple owners cannot create a proprietorship.

Quiz 14: Business Organizations