Question 1

Unincorporated associations are generally formed to further a common purpose.

Accepted Answer

Unincorporated associations are groups of individuals who have come together to pursue a common purpose or goal without having to form a separate legal entity. They are not considered to be separate legal entities and do not have a formal registration process.

Question 2

The major advantage to investors in a corporation stems from the fact that their risk of loss is limited to the amount of their investment.

Accepted Answer

This is one of the defining characteristics of a corporation - the limited liability of its investors. It means that if the corporation goes bankrupt or faces legal action, the most an investor can lose is their initial investment. They are not personally responsible for any debts or liabilities incurred by the corporation beyond their investment.

Question 3

A sole proprietor is subject to unlimited personal liability for the debts of the business.

Accepted Answer

As a sole proprietor, the individual owns the business and is responsible for all of its debts and obligations. Unlike other business entities such as corporations, there is no legal separation between the individual and the business, which means that personal assets can be used to pay off business debts.

Question 4

In a corporation, a large number of investors may pool their assets to finance a large business enterprise.

Accepted Answer

This statement is true. Corporations often finance their operations through the sale of stocks or shares to investors, allowing many individuals to contribute to the funding of the company.

Question 5

If there is a joint venture, the fault or negligence of one venturer will not be imputed to the other venturers.

Accepted Answer

The answer of If there is a joint venture, the...

Question 6

Most courts hold that joint ventures are not subject to the same principles of law as partnerships.

Accepted Answer

The answer of Most courts hold that joint ventures are...

Question 7

A partnership is dissolved by the death of a partner.

Accepted Answer

When a partner in a partnership dies, the partnership is automatically dissolved because it is a legal entity based on the mutual agreement of all partners. However, the surviving partners may choose to continue the business by forming a new partnership or by incorporating the company.

Question 8

The process of incorporation involves the expenditure of funds for organizational expenses.

Accepted Answer

The process of incorporation involves various organizational expenses, such as legal fees, filing fees, and the cost of preparing and filing documents with the appropriate state agencies.

Question 9

Partnership agreements allow individuals to conduct their business without the requirement of a formal organizational structure.

Accepted Answer

Partnership agreements define the terms and responsibilities of each partner in a business venture, allowing them to operate without the need for a formal organizational structure such as a corporation.

Question 10

A sole proprietor must file a certificate indicating that he or she is commencing operations and pay a single organizational fee.

Accepted Answer

A sole proprietor does not have to file a certificate or pay a single organizational fee to commence operations.

Question 11

The death of a majority shareholder terminates a corporate enterprise.

Accepted Answer

The death of a majority shareholder does not necessarily terminate a corporate enterprise. The shares can be inherited or sold, and the corporation can continue to operate with new shareholders or board members.

Question 12

A cooperative consists of a group of two (2) or more independent persons or enterprises that cooperate for a common objective or function.

Accepted Answer

This is the definition of a cooperative.

Question 13

Business corporations exist to make a profit.

Accepted Answer

The main objective of business corporations is to earn profits and increase the value of shareholders' investments.

Question 14

An unincorporated association cannot sue or be sued in its own name.

Accepted Answer

An unincorporated association is not a legal entity and therefore cannot sue or be sued in its own name. Instead, legal action would have to be taken against the individual members of the association.

Question 15

Corporations are subject to a form of double taxation.

Accepted Answer

Corporations are taxed on their profits at the corporate level, and then shareholders are taxed on any distributions they receive from the corporation at the individual level, resulting in double taxation.

Question 16

A corporation is a separate legal entity capable of owning property, contracting, and being sued in its own name.

Accepted Answer

A corporation is a legal entity that exists separately from its owners and has its own legal rights and liabilities. It can enter into contracts, own property, and be sued or sue others in its own name.

Question 17

A sole proprietorship must pay, at the corporate income tax rate, income taxes based on the net earnings of the sole proprietorship.

Accepted Answer

A sole proprietorship is not considered a separate legal entity from the sole proprietor themselves. Instead, the sole proprietor reports the net earnings of the business on their personal income tax return and pays taxes based on their individual tax rate, not the corporate tax rate.

Question 18

A joint venture typically relates to the carrying out of a single enterprise or transaction.

Accepted Answer

A joint venture is often formed between two or more parties to carry out a specific business project or transaction. It is a partnership created for a limited time for a specific purpose.

Question 19

A corporation must have at least two shareholders.

Accepted Answer

A corporation can be formed and owned by a single shareholder.

Question 20

Partnership agreements must always be in writing.

Accepted Answer

While it is highly recommended to have a written partnership agreement, in some jurisdictions it is possible to form informal partnerships without a written agreement. However, it is always best to have a written agreement in place to prevent misunderstandings and potential legal disputes.

Quiz 41: Types of Business Organizations