Exam 4: Choosing a Form of Business Ownership

You run a fitness studio that trains individual clients and small groups. Because you are the only trainer, you run the business as a sole proprietorship. A client was injured and sues you for $1,000,000. You have no liability insurance on the business. What is your personal liability if you lose the lawsuit?

Santino would like to start selling his homemade salsas and sauces. He figures his start-up costs will be low, and he has money saved, so he decides to start his business on his own and sell his products at a local farmers' market. This is likely an example of which of the following?

Amal and Nasim would like a form of business that combines the benefits of a corporation and a partnership while avoiding some of the restrictions associated with those forms of ownership. Which type of business should they form?

Manuel owns a mobile pet-grooming business. Last year as he was grooming a poodle Manuel accidentally dropped the clippers, causing a gash on the poodle's back. The poodle's owner then sued Manuel for the veterinarian bills. The court determined that Manuel owed the poodle's owner $2,000. Which of the following describes the likely form of Manuel's pet-grooming business and his liability?

What is the primary disadvantage of a sole proprietorship that a corporation overcomes?

You are starting a construction business with a friend. You will each own 50% of the business, but you will get 60% of the profits. Your business partner will get the other 40%. You want to ensure that the business offers liability protection against unpaid business debts and legal liabilities. Which form of business best meets your needs?

You are 50% partner in a general partnership. The business has outstanding debts of $250,000 and is closing due to the death of your only partner. What is your personal liability?

The Zebra Corporation is owned by three people. Jun owns 40%, Liu Wei owns 35%, and Minh owns 25%. However, Minh does at least 50% of the work, and Jun is a passive owner who does no work at all. If the company makes $100,000 profit this year and decides to distribute it all to the owners, how much would Jun get?

A growing pizza restaurant was originally formed as a sole proprietorship because it was based on the owner's family recipe. The restaurant has become so popular that several wealthy people have inquired about investing money to help the business open more locations. If the owner had known there would be an opportunity to sell shares of the company in exchange for investment capital, which form of business would he have chosen?

Which of the following is the top governing body of a corporation?

What does corporate taxation mean?

Joan is opening a home-based craft business where she makes high-end greeting cards and sells them on Etsy. Because this will remain a small and simple business, which of the following will she likely form?

Keisha and Wasim decide to go into business together. They start by writing an agreement explaining the terms of the business they will both own, along with each of their responsibilities. Which of the following have Keisha and Wasim created?

Kayla is evaluating the ownership structure for her new business, which is in a high-risk industry where businesses are often sued. This relates to which key consideration for choosing ownership structure?

Which of the following ownership structures holds a business owner personally responsible for all debts of the business?

Jerome is starting a solo business right now, but he hopes it will grow fast so that he can sell it in a few years. This relates to which key consideration for choosing ownership structure?

When Alyssa decides that she wants to sell her accounting business, which of the following will she discover to be a related benefit of a corporation?

In which of the following do profits from a business go straight to the owners, who then report their share of profits (or losses) in the business on their individual tax returns?

If a corporation makes $100,000 in profit, how will that profit be taxed if the money is all distributed to the owners?

Two dermatologists have created a skin care line to help with blemishes and wrinkles. They'd like to go into business selling their products. Which form of business would allow them to combine the benefits of a corporation and a partnership while avoiding some of the disadvantages?