Question 1

Which of the following is necessary for starting a sole proprietorship?

Accepted Answer

A)  A contract 
B)  An agreement 
C)  An application to the secretary of state 
D)  Articles of proprietorship 
E)  No specific legal documents 
A)  A contract 
B)  An agreement 
C)  An application to the secretary of state 
D)  Articles of proprietorship 
E)  No specific legal documents

Question 2

Wade Comer and Tom Busby decide to start a partnership and offer accounting services. Which of the following is the best way to start this partnership?

Accepted Answer

A)  They should orally discuss how they want the partnership to work and who is responsible for certain areas. 
B)  They should determine the exact way the business should be run and have a witness listen to their oral discussion. 
C)  They should let a third party, such as a consultant or an attorney, draft whatever agreement the consultant or attorney thinks is appropriate. 
D)  They should carefully draft an articles of partnership together, outlining each partner's responsibilities and other important information. 
E)  With the help of an attorney, they should draft a partnership agreement that states each partner's duties and investments. 
A)  They should orally discuss how they want the partnership to work and who is responsible for certain areas. 
B)  They should determine the exact way the business should be run and have a witness listen to their oral discussion. 
C)  They should let a third party, such as a consultant or an attorney, draft whatever agreement the consultant or attorney thinks is appropriate. 
D)  They should carefully draft an articles of partnership together, outlining each partner's responsibilities and other important information. 
E)  With the help of an attorney, they should draft a partnership agreement that states each partner's duties and investments.

Question 3

Corporations are forbidden by law to enter joint ventures.

Accepted Answer

A) True 
 B)False

Question 4

As with a sole proprietorship, one disadvantage of a partnership is a lack of continuity.

Accepted Answer

A) True 
 B)False

Question 5

A ____ is a merger between firms operating at different but related levels in the production and marketing of a product.

Accepted Answer

A)  conglomerate merger 
B)  cooperative 
C)  joint venture 
D)  vertical merger 
E)  horizontal merger 
A)  conglomerate merger 
B)  cooperative 
C)  joint venture 
D)  vertical merger 
E)  horizontal merger

Question 6

Every partnership must have at least one limited partner.

Accepted Answer

A) True 
 B)False

Question 7

A merger between firms in completely unrelated industries is known as a

Accepted Answer

A)  conglomerate merger. 
B)  cooperative. 
C)  joint venture. 
D)  vertical merger. 
E)  horizontal merger. 
A)  conglomerate merger. 
B)  cooperative. 
C)  joint venture. 
D)  vertical merger. 
E)  horizontal merger.

Question 8

A banker or lender is more likely to make sizable loans to a sole proprietor than to a partnership.

Accepted Answer

A) True 
 B)False

Question 9

A corporation chartered in Canada and doing business in the United States is known as a foreign corporation in the United States.

Accepted Answer

A) True 
 B)False

Question 10

To raise capital, Candace Tyson and Martha Black plan to sell stock to between 108 and 200 investors. They also want to avoid double taxation. Which type of business ownership would you recommend?

Accepted Answer

A)  Regular corporation 
B)  S-corporation 
C)  Cooperative 
D)  Limited-liability company 
E)  Limited partnership 
A)  Regular corporation 
B)  S-corporation 
C)  Cooperative 
D)  Limited-liability company 
E)  Limited partnership

Question 11

To close a sole proprietorship, the owner must

Accepted Answer

A)  notify the secretary of state. 
B)  pay creditors. 
C)  publish an out-of-business statement in the newspaper. 
D)  have all licenses and permits revoked. 
E)  do none of the above. 
A)  notify the secretary of state. 
B)  pay creditors. 
C)  publish an out-of-business statement in the newspaper. 
D)  have all licenses and permits revoked. 
E)  do none of the above.

Question 12

With regard to taxation of partnerships, which of the following statements is true?

Accepted Answer

A)  Profits are taxed twice. 
B)  Each partner is taxed in the same way as a sole proprietor. 
C)  Taxes are paid on a partnership's profits, after which each partner pays taxes on his or her share of the profits. 
D)  A partnership is exempt from taxes. 
E)  The partnership is taxed as a separate entity. 
A)  Profits are taxed twice. 
B)  Each partner is taxed in the same way as a sole proprietor. 
C)  Taxes are paid on a partnership's profits, after which each partner pays taxes on his or her share of the profits. 
D)  A partnership is exempt from taxes. 
E)  The partnership is taxed as a separate entity.

Question 13

Karen Howard loves to cook and receives unqualified praise whenever she prepares a meal for someone. Encouraged by these compliments and eager to put her culinary talents to good use, Karen decides to open a small neighborhood restaurant. Since she plans to maintain complete control of the business, she will most likely organize it as a

Accepted Answer

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

Question 14

B&G, Inc.
A year ago, Kevin went to work for B&G, Inc. He has worked for the finance department ever since he started. He noticed that the corporation was only taxed as though it were a partnership. This was something that he found very odd when he first started working for the company, but he later realized it was a fairly common practice. He recognized that this was one of the advantages of this type of corporation.
While the job was challenging, Kevin was not happy. He wanted to work for a company whose main goal was to provide service to the community, not to make a profit. However, Kevin felt that, considering his present financial situation, he had to continue working for B&G, Inc. A week later, Kevin discovered there was going to be a merger between B&G, Inc. and one of its major competitors. Kevin's boss informed him that he would be getting a promotion and a raise. While he was excited about making more money, he still was not happy. He knew then that he would not be working for the company for long.
-Refer to B&G, Inc. What type of organization was Kevin considering switching to?

Accepted Answer

A)  Limited-liability corporation 
B)  Sole proprietorship 
C)  S-corporation 
D)  Not-for-profit corporation 
E)  Closed corporation 
A)  Limited-liability corporation 
B)  Sole proprietorship 
C)  S-corporation 
D)  Not-for-profit corporation 
E)  Closed corporation

Question 15

Which form of business is the easiest to start?

Accepted Answer

A)  Corporation 
B)  Partnership 
C)  Entrepreneurship 
D)  Sole proprietorship 
E)  S-corporation 
A)  Corporation 
B)  Partnership 
C)  Entrepreneurship 
D)  Sole proprietorship 
E)  S-corporation

Question 16

How would you go about incorporating a business? Describe the information contained in a corporate charter.

Accepted Answer

Incorporating a business involves severa

Question 17

What is the difference between a joint venture and a syndicate?

Accepted Answer

A joint venture and a syndicate are both

Question 18

The weakness of one partner may be offset by another partner's strength.

Accepted Answer

A) True 
 B)False

Question 19

Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid double taxation. Which type of business ownership would you recommend?

Accepted Answer

A)  Regular corporation 
B)  General partnership 
C)  Sole proprietorship 
D)  S-corporation 
E)  Not-for-profit corporation 
A)  Regular corporation 
B)  General partnership 
C)  Sole proprietorship 
D)  S-corporation 
E)  Not-for-profit corporation

Question 20

A contract between a business and a state recognizing the business as an artificial person is known as the

Accepted Answer

A)  articles of partnership. 
B)  articles of incorporation. 
C)  S-corporation. 
D)  stock certificate. 
E)  proxy. 
A)  articles of partnership. 
B)  articles of incorporation. 
C)  S-corporation. 
D)  stock certificate. 
E)  proxy.

Exam 4: Choosing a Form of Business Ownership

Which of the following is necessary for starting a sole proprietorship?

Wade Comer and Tom Busby decide to start a partnership and offer accounting services. Which of the following is the best way to start this partnership?

Corporations are forbidden by law to enter joint ventures.

As with a sole proprietorship, one disadvantage of a partnership is a lack of continuity.

A ____ is a merger between firms operating at different but related levels in the production and marketing of a product.

Every partnership must have at least one limited partner.

A merger between firms in completely unrelated industries is known as a

A banker or lender is more likely to make sizable loans to a sole proprietor than to a partnership.

A corporation chartered in Canada and doing business in the United States is known as a foreign corporation in the United States.

To raise capital, Candace Tyson and Martha Black plan to sell stock to between 108 and 200 investors. They also want to avoid double taxation. Which type of business ownership would you recommend?

To close a sole proprietorship, the owner must

With regard to taxation of partnerships, which of the following statements is true?

Which form of business is the easiest to start?

How would you go about incorporating a business? Describe the information contained in a corporate charter.

What is the difference between a joint venture and a syndicate?

The weakness of one partner may be offset by another partner's strength.

Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid double taxation. Which type of business ownership would you recommend?

A contract between a business and a state recognizing the business as an artificial person is known as the

Exploring the World of Business and Economics

A: Being Ethical and Socially Responsible

B: Being Ethical and Socially Responsible

A: Exploring Global Business

B: Exploring Global Business

Small Business, Entrepreneurship, and Franchises

Understanding the Management Process

Creating a Flexible Organization

Producing Quality Goods and Services

Attracting and Retaining the Best Employees

Motivating and Satisfying Employees and Teams

Enhancing Union-Management Relations

Building Customer Relationships Through Effective Marketing

A: Creating and Pricing Products That Satisfy Customers

B: Creating and Pricing Products That Satisfy Customers

Wholesaling, Retailing, and Physical Distribution

Developing Integrated Marketing Communications

Social Media, E-Business, and Accounting

Using Management and Accounting Information

Understanding Money, Banking, and Credit

Mastering Financial Management

A: Understanding Personal Finances and Investments

B: Understanding Personal Finances and Investments

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