Question 1

Which of the following is not an advantage of the corporate form of ownership?

Accepted Answer

A) Limited liability for the owners. 
B) It is the easiest and least expensive form of ownership to create. 
C) Easy transfer of ownership. 
D) Perpetual life. 
A) Limited liability for the owners. 
B) It is the easiest and least expensive form of ownership to create. 
C) Easy transfer of ownership. 
D) Perpetual life.

Question 2

A special type of partnership in which all partners, who in many states must be professionals, are limited partners is called ________ partnership.

Accepted Answer

A) general 
B) limited 
C) silent 
D) limited liability 
A) general 
B) limited 
C) silent 
D) limited liability

Question 3

All the profits of a sole proprietorship are taxed as current income of the owner even if they are not withdrawn from the business.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a disadvantage of the corporation form of ownership?

Accepted Answer

A) An inability to accumulate capital. 
B) The unlimited liability to the members of the board. 
C) Double taxation on profits. 
D) The lack of continuity. 
A) An inability to accumulate capital. 
B) The unlimited liability to the members of the board. 
C) Double taxation on profits. 
D) The lack of continuity.

Question 5

A disadvantage of the corporate form of ownership is when profits are taxed at the corporate rate and at the individual rate and this is referred to as ________.

Accepted Answer

A) double taxation 
B) limited liability 
C) double liability 
D) single taxation 
A) double taxation 
B) limited liability 
C) double liability 
D) single taxation

Question 6

Corporations must obtain a federal charter before they can conduct any business.

Accepted Answer

A) True 
 B)False

Question 7

A limited partner is treated as an investor in a business venture and does not take an active role in managing it.

Accepted Answer

A) True 
 B)False

Question 8

The most critical disadvantage of the sole proprietorship is ________.

Accepted Answer

A) the owner's unlimited personal liability 
B) limited access to capital 
C) lack of continuity 
D) limited skills and abilities of the owner 
A) the owner's unlimited personal liability 
B) limited access to capital 
C) lack of continuity 
D) limited skills and abilities of the owner

Question 9

Although not required by law, a written partnership agreement that spells out the terms of operating the partnership and the status of each partner should be developed.

Accepted Answer

A) True 
 B)False

Question 10

In a partnership, profits (and losses)must be shared according to the ratio of capital originally invested in the partnership.

Accepted Answer

A) True 
 B)False

Question 11

Of all U.S. business firms, sole proprietorships are the most common, accounting for approximately 71 percent of businesses.

Accepted Answer

A) True 
 B)False

Question 12

Mini Case 6-1: "Today, You Gotta' Be a Corporation"
Duke has been a successful used car dealer for 25 years in the same location, operating as a proprietorship. In those 25 years, he has expanded his operation and become the largest independent car dealer in a city of 85,000 people. Few people in town can boast of a business reputation better than Duke's. As he says, "I've always done business in a fair and honest fashion, and I've tried to give my customers an honest deal. The public has responded well, and last year the business revenue increased to an all-time high of $830,000."
As the business has grown, so have Duke's liabilities. On a given day, Duke will have cars worth from $350,000 to $450,000 as inventory on the lot. "Twenty years ago, if I'd asked the bank for a line of credit of $200,000, they'd have tossed me out the front door. There is no question that today business is different."
Duke's only daughter recently married a garage mechanic who has worked in the area for the past three years. Though Duke thinks the boy is certainly nice enough, he does not believe he is very smart. "The kid sure knows how to fix a car, but that's as far as it goes," says Duke. "On my last visit to the accountant, he suggested I consider incorporating. I guess he knows what he's talking about. That's all you hear today - 'you gotta be a corporation.' I guess he's right. But, to tell you the truth, I don't know."
-Would you recommend Duke establish an S corporation? What conditions would he have to meet?

Accepted Answer

Duke's business looks as though it would

Question 13

Which of the following statement(s)is/are true?

Accepted Answer

A) Closely held corporations are owned by only a few shareholders - often family members. 
B) Most closely held corporations require shareholders interested in selling their stock to offer it first to the corporation. This is known as the right of first refusal. 
C) Shares of stock the corporation itself owns are called treasury stock. 
D) All of the above 
A) Closely held corporations are owned by only a few shareholders - often family members. 
B) Most closely held corporations require shareholders interested in selling their stock to offer it first to the corporation. This is known as the right of first refusal. 
C) Shares of stock the corporation itself owns are called treasury stock. 
D) All of the above

Question 14

Probably the most important reason to have a partnership agreement is that ________.

Accepted Answer

A) it identifies the name of the partnership and protects that name from infringement by others 
B) it states the location and the purpose of the business 
C) it determines how the partnership and the partners will pay taxes 
D) it resolves potential sources of conflict that, if not addressed in advance, could later result in partnership battles and dissolution of an otherwise successful business 
A) it identifies the name of the partnership and protects that name from infringement by others 
B) it states the location and the purpose of the business 
C) it determines how the partnership and the partners will pay taxes 
D) it resolves potential sources of conflict that, if not addressed in advance, could later result in partnership battles and dissolution of an otherwise successful business

Question 15

Profits earned by a partnership are taxed in the same fashion as those earned by a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 16

Entrepreneurs should not spend much time selecting a form of ownership for their businesses because making the choice is merely a technicality, which has little impact on the business and its owner(s).

Accepted Answer

A) True 
 B)False

Question 17

The sole proprietorship is the best form of ownership for entrepreneurs launching their first businesses.

Accepted Answer

A) True 
 B)False

Question 18

C corporations, S corporations, and LLCs can be ________ to establish.

Accepted Answer

A) costly 
B) easy 
C) quick 
D) cheap 
A) costly 
B) easy 
C) quick 
D) cheap

Question 19

All of the following are advantages of a partnership except ________.

Accepted Answer

A) partnerships are relatively easy and inexpensive to establish 
B) partnerships avoid double taxation since the partnership itself is not subject to federal taxation 
C) partnerships have the greatest ability to accumulate capital of all of the forms of ownership 
D) partnerships offer the ability to combine the management and business skills of two or more people in a complementary and powerful fashion 
A) partnerships are relatively easy and inexpensive to establish 
B) partnerships avoid double taxation since the partnership itself is not subject to federal taxation 
C) partnerships have the greatest ability to accumulate capital of all of the forms of ownership 
D) partnerships offer the ability to combine the management and business skills of two or more people in a complementary and powerful fashion

Question 20

If a sole proprietorship fails, the owner is not liable for its debts since the business is a separate legal entity.

Accepted Answer

A) True 
 B)False

Which of the following is not an advantage of the corporate form of ownership?

A special type of partnership in which all partners, who in many states must be professionals, are limited partners is called ________ partnership.

All the profits of a sole proprietorship are taxed as current income of the owner even if they are not withdrawn from the business.

Which of the following is a disadvantage of the corporation form of ownership?

A disadvantage of the corporate form of ownership is when profits are taxed at the corporate rate and at the individual rate and this is referred to as ________.

Corporations must obtain a federal charter before they can conduct any business.

A limited partner is treated as an investor in a business venture and does not take an active role in managing it.

The most critical disadvantage of the sole proprietorship is ________.

Although not required by law, a written partnership agreement that spells out the terms of operating the partnership and the status of each partner should be developed.

In a partnership, profits (and losses)must be shared according to the ratio of capital originally invested in the partnership.

Of all U.S. business firms, sole proprietorships are the most common, accounting for approximately 71 percent of businesses.

Which of the following statement(s)is/are true?

Probably the most important reason to have a partnership agreement is that ________.

Profits earned by a partnership are taxed in the same fashion as those earned by a sole proprietorship.

Entrepreneurs should not spend much time selecting a form of ownership for their businesses because making the choice is merely a technicality, which has little impact on the business and its owner(s).

The sole proprietorship is the best form of ownership for entrepreneurs launching their first businesses.

C corporations, S corporations, and LLCs can be ________ to establish.

All of the following are advantages of a partnership except ________.

If a sole proprietorship fails, the owner is not liable for its debts since the business is a separate legal entity.

The Foundations of Entrepreneurship

Ethics and Social Responsibility: Doing the Right Thing

Creativity and Innovation: Keys to Entrepreneurial Success

Conducting a Feasibility Analysis and Designing a Business Model

Crafting a Business Plan and Building a Solid Strategic Plan

Buying an Existing Business

Franchising and the Entrepreneur

Building a Powerful Bootstrap Marketing Plan

E-Commerce and the Entrepreneur

Pricing and Credit Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Choosing the Right Location and Layout

Sources of Financing: Equity and Debt

Global Aspects of Entrepreneurship

Building a New Venture Team and Planning for the Next Generation

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Exam 6: Forms of Business Ownership

Which of the following is not an advantage of the corporate form of ownership?

A special type of partnership in which all partners, who in many states must be professionals, are limited partners is called ________ partnership.

All the profits of a sole proprietorship are taxed as current income of the owner even if they are not withdrawn from the business.

Which of the following is a disadvantage of the corporation form of ownership?

A disadvantage of the corporate form of ownership is when profits are taxed at the corporate rate and at the individual rate and this is referred to as ________.

Corporations must obtain a federal charter before they can conduct any business.

A limited partner is treated as an investor in a business venture and does not take an active role in managing it.

The most critical disadvantage of the sole proprietorship is ________.

Although not required by law, a written partnership agreement that spells out the terms of operating the partnership and the status of each partner should be developed.

In a partnership, profits (and losses)must be shared according to the ratio of capital originally invested in the partnership.

Of all U.S. business firms, sole proprietorships are the most common, accounting for approximately 71 percent of businesses.

Which of the following statement(s)is/are true?

Probably the most important reason to have a partnership agreement is that ________.

Profits earned by a partnership are taxed in the same fashion as those earned by a sole proprietorship.

Entrepreneurs should not spend much time selecting a form of ownership for their businesses because making the choice is merely a technicality, which has little impact on the business and its owner(s).

The sole proprietorship is the best form of ownership for entrepreneurs launching their first businesses.

C corporations, S corporations, and LLCs can be ________ to establish.

All of the following are advantages of a partnership except ________.

If a sole proprietorship fails, the owner is not liable for its debts since the business is a separate legal entity.

The Foundations of Entrepreneurship

Ethics and Social Responsibility: Doing the Right Thing

Creativity and Innovation: Keys to Entrepreneurial Success

Conducting a Feasibility Analysis and Designing a Business Model

Crafting a Business Plan and Building a Solid Strategic Plan

Buying an Existing Business

Franchising and the Entrepreneur

Building a Powerful Bootstrap Marketing Plan

E-Commerce and the Entrepreneur

Pricing and Credit Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Choosing the Right Location and Layout

Sources of Financing: Equity and Debt

Global Aspects of Entrepreneurship

Building a New Venture Team and Planning for the Next Generation

Filters