Exam 6: Forms of Business Ownership

Which of the following would be most likely to benefit from choosing S corporation status?

Which of the following is not true of a limited liability partnership?

What is a sole proprietorship? Explain the advantages and the disadvantages of a sole proprietorship.

Stockholders in the corporation have the same kind of liability as general partners in a partnership.

Most states do not require a Certificate of Incorporation or a charter to be filed for a new corporation.

Which of the following generally is not required by a Certificate of Incorporation?

The partnership, like the proprietorship, avoids the disadvantage of double taxation.

A corporation formed in Taiwan doing business in the United States is a foreign corporation.

One of the advantages of a partnership over a proprietorship is the increased sources of capital and credit it offers.

A common denominator in many partnership disputes is the lack of a written agreement clearly spelling out the roles, rights, and responsibilities of each partner.

Which form of ownership generally has the least ability to accumulate capital?

In a general partnership, ________.

When filing the corporate charter, a corporation must file in the state in which its headquarters are located.

Acme Corporation is chartered in Delaware, but its primary area of operation is in South Carolina. In South Carolina, Acme would be considered a(n)________ corporation.

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." -The "Das Spelunker" corporation, formed in Germany and conducting business in the U.S., is considered to be a(n)________ corporation.

In the ________ form of ownership, the business itself pays income taxes.

There is no limit to the number of general partners a partnership may have, but it must have at least one general partner.

What factors should an entrepreneur consider when choosing a form of ownership?

A limited liability company is most like a(n)________.

The sole proprietorship is the easiest form of ownership to create, but once formed, it is subject to the greatest number of regulations.