Exam 6: Forms of Business Ownership

Limited liability partnerships (LLP)are where all partners in a business are limited partners, which offers the advantage of limited liability for the debts of the partnership.

Which of the following issues would influence an entrepreneur's choice of a form of business ownership?

One disadvantage of the partnership form of ownership is the great potential for personality and authority conflicts.

Some forms of ownership are much more costly and involved to create.

The average cost to create a legal business entity is ________.

The most common form of business ownership in the United States is the partnership.

What is a corporation? Explain the advantages and the disadvantages of a corporation.

A corporation formed and chartered in Kansas is considered a domestic corporation when doing business in Kansas, and a foreign corporation when doing business in Missouri.

Each partner in a limited liability partnership is a limited partner; there are no general partners.

In a partnership, the ________ partner(s)has (have)unlimited liability for the partnership's debts.

A general partner is personally liable only for the amount of money he has invested in the partnership.

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." -Should Duke incorporate or should he remain a proprietorship? Why?

An S corporation form of ownership overcomes which disadvantage of the regular or C corporation form of ownership?

Which of the following issues would a typical partnership agreement address?

Carlos founded the "Taco Factory" 20 years ago as a family-oriented restaurant. Over the years as they grew the business, he incorporated and sold stock to outside investors. Recently the stockholders voted to seek liquor licenses and to sell beer and hard liquor in the restaurants. Carlos opposed this, citing the history of the restaurant's "family" environment, but was voted down. Carlos has experienced which drawback of the corporate form of ownership?

In a sole proprietorship, the owner has limited liability.

If a limited partner withdraws, sells his ownership in the partnership, or dies, the partnership is not forced into dissolution.

Marco is opening a new computer repair shop. He is owner and sole employee. He has paid the appropriate fees and licensing costs and begun his business. This is an example of a(n)________.

Outline the incorporation process.

Which of the following statements is not true regarding the liquidation of an S corporation?