Exam 4: Selecting a Form of Business Ownership

Some people with substantial assets may hesitate to enter a partnership. They don't want to lose some or all of these assets because of the mistakes of other partners. To offset this possible loss they can form an unlimited partnership.

Major advantages of a partnership over a sole proprietorship include having diverse management talent and the ability to sell shares of stock to the public to raise operating funds.

Bob Grange has just opened a new pet shop on Main Street. If he selected the easiest and cheapest legal form to start a business, what legal form would Bob have selected

How does a limited partnership overcome the unlimited liability defect of a general partnership?

As a limited liability company (LLC), Miller Shipping would closely resemble a(n) _____.

Some business owners prefer to operate as a limited liability company (LLC) rather than an S-corporation for the following reason:

Pat Smith and George Johnson own five flower shops in Manhattan. They want to open a wholesale flower business to supply their shops as well as others in their geographical area. They currently operate as a partnership but are considering changing their legal form of organization. One reason for doing this is to increase the likelihood that they will be able to raise the funds needed to expand. -If they form a corporation and Pat Smith gets into an accident with the company's van and the van is not insured, George Johnson could be held personally liable for any damages resulting from the accident.

Rock City is a community in the Midwest with a population of 23,000 people. Three dental clinics serve the city and the surrounding area. Perfect Smile is owned and operated by the newest dentist in town, Dr. Martin Harris, who employs one dental assistant and a secretary/receptionist. Drs. Joan Bennett and Joseph Young jointly operate Teeth for Life and provide a few more services than Dr. Harris. Rock City Dental Clinic has been in business for 58 years, employs 38 people, and offers a range of services that include dentures, orthodontics, and minor oral surgery. -What action could any of Rock City's dentists take to limit their exposure to liability as well as make it easier to find capital for expansion

Which of the following is not true for a sole proprietor

The most important benefit of incorporation is the limited liability to which the owners are exposed.

Some corporate founders of Smith Company want to restrict the transferability of their stock and hold it in the hands of only a few individuals who are not allowed to sell it to the general public. What type of company is Smith Company

A major problem with partnerships is limited liability. Each partner is personally liable for his or her own actions, but not for the actions of all the partners.

Some of the advantages of a sole proprietorship business are that it is easy and inexpensive to form, there are few government regulations, and the owner has complete control over his/her business.

The earnings of a limited liability company (LLC) are only taxed once-when they are paid out to employees in the form of wages and salaries.

The combination of Adidas and Reebok was an example of a(n) _____.

What is a sole proprietorship

A limited partnership is restricted to joint ownership by two people.

Under the ____ form of ownership, the business dissolves upon the owner's death.

The _____ in a limited partnership has(have) limited involvement in the business and suffer loss only to the extent of their business investments.

Rock City is a community in the Midwest with a population of 23,000 people. Three dental clinics serve the city and the surrounding area. Perfect Smile is owned and operated by the newest dentist in town, Dr. Martin Harris, who employs one dental assistant and a secretary/receptionist. Drs. Joan Bennett and Joseph Young jointly operate Teeth for Life and provide a few more services than Dr. Harris. Rock City Dental Clinic has been in business for 58 years, employs 38 people, and offers a range of services that include dentures, orthodontics, and minor oral surgery. -In deciding which legal form of business ownership to choose, these professionals must ask themselves all of the following questions except _____.