Exam 4: Selecting a Form of Business Ownership

The major problem with general partnerships is:

A major disadvantage of a partnership is that partners may disagree on how to operate the business and divide the profits.

A _____ is entirely separate from the parties who own it.

Corporations are limited to large, well-known companies.

There are pros and cons for sole proprietorships and partnerships, but not for corporations.

An alternative approach to traditional business growth is to merge with or acquire another company.

Financing needs are not directly related to selecting a form of business ownership.

Jane, Karla, and Brenda have set up an accounting firm. An essential part of their partnership agreement is the division of the business income.

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. -With enough employees and annual sales to form a company to limit the liabilities of its owners, Rock City Dental Clinic could opt to organize as a _____.

Scuffy the Tugboat is a family-run business that makes tugboats. It is owned by three brothers, Jack, Frank, and Bob. Their first tugboat is still towing ships in Boston Harbor, and over the years, success has allowed them to grow the company by plowing money back into it. Now, however, they want to expand but they are not sure how they should do this. They are also unsure about which legal form of organization is best for them. -If the three brothers form a limited partnership, all three could be limited partners and therefore limit their liability.

A disadvantage of a corporation is that managers and shareholders may have goals that conflict.

Which of the following is not true about not-for-profit corporations:

An acquisition occurs when two companies combine to form a new company. A merger is the purchase of one company by another with no new company being formed.

In a(n) _____ partnership, a single partner runs the business and any number of other partners have little involvement in it.

The number and severity of disputes between partners can be lessened if the partners have executed _______ that specifies everyone's rights and responsibilities.

As a sole proprietor, your personal assets are not at risk for the sake of the business.

If a sole proprietorship incurs a debt or suffers a catastrophe, the owner is personally liable for it.

Which of the following statements is not true about sole proprietors

The board of directors of a corporation sets the company's policies, goals and decisions, and approves the distribution of dividends.

With a sole proprietorship, you -- the owner -- are, in effect, the business.