Question 1

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 2

An S corporation can issue both voting and nonvoting common stock to its shareholders.

Accepted Answer

A) True 
 B)False

Question 3

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 4

A corporation receives its charter from:

Accepted Answer

A)  the federal government. 
B)  the state. 
C)  the board of directors. 
D)  the stockholders. 
A)  the federal government. 
B)  the state. 
C)  the board of directors. 
D)  the stockholders.

Question 5

Company founders can become minority stockholders in a corporation but can never lose their final authority or control over business decisions because they are the founders.

Accepted Answer

A) True 
 B)False

Question 6

A business with more than five owners must be a corporation.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  Tax considerations 
B)  Management succession plans 
C)  Liability exposure 
D)  All of the above 
A)  Tax considerations 
B)  Management succession plans 
C)  Liability exposure 
D)  All of the above

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A ________ partnership is composed of at least one general partner and at lease one limited partner.

Accepted Answer

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

Question 10

In a general partnership:

Accepted Answer

A)  each partner is held responsible for an agreement/decision made by any one of the partners. 
B)  partners can be held responsible only for decisions they make personally. 
C)  no partner can be held legally responsible for decisions since the partnership itself is a legal entity. 
D)  no decision is binding unless all partners agree to it in writing. 
A)  each partner is held responsible for an agreement/decision made by any one of the partners. 
B)  partners can be held responsible only for decisions they make personally. 
C)  no partner can be held legally responsible for decisions since the partnership itself is a legal entity. 
D)  no decision is binding unless all partners agree to it in writing.

Question 11

Defining the duties, responsibilities, contributions, and roles of the partners in a partnership agreement is not necessary since the law covers these provisions automatically.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

A partnership agreement defines how the partners will be compensated. Normally,

Accepted Answer

A)  partners are not entitled to salaries or wages, but are compensated by a share of the profits of the business. 
B)  the general partner's salary is set at two times the salaries of the limited partners. 
C)  both general and limited partners are permitted salaries, but all silent or dormant partners are compensated only by sharing in the profits. 
D)  while the agreement establishes payout schedules, it does not spell out what constitutes profit. 
A)  partners are not entitled to salaries or wages, but are compensated by a share of the profits of the business. 
B)  the general partner's salary is set at two times the salaries of the limited partners. 
C)  both general and limited partners are permitted salaries, but all silent or dormant partners are compensated only by sharing in the profits. 
D)  while the agreement establishes payout schedules, it does not spell out what constitutes profit.

Question 14

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

Accepted Answer

A)  The owners pay all taxes, debts, and creditors. 
B)  The owners obtain the written approval of shareholders to dissolve the company. 
C)  The owners file a statement of intent to dissolve with the secretary of state's office in each state where they conduct business. 
D)  The owners distribute all assets of the corporation to the shareholders. 
A)  The owners pay all taxes, debts, and creditors. 
B)  The owners obtain the written approval of shareholders to dissolve the company. 
C)  The owners file a statement of intent to dissolve with the secretary of state's office in each state where they conduct business. 
D)  The owners distribute all assets of the corporation to the shareholders.

Question 15

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 16

The key to choosing the right form of ownership is:

Accepted Answer

A)  envisioning where your business will be in 10 years. 
B)  understanding the characteristics of each form and knowing how they affect your business and personal circumstances. 
C)  forming either an S corporation or a limited liability company since they are the only forms that offer owners liability protection. 
D)  irrelevant since choosing a form of ownership is merely a technicality and has little impact on the business and its owner(s). 
A)  envisioning where your business will be in 10 years. 
B)  understanding the characteristics of each form and knowing how they affect your business and personal circumstances. 
C)  forming either an S corporation or a limited liability company since they are the only forms that offer owners liability protection. 
D)  irrelevant since choosing a form of ownership is merely a technicality and has little impact on the business and its owner(s).

Question 17

A professional corporation is created in the same way as a regular corporation, and exists to provide the advantages of corporate ownership, including limited liability, to professionals such as doctors and lawyers.

Accepted Answer

A) True 
 B)False

Question 18

"Double taxation" refers to the fact that the corporation itself must pay taxes on its net profits, and the stockholders must also pay taxes on the portion of those same profits distributed to them as dividends.

Accepted Answer

A) True 
 B)False

Question 19

One significant advantage of a corporation is the ability to attract capital.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  proprietorship 
B)  partnership 
C)  corporation 
D)  All of the above 
A)  proprietorship 
B)  partnership 
C)  corporation 
D)  All of the above

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

An S corporation can issue both voting and nonvoting common stock to its shareholders.

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

A corporation receives its charter from:

Company founders can become minority stockholders in a corporation but can never lose their final authority or control over business decisions because they are the founders.

A business with more than five owners must be a corporation.

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

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

A ________ partnership is composed of at least one general partner and at lease one limited partner.

In a general partnership:

Defining the duties, responsibilities, contributions, and roles of the partners in a partnership agreement is not necessary since the law covers these provisions automatically.

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

A partnership agreement defines how the partners will be compensated. Normally,

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

All of the following are advantages of a partnership except:

The key to choosing the right form of ownership is:

A professional corporation is created in the same way as a regular corporation, and exists to provide the advantages of corporate ownership, including limited liability, to professionals such as doctors and lawyers.

"Double taxation" refers to the fact that the corporation itself must pay taxes on its net profits, and the stockholders must also pay taxes on the portion of those same profits distributed to them as dividends.

One significant advantage of a corporation is the ability to attract capital.

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

The Foundations of Entrepreneurship

Inside the Entrepreneurial Mind: From Ideas to Reality

Designing a Competitive Business Model and Building a Solid Strategic Plan

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Franchising and the Entrepreneur

Buying an Existing Business

Building a Powerful Marketing Plan

E-Commerce and the Entrepreneur

Pricing Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Sources of Financing: Debt and Equity

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters

Exam 5: Forms of Business Ownership

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

An S corporation can issue both voting and nonvoting common stock to its shareholders.

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

A corporation receives its charter from:

Company founders can become minority stockholders in a corporation but can never lose their final authority or control over business decisions because they are the founders.

A business with more than five owners must be a corporation.

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

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

A ________ partnership is composed of at least one general partner and at lease one limited partner.

In a general partnership:

Defining the duties, responsibilities, contributions, and roles of the partners in a partnership agreement is not necessary since the law covers these provisions automatically.

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

A partnership agreement defines how the partners will be compensated. Normally,

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

All of the following are advantages of a partnership except:

The key to choosing the right form of ownership is:

A professional corporation is created in the same way as a regular corporation, and exists to provide the advantages of corporate ownership, including limited liability, to professionals such as doctors and lawyers.

"Double taxation" refers to the fact that the corporation itself must pay taxes on its net profits, and the stockholders must also pay taxes on the portion of those same profits distributed to them as dividends.

One significant advantage of a corporation is the ability to attract capital.

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

The Foundations of Entrepreneurship

Inside the Entrepreneurial Mind: From Ideas to Reality

Designing a Competitive Business Model and Building a Solid Strategic Plan

Conducting a Feasibility Analysis and Crafting a Winning Business Plan

Franchising and the Entrepreneur

Buying an Existing Business

Building a Powerful Marketing Plan

E-Commerce and the Entrepreneur

Pricing Strategies

Creating a Successful Financial Plan

Managing Cash Flow

Sources of Financing: Debt and Equity

Choosing the Right Location and Layout

Global Opportunities

Building a Team and Management Succession

Filters