Deck 3: Forms of Ownership of Small Businesses

Question 1

A disadvantage of a partnership is that:

A) financial resources are available from one person only.
B) each partner is responsible for the acts of the other partners.
C) only limited capital can be raised.
D) there are inadequate management and employee skills.

Answer 1

B

Question 2

A partnership is a business that is:

A) formed for civic, educational, charitable, and religious purposes.
B) organized to provide a professional service for which each shareholder is licensed.
C) owned by two persons who have unlimited liability for its debts and obligations.
D) organized to protect individual partners from personal liability.

Answer 2

C

Question 3

What are articles of copartnership?

A) They are the instruments by which a partnership is formed under the business laws of a given state.
B) They state what the business can do and provide other organizational and financial information.
C) They are drawn up before the formation of a partnership to show the rights, duties, and responsibilities of each partner.
D) They explain how stockholders can buy out each other's interest in the business.

Answer 3

C

Question 4

Which of the following is an advantage of a corporation?

A) It is a legal entity separate and distinct from its owners as individuals.
B) It gives unlimited powers to the owners.
C) The procedures required by the government are simple.
D) This legal form of business has tax advantages.

Question 5

Which of the following is true about the board of directors of a corporation?

A) They represent the stockholders in managing the company.
B) They direct the day-to-day operations of the business.
C) They elect to form the executive committee.
D) They have a controlling interest in the corporation.

Question 6

Which of the following is true of a limited partnership?

A) General partners conduct the business.
B) Limited partners are held liable for debts of general partners.
C) Limited partners do not contribute any capital to the business.
D) General partners have limited liability for the debts of the business.

Question 7

Which form of business combines the advantages of a corporation with the benefits of a partnership?

A) Nonprofit corporation
B) Proprietorship
C) Limited-liability company
D) Professional service corporation

Question 8

A _____ provides the protection of limited liability for shareholders, but its earnings are taxed at both the corporate and shareholder levels.

A) cooperative
B) C corporation
C) nonprofit corporation
D) joint venture

Question 9

Which of the following is true of S corporations?

A) They can issue only one class of stock-common.
B) They are subject to multiple taxations.
C) They require excessive paperwork.
D) They are governed by simple tax rules.

Question 10

Which of the following is an advantage of a partnership?

A) The partners have limited liability for the debts of the business.
B) Each partner is responsible only for his or her acts.
C) A partner can obtain bonding protection against the acts of other partners.
D) More capital can be raised since good credit may be available.

Question 11

What is the purpose of the Uniform Partnership Act (UPA)?

A) It legally terminates the business upon the death of a partner.
B) It governs partnerships in the absence of other expressed agreements.
C) It provides the protection of limited liability for shareholders.
D) It combines the advantages of a corporation with the benefits of a partnership.

Question 12

Which of the following is true of articles of incorporation?

A) They govern the operations of partnerships in the absence of other expressed agreements.
B) They provide for protection of limited liability for shareholders.
C) They combine the advantages of a corporation with the benefits of a partnership.
D) They are the instruments by which a corporation is formed.

Question 13

In the United States, finance, insurance, and real estate use the _____ form of business more frequently than do the other industries.

A) partnership
B) proprietorship
C) corporation
D) cooperative

Question 14

What does a buy-sell agreement do?

A) It states what the business can do and provides other financial information.
B) It details the terms by which stockholders can purchase each other's interest.
C) It shows the rights, duties, and responsibilities of each partner.
D) It oversees the usage of an expensive asset.

Question 15

Which of the following factors should be considered when choosing the proper legal form for a business?

A) Packaging of the product
B) Location of the factory
C) Earnings reinvestment
D) Name of the product

Question 16

Small business owners prefer a proprietorship over other forms of business because it:

A) provides access to unlimited capital.
B) ensures that the business has an unlimited life.
C) provides relative freedom of action and control.
D) makes it easy for the owner to obtain credit.

Question 17

A disadvantage of a corporation is that:

A) it is difficult to raise capital.
B) its life is dependent on its owners.
C) it is subject to double taxation.
D) it is considered separate from its owners.

Question 18

Which of the following is true about proprietorship?

A) It is frequently used in finance, insurance, and real estate.
B) It is the most popular form of business in the United States.
C) The owner of the business has to share the profits with his partner.
D) It is owned by two persons who have unlimited liability for its debts and obligations.

Question 19

The _____ form of business generates significant revenues in services, trade, and construction in the United States.

A) partnership
B) cooperative
C) corporation
D) proprietorship

Question 20

An advantage of proprietorship is that it:

A) proves easy in obtaining credit.
B) offers unique tax advantages.
C) ensures that the business has an unlimited life.
D))provides access to unlimited capital.

Question 21

The partnership is easier to form, operate, and terminate than a proprietorship.

Question 22

Which of the following is true about a family limited partnership?

A) The family limited partnership has the same advantages and disadvantages as a proprietorship.
B) In a family limited partnership, the majority of the partners are related to each other as spouses, parents, grandparents, siblings, cousins, nieces, or nephews.
C) The family limited partnership has fewer benefits than other limited liability partnerships.
D) Only spouses, parents and siblings can form a family limited partnership.

Question 23

Which of the following is true of a limited liability partnership?

A) The most common type of industry for this type of organization is agriculture, or family farms.
B) States that recognize limited liability partnerships sometimes limit them to organizations that provide a professional service for which each partner is licensed.
C) In a limited liability partnership, partners do not report their profits and losses on their personal tax returns.
D) One of the disadvantages of a limited liability partnership is that it does not protect individual partners from personal liability for the negligent acts of other partners.

Question 24

Proprietorship is the most popular form of business in the United States.

Question 25

Proprietorship is the oldest and most prevalent form of ownership in the United States.

Question 26

The most common type of industry for a _____ is agriculture.

A) nonprofit corporation
B) professional service corporation
C) joint venture
D) family limited partnership

Question 27

_____ is defined as a percentage share of an expensive asset and is most often used for aircraft, sports cars, and real property.

A) Fractional ownership
B) Limited liability partnership
C) Joint venture
D) Limited partnership

Question 28

Equal partnership is advisable in order to facilitate decision making.

Question 29

Partnerships are more effective than proprietorships in raising funds.

Question 30

A _____ is formed for civic, educational, charitable, and religious purposes.

A) limited-liability company
B) joint venture
C) family limited partnership
D) nonprofit corporation

Question 31

Once the choice of a legal form for a new business has been made, it cannot be changed until the business is dissolved or sold.

Question 32

In an endeavor where neither party can achieve its purpose alone, a _____ becomes a viable option.

A) joint venture
B) proprietorship
C) corporate charter
D) buy-sell agreement

Question 33

Which of the following is a characteristic of a nonprofit corporation?

A) The trustees have unlimited liability status.
B) It enjoys tax-exempt status.
C) It is formed to provide a professional service.
D) It is owned by and operated for the benefit of patrons using its services.

Question 34

Which of the following is a characteristic of successful fractional ownership?

A) The co-owners require a professional license.
B) The co-owners establish it for religious purposes.
C) The co-owners must be related to each other.
D) The co-owners must be honest in their dealings.

Question 35

What is a business that is owned by and operated for the benefit of patrons using its services called?

A) Joint venture
B) Fractional ownership
C) Cooperative
D) Proprietorship

Question 36

A cooperative is a business owned by two or more persons who have unlimited liability for its debt and obligations.

Question 37

A proprietorship legally ends with the owner's death, and some legal action must be taken to restart it.

Question 38

In the United States, partnerships produce the most revenue.

Question 39

A corporation formed by a doctor for the sole purpose of providing his services for which he is licensed is called a(n) _____.

A) nonprofit corporation
B) S corporation
C) professional service corporation
D) C corporation

Question 40

From a legal standpoint, a business and its owner are one in a proprietorship.

Question 41

A buy-sell agreement details the terms by which stockholders can buy out each other's interest.

Question 42

The owners of a corporation are the corporate officers.

Question 43

In a limited partnership, the limited partners manage the business.

Question 44

The cooperative form of business is usually associated with farm products.

Question 45

The articles of copartnership should be drawn during the preoperating period and should show the rights, duties, and responsibilities of each partner.

Question 46

The Uniform Partnership Act (UPA) governs the operations of partnerships in the absence of other expressed agreements.

Question 47

An advantage of a corporation is that large amounts of capital can be raised easily.

Question 48

The main disadvantage of a corporation is double taxation.

Question 49

Usually, income derived from a joint venture is taxed as if the organization were a partnership.

Question 50

Articles of incorporation are the instrument by which a corporation is formed under the corporation laws of a given state.

Question 51

In a limited partnership, the general partners have limited personal liability for the debts of the business.

Question 52

In an S corporation, all shareholders must be individuals, estates, or some type of personal trust.

Question 53

A corporation is considered by law to be a unique entity, separate and apart from those who own it.

Question 54

In a corporation, personal property of the owners can be taken to pay the debts of the business.

Question 55

In a corporation, the shareholders elect a board of directors to oversee major decisions.

Question 56

Limited-liability companies are permissible only in a few states in the U.S.

Question 57

The traditional form of the corporation is called a C corporation.

Question 58

In a partnership, each partner is responsible for the acts of all the other partners.

Question 59

The board of directors conducts the day-to-day operations of the business.

Question 60

A buy-sell agreement states what a business can do and provides other organizational and financial information.

Question 61

Compare a partnership with a proprietorship.

Question 62

Describe a cooperative and a joint venture.

Question 63

Differentiate between a general partnership and a limited partnership.

Question 64

Why do small business owners prefer proprietorship? What are the disadvantages of proprietorship?

Question 65

What is a family limited partnership?

Question 66

Describe the people who govern a corporation.

Question 67

What are some of the factors that should be considered when choosing the proper legal form for a business?

Question 68

What are the features of an S corporation?

Question 69

What is fractional ownership?

Question 70

What are the advantages and disadvantages of a corporation?