Deck 4: Options for Organizing Business

Question 1

A business's legal form of organization has no effect on how much taxes it pays.

Answer 1

False
Explanation: A business's legal form of ownership affects how it operates,how much tax it pays,and how much control its owners have.

Question 2

Which of the following is not a source of funds for a sole proprietorship?

A)Bank loans
B)Family members
C)Personal funds
D)Selling stock or issuing bonds
E)Small Business Administration

Answer 2

D
Explanation: The few sources of money available to the sole proprietorship are a bank,family,friends,the Small Business Administration and his or her personal funds;selling stock or issuing bonds is only applicable to corporations.

Question 3

About three-quarters of all businesses in the United States are sole proprietorships,and they earn somewhere around 10 percent of total business income.We may conclude that

A)the average corporation is small,but earns little income.
B)the average corporation hires many people,but makes little income.
C)the average sole proprietorship is large,but earns little income.
D)there are many sole proprietorships,but their average income is small.
E)there are few sole proprietorships,and their average income is small.

Answer 3

D
Explanation: If 72% of all businesses are sole proprietorships,we can conclude that many are in existence.If sole proprietorships only contribute 10% of total business income,we can conclude that is a small percentage of total income.

Question 4

Sole proprietorships are taxed as

A)A partnership
B)Individual owner's income is taxed
C)Shareholders are taxed
D)Corporations
E)Depends on the kind of sole proprietorship formed

Question 5

One of the most popular and easiest to establish forms of business in the United States is the

A)partnership.
B)sole proprietorship.
C)corporation.
D)joint venture.
E)cooperative.

Question 6

All of the following are advantages of a sole proprietorship except

A)ease of formation.
B)secrecy.
C)unlimited liability.
D)control of the business.
E)limited government regulation.

Question 7

Sole proprietorships have the least degree of secrecy.

Question 8

Which characteristic of a sole proprietorship can be considered both an advantage and a disadvantage?

A)Taxation
B)Fund sources
C)Liability
D)Continuity
E)Secrecy

Question 9

The following is an advantage of a sole proprietorship:

A)limited sources of funds
B)profits are not shared
C)limited liability
D)ease of hiring qualified employees
E)owner's role as a generalist

Question 10

Barber shops,dog kennels,and independent grocery stores are typically

A)franchises.
B)nonprofit agencies.
C)sole proprietorships.
D)partnerships.
E)limited liability partnerships.

Question 11

Ruji has realized that she does not like working for others.She wants to open a business in which she will have maximum control and the least interference from government regulation.Which business form might be best for her to use?

A)Joint venture
B)Cooperative
C)Corporation
D)Partnership
E)Sole proprietorship

Question 12

Sole proprietorships typically employ fewer than 50 people.

Question 13

Which of the following forms of business ownership is directly limited by the life of its owner?

A)Sole proprietorships
B)Limited partnerships
C)Corporations
D)Holding companies
E)Subsidiaries

Question 14

Most sole proprietorships focus on manufacturing.

Question 15

In the US,men are twice as likely as women to start their own business.

Question 16

Lack of control is a disadvantage of sole proprietorships.

Question 17

Which of the following requires owners to perform many functions and possess diverse skills to make decisions?

A)Corporation
B)Partnership
C)Sole proprietorship
D)Cooperative
E)Holding company

Question 18

A sole proprietorship has limited sources of funds,which may affect the growth of the business.

Question 19

If you want to go into business for yourself,the easiest way is a sole proprietorship.

Question 20

The income earned by sole proprietorships is

A)taxed twice.
B)not taxable.
C)taxed as personal income.
D)too high.
E)audited less often than others.

Question 21

In a general partnership,each partner is liable only for the debts he or she incurs.

Question 22

Articles of partnership are required by many states for businesses that have two or more co-owners.The issues covered usually include all of the following except

A)a statement of what each partner contributes.
B)how the profits and losses will be divided.
C)what duties the partners will have.
D)provisions for leaving the partnership.
E)classes of stock to be issued.

Question 23

What are sole proprietorships? Provide an example.

Question 24

It is easier to raise funds in a partnership than in a sole proprietorship because

A)more people means greater earning power and credit.
B)partners have better organizational control.
C)banks know them better.
D)partners have more combined experience.
E)all of the above.

Question 25

In a partnership,if the goals of one partner change,the result may be friction and even legal disputes.

Question 26

A limited partnership always has at least one general partner,who assumes unlimited liability.

Question 27

Which of the following is not a disadvantage of forming a partnership?

A)All partners are responsible for all other partners
B)Unlimited liability
C)Fewer regulatory controls than in a corporation
D)The partnership ends when a partner withdraws or dies
E)Sources of funds are limited

Question 28

The legal documents that identify the basic agreements between partners are called

A)proposals of partnership.
B)a partnership charter.
C)agreements of partnership.
D)articles of partnership.
E)a partnership contract.

Question 29

A limited partnership involves a complete sharing in the management of a business.

Question 30

What are the advantages of sole proprietorships over other forms of business organization?

Question 31

Partnerships have fewer regulatory controls than corporations.

Question 32

All states require partnerships to have articles of partnership.

Question 33

Selling interest in a partnership may be difficult because

A)partnerships are subject to unlimited liability.
B)partnerships can't issue bonds.
C)of regulatory controls.
D)it is difficult to place a value on a share of a partnership.
E)of double taxation.

Question 34

Which form of business organization is the least used in the U.S.?

A)S-corporation
B)Franchise
C)Sole proprietorship
D)Corporation
E)Partnership

Question 35

Why is taxation considered both an advantage and a disadvantage of the sole proprietorship organizational form?

Question 36

A sole proprietorship is a popular form of business because

A)it is heavily regulated by the government.
B)it is taxed more than other forms.
C)it is hard to dissolve.
D)the proprietor does not have direct control.
E)it is easy to form.

Question 37

When are limited partnerships generally used?

A)When one partner has more money than the others
B)They are used most of the time for many reasons
C)Limited partnerships are almost never used
D)When all partners wish to share liability equally
E)When the project is risky and the chance of loss is great

Question 38

In a partnership,all partners are equally liable.

Question 39

The decision-making process in a partnership tends to be faster when the partnership is

A)multifaceted.
B)small.
C)foreign.
D)domestic.
E)large.

Question 40

Anand has been asked to join a new partnership that is developing wind energy technologies.Because the business is high risk,he does not want to be liable for the firm's debts if the project should fail.He could still participate as a

A)general partner.
B)limited partner.
C)silent partner.
D)working partner.
E)contributor.

Question 41

Taking a company public means announcing its creation to the public.

Question 42

S Corporations are more flexible than traditional "C corporations."

Question 43

Preferred stockholders receive dividends before common stockholders and have principle voting rights as well.

Question 44

Which of the following is an advantage of a partnership?

A)Unlimited liability
B)Life of partnership
C)Selling a partnership
D)Limited funding sources
E)Ease of organization

Question 45

Why is it more difficult to value a partnership share than a share of stock in a corporation,for example?

Question 46

In creating a corporation,once the articles of incorporation are filed with the appropriate state office,the state may then issue a

A)corporate chapter.
B)corporate contract.
C)corporate charter.
D)corporate collaboration.
E)corporate commentary.

Question 47

The biggest advantage of the corporate form of ownership may be the limited liability of its owners.

Question 48

How does the taxation of partnerships work? How is this different than with a corporation?

Question 49

Corporations cannot be sued.

Question 50

While corporations account for the majority of businesses in the United States,they represent a small minority of profits.

Question 51

Which of the following is a disadvantage of a partnership?

A)Difficulty of selling ownership
B)Ease of organizing business
C)Specialization of partners
D)Relatively fast decision making
E)Limited government regulation

Question 52

A private corporation is one that

A)is owned by only a few people and not traded on the open market.
B)does not pay taxes on its income.
C)does not hire employees.
D)can be purchased on the New York Stock Exchange.
E)all of the above.

Question 53

In most states,corporations must have "corporation," "incorporated," or "limited" in their names to show that their owners have limited liability.

Question 54

Which stockholders usually have the right to vote and control the board of directors?

A)Preferred
B)Common
C)Cumulative preferred
D)Preemptive
E)Favorite

Question 55

The right of common stockholders to have the opportunity to purchase new shares of stock is called a

A)first offer right.
B)preemptive right.
C)stock split right.
D)profit sharing right.
E)secondary right.

Question 56

According to the Internal Revenue Service,

A)profitable partnerships pay taxes before distributing profits.
B)partners report their share of profits as personal income.
C)partners pay no taxes.
D)partners have the most advantageous tax structure.
E)all of the above.

Question 57

Corporations distribute profits to their owners in the form of

A)tax-free dividends.
B)interest.
C)retained earnings.
D)dividends.
E)bribes.

Question 58

A corporation doing business outside the state in which it is chartered is known as a(n)

A)private corporation.
B)multi-state corporation.
C)domestic corporation.
D)alien corporation.
E)foreign corporation.

Question 59

Define the partnership form of business organization.What are its advantages?

Question 60

The type of corporation represented by organizations such as the National Aeronautics and Space Administration (NASA)and the U.S.Postal Service is called

A)private.
B)quasi-private.
C)public.
D)quasi-public.
E)private-public.

Question 61

A conglomerate merger results when two firms in unrelated industries merge.

Question 62

The type of ownership that has the ability to raise capital most easily is a

A)public corporation.
B)private corporation.
C)sole proprietorship.
D)general partnership.
E)limited partnership.

Question 63

The government usually will scrutinize high-profile mergers and acquisitions to ensure that they are not creating monopolies.

Question 64

A leveraged buyout is an organization composed of small businesses that have banded together to reap the benefits of belonging to a larger organization.

Question 65

When firms that make and sell similar products to the same customers merge,it is known as a horizontal merger.

Question 66

How do preferred stockholders differ from the common stockholders of a corporation?

Question 67

Shark repellant is a method of thwarting a corporate takeover in which management requires a large majority of stockholders to approve the takeover.

Question 68

The organizational form that many consider to be a blend of the best characteristics of corporations,partnerships,and sole proprietorships is the

A)joint venture.
B)cooperative.
C)C corporation.
D)S corporation.
E)limited liability company.

Question 69

A written authorization assigning a stockholder's voting privilege to another is a

A)stock sale.
B)stock certificate.
C)stock split.
D)dividend restructuring.
E)proxy.

Question 70

Which of the following forms of business organization restricts the number and type of shareholder?

A)Sole proprietorship
B)Co-op
C)Limited liability company
D)S-corporation
E)Partnership

Question 71

An important advantage of a corporation is its

A)single taxation.
B)limited liability.
C)ease of formation.
D)lack of bureaucracy.
E)double taxation.

Question 72

Companies of all sizes grow and improve profitability by

A)Choosing the right kind of organizational structure
B)Sticking to domestic markets
C)Not utilizing new technologies as they become available
D)Expanding their operations
E)Creating franchises

Question 73

All of the following are advantages of a corporation except

A)limited liability.
B)lower frequency of taxation.
C)perpetual life of organization.
D)ease of transfer of ownership.
E)external funding sources.

Question 74

Common stockholders do not have the right to

A)vote for the board of directors.
B)share in profits.
C)attend the stockholders' meetings.
D)exercise preemptive rights.
E)receive dividends before preferred stockholders.

Question 75

Joint ventures are popular in situations that call for

A)reduced regulations.
B)cooperation among farmers or ranchers.
C)unlimited liability.
D)large investments.
E)small investments.

Question 76

What is a limited liability company (LLC),and why do some consider it the best form of business ownership?

Question 77

A merger occurs when one company buys another by buying its stock.

Question 78

The group of individuals elected by the stockholders to oversee the general operation of a corporation are known as the

A)middle managers.
B)top managers.
C)board of directors.
D)shareholders.
E)owners.

Question 79

Most tender offers are considered hostile.

Question 80

Which of the following organizational forms is most expensive to set up?

A)Sole proprietorship
B)Limited partnership
C)General partnership
D)Cooperative
E)Corporation