BSAD 1010 Ch4 self test

Two or more businesses or individuals may join together temporarily for many business reasons including to perform a specific task. If they join together to raise a large amount of capital for that specific task, what type of organization have they created? a. Syndicate b. S corporation c. Joint venture d. Limited liability company

Syndicate

Profits of a large corporation are taxed twice, once as corporate income and again as personal income of stockholders. a. True b. False

True

There are many advantages to conducting business as a corporation. Which of the following is not an advantage of conducting business as a corporation? a. Ease of transfer of ownership b. Management with specialized skill-sets c. Pressure to improve d. Perpetual life

. Pressure to improve

There are many kinds of partnerships. Which of the following best describes a general partnership? a. A general partnership is one in which the partners all share the management responsibility and are protected from liability if the partnership should be sued. b. A general partnership is one in which a general partner or partners manage the partnership and the other partners invest money in the business without management responsibilities. c. A general partnership is a partnership in which the partners have full or shared responsibility for operating the business. d. A general partnership is one in which the partners are required to sign articles of partnership prior to becoming a partner.

A general partnership is a partnership in which the partners have full or shared responsibility for operating the business.

Corporations can grow in a variety of ways, which of the following is not a way corporations grow? a. Corporations grow by acquiring other corporations. b. Corporations grow by creating more corporations. c. Corporations grow by expanding their present operations. d. Corporations grow by merging with other firms.

Corporations grow by creating more corporations.

A corporation can elect to change its tax status to an S corporation. Which of the following is an advantage of electing S corporation status? a. Losses are passed directly to stockholders through the business and are reported on the owners' personal income tax returns. b. Double taxation is eliminated as profits and losses pass directly to stockholders through the business and are reported on the owners' personal income tax returns. c. Profits are passed directly to stockholders through the business and are reported on the owners' personal income tax returns. d. Income shifting is eliminated as profits and losses pass directly to stockholders through the business and are reported on the owners' personal income tax returns.

Double taxation is eliminated as profits and losses pass directly to stockholders through the business and are reported on the owners' personal income tax returns

There are many ways in which corporations can merge. Which of the following describes a vertical merger? a. The management and board of directors of a firm target another firm whose management disapproves of the merger. b. Firms that operate at different but related levels in the production and marketing of a product join together. c. A large corporation buys a smaller corporation. d. Firms that make and sell similar products or services in similar markets join together.

Firms that operate at different but related levels in the production and marketing of a product join together.

A vertical merger is a merger between firms that operate at different but related levels in the production and marketing of a product. a. True b. False

True

As with a sole proprietorship, one disadvantage of a partnership is a lack of continuity. a. True b. False

True

What is the primary disadvantage of both a sole proprietorship and a partnership that a corporation overcomes? a. Unlimited liability b. Lack of secrecy c. No access to capital d. Taxing complications e. Ease of start-up

Unlimited liability

The primary difference between a limited-liability partnership (LLP) and limited partnership is

a limited partnership must have at least one general partner that has unlimited liability

Under the United States Uniform Partnership Act a partnership is defined as

a voluntary association of two or more persons to act as co-owners of a business for profit.

A banker or lender is more likely to make sizable loans to a sole proprietor than to a partnership. a. True b. False

false

A limited-liability company is taxed like a corporation. a. True b. False

false

Because there are two or more people in a general partnership, bankers, suppliers, and other creditors are not concerned about unlimited liability. a. True b. False

false

Compared to a corporation, a partnership is more difficult and expensive to establish. a. True b. False

false

Financial experts agree that takeovers enhance corporate profitability and productivity. a. True b. False

false

In a limited partnership, a limited partner's name must be included in the partnership's name. a. True b. False

false

Surplus funds of a not-for-profit organization are distributed to members of the board of directors. a. True b. False

false

According to the textbook, a partnership usually has more capital available than a sole proprietorship because partners can pool their funds. This additional capital, in addition to the general partners' unlimited liability and partners working together in management skills, may encourage ------------ to extend more credit or approve larger loans to a partnership than to a sole proprietor.

may encourage banks and suppliers

Gwyn owns and operates a large hardware store in Missouri that employs about fifty people. He delegates some of the decision making to two managers, but he remains the only owner. Gwyn's business is organized as a a. limited-liability corporation. b. partnership. c. sole proprietorship. d. limited partnership. e. corporation.

sole proprietorship.

Hailey Wilson loves to cook and receives unqualified praise whenever she prepares a meal for someone. Encouraged by these compliments and eager to put her culinary talents to good use, Hailey decides to open a small neighborhood restaurant. Since she plans to maintain complete control of the business, she will most likely organize it as a a. corporation. b. general partnership. c. cooperative. d. limited partnership. e. sole proprietorship.

sole proprietorship.

Corporate limited liability means corporate losses are limited to

the extent of the assets of the corporate and share holder's stock investment

One of the benefits of being a sole proprietorship is ----------, which is evidenced by a sole proprietor being completely free to make decisions about the firm's operations, location, expansion plans, business hours, and other details.

being your own boss

There are many disadvantages to creating a corporation and conducting business as a corporation. One of the disadvantages is double taxation. Which of the following best describes what is meant by double taxation? a. Taxation when stock increases in value and then again when the stock is sold b. Taxation on dividends when they are declared by the corporation and when they are received by stockholders c. Taxation on profits when they are earned and taxation again as personal income of stockholders d. Taxation on profits when they are earned and when the corporation retains the profits for specified projects and does not distribute them as dividends to shareholders

c. Taxation on profits when they are earned and taxation again as personal income of stockholders

Although a partnership pays no income tax, the Internal Revenue Service requires partnerships to file an annual information return that states the amount of distributions made to each partner. a. True b. False

true