CH 5

Which of the following is a key difference between a corporation and a sole proprietorship? A. Unlike a sole proprietorship, a corporation is subject to limited liability. B. Compared to establishing a proprietorship, establishing a corporation is easier. C. Establishing a sole proprietorship has complex legal requirements unlike a corporation. D. Unlike a corporation, a proprietorship is subject to double taxation. E. Regulatory requirements are less severe for corporations than sole proprietorships.

A. Unlike a sole proprietorship, a corporation is subject to limited liability.

RSS Bank is registered as a corporation in Maryland. Apart from its financial objectives, the company has also formed a legal requirement to work for the welfare of the elderly citizens in the state. The bank is obligated to work for the cause even if there is a change in ownership. Based on this information, it can be concluded that RSS bank is a(n) ________. A. benefit corporation B. S corporation C. public corporation D. not-for-profit company E. unlimited company

A. benefit corporation

An S corporation ________. A. combines limited liability of a corporation with the federal taxation advantages of a partnership B. combines limited ownership of a proprietorship with the capital-raising options of a corporation C. files income tax returns in a country other than the country of operation D. does not split the ownership into smaller units E. does not have such advantages as limited liability of investments

A. combines limited liability of a corporation with the federal taxation advantages of a partnership

A ________ merger occurs when different companies at the same stage or level merge. A. horizontal B. conglomerate C. standardized D. vertical E. operational

A. horizontal

A potentially significant disadvantage of a partnership is that ________. A. it has more chances for disagreement and conflict B. the amount of money generated in a partnership is low C. income tax is not straightforward and is complex D. it does not present opportunities to share costs E. it involves double taxation of the income generated

A. it has more chances for disagreement and conflict

A ________ occurs when someone purchases a company's publicly-traded stock primarily by using borrowed funds, sometimes using the target company's assets as collateral for these loans. A. strategic alliance B. leveraged buyout C. hostile takeover D. consolidation E. forced joint venture

B. leveraged buyout

Which of the following is a key difference between a master limited partnership (MLP) and other forms of partnerships? A. A MLP allows the partners to have limited liability on their investments. B. Other partnerships should have more members than an MLP. C. A MLP allows partnerships to sell units of ownership to the general public. D. A MLP is characterized by double taxation unlike the other forms of partnerships. E.Other partnerships have double-taxation disadvantage unlike an MLP.

C. A MLP allows partnerships to sell units of ownership to the general public.

A group of college graduates starts a business. They want to give their business a structure such that their risk is limited to the amount they have invested in the business. They also want to avoid double taxation of the income that they generate from the business. Which of the following structures is most suitable to satisfy these wants? A. sole proprietorship B. corporation C. S corporation D. direct partnership

C. S corporation

A ________ merger occurs when companies in unrelated industries join to form a single entity. A. product-extension B. market-extension C. conglomerate D. etail E. vertical

C. conglomerate

A sole proprietorship ________. A. requires immense paperwork B. is taxed as a separate corporation C. is owned by only one person D. gives reduced control to the owner E. does not have a legal status

C. is owned by only one person

A corporation primarily or wholly owned by another company is known as a(n) ________. A. parent company B. domestic company C. subsidiary D. alien company E. holding company

C. subsidiary

In a sole proprietorship, the owner ________. A. has lesser responsibility compared to other forms B. is taxed more than once for the income generated C. obtains limited liability protection on the business's actions D. and the business are legally inseparable E. does not have personal liability for the transactions of the business

D. and the business are legally inseparable

Who is the highest-ranked officer of a corporation? A. chief financial officer B. chief operating officer C. chief information officer D. chief executive officer E. chief technology officer

D. chief executive officer

Edwin runs an antique retail shop that is registered as a sole proprietorship. The liability exposure of Edwin's business ________. A. refers to the amount invested on variable assets B. refers to the total fixed investments made by him C. is more if the size of transactions is limited D. is unlimited for the business's personal obligations E. is limited to the amount he has invested on fixed assets

D. is unlimited for the business's personal obligations

In a general partnership, ________. A. units of ownership are sold to the general public B. risk is limited to the amount invested in a partnership C. the number of partners is limited to five D. all partners have limited liability E. all partners have joint authority to make decisions

E. all partners have joint authority to make decisions

Which of the following business structures is the most complicated and expensive? A. general partnership B. limited partnership C. sole proprietorship D. unlimited partnership E. corporation

E. corporation

Which of the following is a document that authorizes another person to vote on behalf of a shareholder in a corporation? A. share certificate B. agency agreement C. affidavit D. draft E. proxy

E. proxy

Robert owns three restaurants in Atlanta. He pays taxes for the income from the restaurants as his personal income. Robert's business is an example of a ________. A. personal partnership B. limited liability firm C. joint venture D. small corporation E. sole proprietorship

E. sole proprietorship

A public corporation refers to a corporation ________. A. that is allowed to sell stock only to a limited number of investors B. that is owned solely by state/federal government C. that is owned solely by the federal government D. whose stock is not traded in stock exchanges or other markets E. whose stock is sold to general people

E. whose stock is sold to general people