Chapter 37: Introduction To Forms Of Business And Formation Of Partnerships
Limited partners usually have no liability for the obligations of the limited partnership once they have paid their ____________ to the limited partnership.
capital contributions
One of the most important decisions that a person makes before beginning a business is __________.
choosing a form of business
A sole proprietorship has __________ who is referred to as the sole proprietor.
one owner
The owners of a partnership are known as _______________.
partners
THREE characteristics of a partnership are: ____________, ____________, and ____________. (Choose three correct answers.)
partners are personally liable for the torts committed by partners acting within the scope of business. a partnership is not a separate tax-paying entity for federal income tax purposes. partners assume all personal liability for all the obligations of the business.
A partnership is a form of business organization in which _______________.
partners assume personal liability for all the obligations of the business
A partnership is a form of business organization in which the partners _____________.
share the profits of the business equally
The most common form of business organization is a(n) _____________.
sole proprietorship
TWO characteristics of a limited partnership (LP) are it: ____________ and it ____________. (Check all that apply.)
continues functioning when a partner dies or otherwise leaves the business. can pay federal income tax on its net income if it is taxed like a corporation.
If a limited liability company (LLC) is manager-managed, it has the management advantage of a ____________.
corporation
A professional corporation is a business organization that is ______________.
formed only by a filing with the secretary of state
When a limited partnership (LP) is taxed like a partnership the _______________.
general partners report their shares of the partnership's income and losses on their individual federal income tax returns.
An attribute of the owner of a sole proprietorship is that she _______________.
has the right to make all the management decisions of the business
A sole proprietorship is risky because the sole proprietor may: _______________.
lose everything if her business becomes insolvent
A limited liability company (LLC) is owned by _________ who may manage the business themselves or elect a manager or managers who will operate the business.
members
A sole proprietorship is a form of business organization in which the _____________.
proprietor is responsible for all the debts of the business
A form of business organization in which there is only one owner is known as a(n) _____ _____.
sole proprietorship
A limited partnership (LP) is a form of business organization in which _____________.
the only general partner is typically a corporation, thereby protecting the human managers from unlimited liability
Match the partners in a limited partnership (LP) (left column) to their descriptions (right column)
General partners ----- They have unlimited liability for the obligations of the limited partnership and manage the business of the limited partnership. Limited partners ----- They usually have no liability for the obligations of the limited partnership once they have paid their capital contributions to the limited partnership and have no right to manage the business.
Match the partners in a limited partnership (LP) (left column) to their descriptions (right column).
General partners ------ They have unlimited liability for the obligations of the limited partnership and manage the business of the limited partnership. Limited partners ----- They usually have no liability for the obligations of the limited partnership once they have paid their capital contributions to the limited partnership and have no right to manage the business.
A(n) _____________ is a form of business organization that is owned by shareholders who elect a board of directors to manage the business.
corporation
Identify TWO requirements for the formation of a limited liability partnership: ____________ and ____________. (Choose two correct answers)
it requires filing a form with the secretary of state. some states require the business to maintain adequate professional insurance.
People organize a business as a partnership because _____.
it requires no formalities for formation and may be formed by default
One disadvantage of managing a sole proprietorship is _______________.
lack of freedom to legally transfer the business to another person
A sole proprietor assumes great liability and is personally: _____________ and _____________. (Choose two correct answers)
liable for all debts of the business liable for all obligations of the business
A characteristic of a limited liability company (LLC) is that _______________.
limited free transferability of the limited liability company's members' ownership interests exists
A form of business organization that intends to combine the non-tax advantages of corporations with the favorable tax treatment of partnerships is a(n) ______________.
limited liability company
A form of business partnership in which partners have elected limited liability status is known as a(n) _____________.
limited liability partnership
Three attributes of a limited liability company (LLC) include: ___________, __________, and ___________. (Choose three correct answers)
members may elect to receive federal tax treatment similar to the S Corporation and its shareholders a membership interest transfer entitles the transferee to receive only the member's distributions from the business the bankruptcy, death, or retirement of any member usually does not dissolve or cause the liquidation of the business
Identify TWO reasons for people to organize a business as a corporation: __________ and __________. (Choose two correct answers)
no human has unlimited liability for the debts of the business. large amounts of capital can be attracted.
A corporation is a form of business organization in which ____________.
officers are elected by the board of directors to run the day-to-day affairs of the business
ONE feature of a limited liability partnership is that ______________.
partners elect limited liability status for all the partners
A characteristic of a limited liability partnership (LLP) is that ______________.
partners have no liability for most business obligations except for their own wrongful acts
THREE attributes of a professional corporation are: ____________, ____________, and ___________. (Choose three correct answers)
shareholders have no personal liability for its obligations it is identical to a business corporation in most respects it is managed by a board of directors
A form of business organization that has no life apart from its owner is a(n) ____________.
sole proprietorship
The decision to choose a form of business is important because ___________________.
the business owner's liability vary greatly among the many forms of business