BA109 Quiz 5
The corporation has the advantage of transferable ownership, which easily enables the corporation to sell shares to others or to transfer stock through inheritance.
True
The limited liability company, like an S corporation, is a form of ownership that is a cross between a partnership and a corporation.
True
There is no limit to the number of general partners a partnership may have, but it must have at least one general partner.
True
To form a limited liability company, an entrepreneur must file both the articles of incorporation and the operating agreement with the secretary of state.
True
A joint venture is different from a partnership in that the joint venture:
can be formed only by two individuals.
Which of the following is required to form a partnership?
A general partner
Which of the following generally is not required by a Certificate of Incorporation?
A statement of how stock proceeds will be used
Which of the following is true regarding the corporate form of ownership?
All of these
Which of the following issues would a typical partnership agreement address?
All of these
Which of the following issues would influence an entrepreneur's choice of a form of business ownership?
All of these
Which of the following statement(s) is/are true?
All of these
Which of the following is a disadvantage of the corporation form of ownership?
Double taxation on profits
"Double taxation" refers to the fact that corporations are required to pay both federal and state income taxes.
False
A business with more than five owners must be a corporation.
False
A corporation formed in Taiwan doing business in the United States is a foreign corporation.
False
A general partner is personally liable only for the amount of money he has invested in the partnership.
False
A limited liability company must have at least two owners.
False
As in a limited partnership, owners of a limited liability company who want to maintain their limited liability status cannot actively participate in the management of the company.
False
Company founders can become minority stockholders in a corporation but can never lose their final authority or control over business decisions because they are the founders.
False
Corporations must obtain a federal charter before they can conduct any business.
False
Defining the duties, responsibilities, contributions, and roles of the partners in a partnership agreement is not necessary since the law covers these provisions automatically.
False
Entrepreneurs should not spend much time selecting a form of ownership for their businesses because making the choice is merely a technicality, which has little impact on the business and its owner(s).
False
If a sole proprietorship fails, the owner is not liable for its debts since the business is a separate legal entity.
False
In a partnership, profits (and losses) must be shared according to the ratio of capital originally invested in the partnership
False
In a partnership, profits (and losses) must be shared according to the ratio of capital originally invested in the partnership.
False
In a sole proprietorship, the owner has limited liability.
False
Stockholders in the corporation have the same kind of liability as do general partners in a partnership.
False
T/F "Double taxation" refers to the fact that corporations are required to pay both federal and state income taxes.
False
T/F Company founders can become minority stockholders in a corporation but can never lose their final authority or control over business decisions because they are the founders.
False
T/F State law requires that individuals creating a partnership file the Articles of Partnership with the secretary of state.
False
T/F Stockholders in the corporation have the same kind of liability as do general partners in a partnership.
False
The most common form of business ownership in the United States is the partnership.
False
The sole proprietorship is the best form of ownership for entrepreneurs launching their first businesses.
False
The sole proprietorship is the easiest form of ownership to create, but once formed, it is subject to the greatest number of regulations.
False
When filing the corporate charter, a corporation must file in the state in which its headquarters are located.
False
In a partnership, the ________ partner(s) has (have) unlimited liability for the partnership's debts.
general
Which of the following is not an advantage of the corporate form of ownership?
It is the easiest and least expensive form of ownership to create.
A special type of limited partnership in which all partners who, in many states must be considered to be professionals, are limited partners.
Limited liability partnership (LLP)
Which form of ownership generally has the least ability to accumulate capital?
Sole proprietorship
Which of the following would be most likely to benefit from choosing S corporation status?
Startup companies anticipating net losses and Highly profitable firms with substantial dividends to pay out to shareholders only
Which of the following documents must an entrepreneur file to create a limited liability company?
The articles of organization and The operating agreement only
Which of the following statements is not true regarding the liquidation of an S corporation?
The owners file a statement of intent to dissolve with the secretary of state's office in each state where they conduct business.
Carlos founded the "Taco Factory" 20 years ago as a family-oriented restaurant. Over the years as they grew the business, he incorporated and sold stock to outside investors. Recently the stockholders voted to seek liquor licenses and to sell beer and hard liquor in the restaurants. Carlos opposed this, citing the history of the restaurant's "family" environment, but was voted down. Carlos has experienced which drawback of the corporate form of ownership?
The potential loss of control
"Double taxation" refers to the fact that the corporation itself must pay taxes on its net profits, and the stockholders must also pay taxes on the portion of those same profits distributed to them as dividends.
True
A common denominator in many partnership disputes is the lack of a written agreement clearly spelling out the roles, rights, and responsibilities of each partner.
True
A corporation formed and chartered in Kansas is considered a domestic corporation when doing business in Kansas, and a foreign corporation when doing business in Missouri.
True
A limited liability company cannot have any more than two of the following corporate characteristics: limited liability, continuity of life, free transferability of interest, and centralized management.
True
A limited partner is personally liable only for the amount of money she has invested in the partnership.
True
All the profits of a sole proprietorship are taxed as current income of the owner even if they are not withdrawn from the business.
True
Although not required by law, a written partnership agreement that spells out the terms of operating the partnership and the status of each partner should be developed.
True
An S corporation can issue both voting and nonvoting common stock to its shareholders.
True
An S corporation maintains the advantages of the corporate form of ownership while having the ability to be taxed as a partnership.
True
Choosing S corporation status is usually beneficial to startup companies anticipating net losses and to highly profitable firms with substantial dividends to pay out to shareholders.
True
Each partner in a limited liability partnership is a limited partner; there are no general partners.
True
If a limited partner withdraws, sells his ownership in the partnership, or dies, the partnership is not forced into dissolution.
True
If a partnership agreement does not exist, the partnership will be governed by the Uniform Partnership Act.
True
If a sole proprietor dies, retires, or becomes incapacitated, the business automatically terminates.
True
Like an S corporation, a limited liability company does not pay income taxes; its income flows through to its owners, who pay taxes on their shares of the limited liability company's net income.
True
Limited liability partnerships (LLP) are where all partners in a business are limited partners, which offers the advantage of limited liability for the debts of the partnership.
True
Liquidating an S corporation involves several steps, including paying all taxes and debts, obtaining the written approval of shareholders to dissolve the company, filing a statement of intent to dissolve with the secretary of state's office and, finally, distributing all remaining assets of the corporation to shareholders.
True
One disadvantage of an S corporation is that the cost of many benefits-insurance, meals, lodging, and others-that are paid to shareholders with 2 percent or more of stock-cannot be deducted as business expenses for tax purposes and are considered taxable income.
True
One disadvantage of the partnership form of ownership is the great potential for personality and authority conflicts.
True
One of the advantages of a partnership over a proprietorship is the increased sources of capital and credit it offers.
True
One significant advantage of a corporation is the ability to attract capital.
True
Profits earned by a partnership are taxed in the same fashion as those earned by a sole proprietorship.
True
Some forms of ownership are much more costly and involved to create.
True
T/F A corporation formed and chartered in Kansas is considered a domestic corporation when doing business in Kansas, and a foreign corporation when doing business in Missouri.
True
T/F A professional corporation is created in the same way as a regular corporation, and exists to provide the advantages of corporate ownership, including limited liability, to professionals such as doctors and lawyers.
True
T/F An S corporation can issue both voting and nonvoting common stock to its shareholders.
True
T/F Changing from one form of ownership to another once a business is up and running can be difficult, expensive, and complicated.
True
T/F Choosing S corporation status is usually beneficial to startup companies anticipating net losses and to highly profitable firms with substantial dividends to pay out to shareholders.
True
T/F If a partnership agreement does not exist, the partnership will be governed by the Uniform Partnership Act.
True
T/F In a professional corporation, all shares of stock must be owned and held by individuals licensed in the profession of the corporation.
True
T/F Liquidating an S corporation involves several steps, including paying all taxes and debts, obtaining the written approval of shareholders to dissolve the company, filing a statement of intent to dissolve with the secretary of state's office and, finally, distributing all remaining assets of the corporation to shareholders.
True
T/F One disadvantage of an S corporation is that the cost of many benefits-insurance, meals, lodging, and others-that are paid to shareholders with 2 percent or more of stock-cannot be deducted as business expenses for tax purposes and are considered taxable income.
True
T/F The corporation has the advantage of transferable ownership, which easily enables the corporation to sell shares to others or to transfer stock through inheritance.
True
T/F The limited liability company, like an S corporation, is a form of ownership that is a cross between a partnership and a corporation.
True
T/F The partnership, like the proprietorship, avoids the disadvantage of double taxation.
True
T/F There is no limit to the number of general partners a partnership may have, but it must have at least one general partner.
True
The "Das Spelunker" corporation, formed in Germany and conducting business in the U.S., is considered to be a(n) ________ corporation.
alien
A disadvantage of the corporate form of ownership is when profits are taxed at the corporate rate and at the individual rate and this is referred to as:
double taxation.
Acme Corporation is chartered in Delaware, but its primary area of operation is in South Carolina. In South Carolina, Acme would be considered a(n) ________ corporation.
foreign
A limited liability company:
is similar to an S corporation in that it is a cross between a partnership and a corporation.
Probably the most important reason to have a partnership agreement is that:
it resolves potential sources of conflict that, if not addressed in advance, could later result in partnership battles and dissolution of an otherwise successful business.
A ________ partner is a person who makes financial investments in a partnership, does not take an active role in managing the business, and whose liability for the partnerships' debts is limited to the amount they have invested.
limited
A special type of partnership in which all partners, who in many states must be professionals, are limited partners is called:
limited liability partnership.
Income from a joint venture is taxed as the income from a(n):
partnership.
All of the following are advantages of a partnership except:
partnerships have the greatest ability to accumulate capital of all of the forms of ownership
Marco is opening a new computer repair shop. He is owner and sole employee. He has paid the appropriate fees and licensing costs and begun his business. This is an example of a(n):
sole proprietorship
The most common form of business ownership that is also the simplest to create is the:
sole proprietorship.
A corporation receives its charter from:
the state.
