Chapter 14
Jonathan Lopez wants to be his own boss and ventures into retailing fruit in the neighborhood after borrowing some money from his mother. While obtaining a license to carry out business in his city, Jonathan mentions the money he borrowed but forgets to specify what type of business undertaking his store will be. Under which of the following major forms of business is Jonathan's store listed by default? A) a general partnership B) a sole proprietorship C) a limited partnership D) a limited liability corporation
B
If no other form of business organization is chosen while obtaining a license, the business is by default a sole proprietorship.
T
The sole proprietor has ________ liability.
Unlimited Personal
The designation for a business that is operating under a trade name is ________.
Doing Business as (D.B.A)
A(n) ________ is a document that is filed with the state that designates a trade name of a business.
Fictitious business name statement
A sole proprietor is legally responsible for the business's contracts.
T
An organization or venture must have a ________ motive in order to qualify as a partnership. A) large-scale expansion B) noncommercial C) profit D) target market
C
The earnings and losses from a sole proprietorship are reported on ________. A) the federal income tax filing document for sole proprietorships B) the sole proprietorship business license that is renewed each year C) the sole proprietor's personal income tax filing D) the state income tax filing document for sole proprietorships
C
An association of two or more persons to carry on as co-owners of a business for profit is known as a ________. A) limited partnership B) sole proprietorship C) corporation D) general partnership
D
Which of the following is true of a sole proprietorship? A) A business operated under sole proprietorship cannot be transferred. B) Large businesses cannot be operated under sole proprietorship. C) A business operated under sole proprietorship must be owned by one or more people of the same family. D) Creditors can recover claims against the business from the sole proprietor's personal assets.
D
In a sole proprietorship, the business is considered a separate legal entity.
F
Which of the following is true of creating a sole proprietorship? A) No state government approval is required. B) A sole proprietorship is subject to double-taxation. C) No licenses are required to do business within a city or state. D) Special permission must be obtained to receive sole proprietorship status.
A
Why does a sole proprietorship not pay taxes at the business level? A) It does not have a separate legal existence. B) It is a small business that is exempted from taxation. C) It is a non-profit organization. D) It is generally an institution with no business dealings.
A
Which of the following best describes an entrepreneur? A) a person who forms and operates a business B) a person who invests in an existing business C) a person who lends capital to a new business D) a person who derives a profit from a new or an existing business
A
A sole proprietorship can operate under the name of the sole proprietor or a trade name.
T
A sole proprietorship does not pay taxes at the business level
T
An entrepreneur is a person who forms and operates a business.
T
Which of the following is true of a business operating under sole proprietorship? A) It is not considered a separate legal entity. B) It cannot be sold when the owner decides to do so. C) It requires governmental approval when being transferred. D) It has access to unrestricted capital by means of investments.
A
23) List the advantages and disadvantages of a sole proprietorship.
1. a) Forming a sole proprietorship is easy and does not cost a lot. 2. b) The owner has the right to make all management decisions concerning the business, including those involving hiring and firing employees. 3. c) The sole proprietor owns all of the business and has the right to receive all of the business's profits. 4. d) A sole proprietorship can be easily transferred or sold if and when the owner desires to do so; no other approval is necessary.
Where a partnership agreement provides for the sharing of profits but is silent as to how losses are to be shared, ________. A) losses are shared in the same proportion as profits B) losses are shared in greater proportion than profits C) profits are shared in greater proportion than losses D) losses are absorbed by the partnership entity rather than borne by the individual partners
A
Which of the following is a major form of conducting business? A) an institution B) a charity C) a corporation D) a trust
C
According to the Statute of Frauds, a general partnership that exists for more than ________ must have a written partnership agreement. A) three months B) six months C) nine months D) one year
D
A sole proprietor has limited personal liability.
F
A sole proprietorship cannot be easily transferred when the owner desires to do so.
F
No federal or state government approval is required for creating a sole proprietorship.
T
Orlando opened a hot dog stand in Brooklyn, doing business as Orlando's Red Hots. Unfortunately, the venture has not generated a profit. Orlando borrowed $5,000 from the bank to open his business, and the short-term loan is now due. Orlando's friend Bob has suggested partnering with him at the beginning of next year. From which of the following sources can the bank currently recover its $5,000? A) Orlando's secondary lender B) Orlando's savings account C) Orlando's family D) Bob, Orlando's prospective business partner
B
________ are the most common form of business organization in the United States. A) General partnerships B) Sole proprietorships C) Limited liability companies D) Limited partnerships
B
Which of the following is true in the creation of a general partnership? A) The business name must include the names of all partners. B) The business name cannot be a fictitious name. C) The name selected by the partnership cannot indicate that it is a corporation. D) The business cannot operate under a trade name.
C
Which of the following is true of a general partnership? A) A business must generate a profit in order to qualify as a general partnership. B) The general partners need not be the co-owners of the business. C) A general partnership may be formed with little or no formality. D) Charity organizations and schools are usually formed as general partnerships.
C
Which of the following must be in writing under the Statute of Frauds? A) a business that has more than one commercial venture B) a partnership that is authorized to deal in real estate C) a business that is authorized to lend money D) an enterprise that deals in health and medicine
B