Chapter 4 Quiz: Forms of Business Ownership

Which of the following statements about incorporation is true?

Articles of incorporation may vary slightly from state to state.

_____ occur when mergers or acquisitions are financed by large amounts of borrowed money, secured by the acquired company's assets.

Leveraged buyouts

What is the major difference between S corporations and limited liability companies (LLCs)?

A major difference is how they are set up. In S corporations, they still have the shareholders, directors, and officers. Llc is not set up this way. They are, however, taxed the same as a partnership.

Dissolving a partnership is easier than dissolving a sole proprietorship.

False

Double taxation is a distinct advantage that corporations have over other forms of ownership.

False

Registration procedures for incorporation are uniform from state to state across the U.S.

False

_____ are the owners of a corporation.

Shareholders

Distinguish between a merger and an acquisition.

The main difference between a merger and acquisition is that one has to do with companies combining and the other has to do with a company being purchased. In a merger, two different companies merge together for economic power gain. In an acquisition, a company is bought by another. Both do result in company growth.

When Ashland Plastics and Melamine Chemicals formed a joint venture to develop flame-resistant plastic sheeting, the relationship most likely ended as soon as the project was completed.

True

When companies in the same industry merge to achieve economies of scale and to expand their product lines, it is called a horizontal merger.

True

Which of the following is a disadvantage of sole proprietor ownership?

Unlimited liability

An _____ is the purchase of a corporation by another corporation or by an investor group.

acquisition

Who owns a corporation?

everyone who owns a share of stock in the corporation

A _____ is form of business organization that is created to carry out a single project and is dissolved upon completion.

joint venture

The first step to incorporating a company is to:

select the company's name

Rebecca Siddoway own and operate Country Candies. Siddoway specializes in making rich, creamy toffees that she packages in attractive gift boxes and sells through the mail. What would her first step be if she decides to incorporate her business to make it easier to find investors?

to write the articles of incorporation

In a sole proprietorship, the owner is fully liable for all business debts of the company. This term is called _____ liability.

unlimited