ENT 3183 Chapter 9

In an S corporation, the maximum number of shareholders is limited to

100

The standard acceptable term of a limited liability company (LLC) is

30 years

Which of the following forms of business has the most freedom in terms of selling one's interest in the business?

A Corporation

Which is the most appealing form of business for raising capital due to its advantages regarding personal liability

A corporation

Which of the following forms of business has the most continuity if one of the entrepreneurs dies or withdraws from the business?

A corporation

Match the kinds of partnerships (in the left column) with the effects on them when one of the entrepreneurs dies or withdraws from the business (in the right column).

A general partnership matches Choice Death or withdrawal leads to the termination of the partnership unless the partnership agreement states otherwise. A limited liability partnership (LLP) matches Choice Death or withdrawal does not affect the continuity of the business.

Which of the following is the least expensive form of business to start

A proprietorship

Which of the following are important considerations and strategies that an entrepreneur should follow in recruiting and assembling an effective team and in creating an effective and positive organization culture?

The entrepreneur should be willing to spend extra time in the hiring process. The entrepreneur should develop a culture that matches the business strategy outlined in his or her business plan.

What is the primary concern of an organization's manager as an entrepreneur?

To cope up with changes in the environment and attempt to find new ideas

What is the intention of Sarbanes-Oxley Act of 2002?

To introduce a more independent functioning board of directors in organizations

True or false: An entrepreneur should be able to assign responsibility to people in order to create a vibrant organizational culture.

True

An advantage of an S corporation over a C corporation is that

capital gains or losses from the S corporation are considered personal income or losses by the shareholders on a pro rata basis

What happens to a sole proprietorship if its owner dies

it terminate the business

In the context of the liability of owners, a true statement about a limited liability partnership (LLP) is that it Blank______

provides partners with an advantage to protect their personal assets from liability risk

Match the forms of business formation (in the left column) with their features related to their ownership

A proprietorship matches Choice A form of business with single owner who has unlimited liability, controls all decisions, and receives all profits A partnership matches Choice A form of business with two or more individuals having unlimited liability who have pooled resources to own a business A corporation matches Choice A form of business with a separate legal entity that is run by stockholders having limited liability

Match the forms of business (in the left column) with the descriptions on their capital requirements (in the right column).

A proprietorship matches Choice Any new capital can be gained only from loans by any number of sources or by additional personal contributions by an entrepreneur. A partnership matches Choice Loans can be obtained from banks but will likely need a change in the agreement involved in the business. A corporation matches Choice New capital can be raised in a number of ways such as selling stocks or bonds.

Which of the following is a disadvantage of an S corporation

An S corporation may not deduct most fringe benefits for shareholders.

Identify the true statements about the tax rates for various forms of business after the new laws passed at the end of 2017.

For service-based businesses, the 20 percent deduction is only applicable to income after salary. For employee-driven, passed through businesses such as restaurants and manufacturers, the tax deduction of 20 percent is limited to 50 percent of the company's payroll.

Stephen, an entrepreneur, plans to recruit an effective team for his new venture. Identify the factors he should consider when recruiting and assembling the team. (Check all that apply.)

He must build a workplace where employees are motivated and rewarded for good work. The desired culture must match the business strategy outlined in the business plan.

What are the basic legal forms of business formation

Proprietorship Partnership Corporation

Match the areas in which entrepreneurs can indicate to the members of an organization what is expected of them (in the left column) with their descriptions (in the right column).

Organization structure matches Choice Explains members' jobs and the communication and relationship these jobs have with each other Rewarding matches Choice Provides member with promotions, bonuses, praise, and so on Selection criteria matches Choice Defines a set of guidelines for choosing individuals for each position

Shareholders are allowed to transfer their shares in a business at any time without consent from the other shareholders in the form of a business called a Blank______

Corporation

Which of the following is true about limited liability companies (LLCs

Currently, regulations allow an LLC to be automatically taxed as a partnership. An LLC is similar to an S corporation.

True or false: A proprietorship is likely to require a larger sum of capital than the capital needed for a partnership or corporation.

False

True or false: In an organization, a board of advisors is more closely tied to the organization than its board of directors.

False

True or false: The advantages of a limited liability partnership (LLP) related to the liability of owners are different from a limited liability company (LLC).

False

A(n)___ ___ is the most common form of corporation, regulated by statute and treated as a separate legal entity for liability and tax purposes.

Field 1: C Field 2: corporation

Which of the following are true when a limited partner in a general partnership is given some control over business decisions?

He or she is not considered a limited partner. He or she assumes personal liability.

Identify the advantages of a limited liability company (LLC) over an S corporation.

It can be formed by one or more individuals, corporations, partnerships, trusts, or other entities. Its members are allowed to share income, profit, expense, deduction, loss and credit, and equity among themselves.

Identify the disadvantages of an S corporation.

It is mandatory for an S corporation to adopt a calendar year for tax purposes. Some restrictions are present related to the qualification for this form of business.

dentify a true statement about management control in a corporation.

It is separated based on the types of business decisions.

Identify the characteristics of a limited liability company (LLC).

It is typically treated by the Internal Revenue Service as partnerships for tax purposes. It allows a member to transfer his or her interest only with the unanimous written consent of the remaining members.

Identify a true statement about a board of advisors in an organization.

It lacks a legal status.

What is the implication of losses incurred by a corporation?

It results in no dividends to stockholders.

Identify a true statement about the continuity of business in a corporation if one of the entrepreneurs dies or withdraws from the business.

It seldom affects the continuity of the business.

Identify an attribute of the owners of a limited liability company (LLC).

They are paid in the form of guaranteed payments without involving any federal or state withholding.

Match the forms of business (in the left column) with the descriptions on their capital requirements (in the right column).

A proprietorship Any new capital can be gained only from loans by any number of sources or by additional personal contributions by an entrepreneur. A partnership Loans can be obtained from banks but will likely need a change in the agreement involved in the business. A corporation New capital can be raised in a number of ways such as selling stocks or bonds.

Which of the following statements are true about the tax rates for various forms of business after the new tax laws passed at the end of 2017? (Check all that apply.)

All C Corporations receive a tax cut from 35 percent to 21 percent. Pass through businesses receive 20 percent reduction of their business income.

Identify the advantages of an S corporation over a C corporation

Shareholders in an S corporation retain the same limited liability protection as a C corporation. An S corporation is not subjected to a minimum tax, as is a C corporation.

Isabella, an entrepreneur, plans to select a board of directors for her new venture. Identify the guidelines she should follow when selecting the members of the board.

She should choose people who are ready to spend enough time to be informed directors who can assist the company in making important decisions. She should choose people who have skills needed for her business, have experience in her industry, and are committed to the venture's mission.

Which of the following has been the reason for the decline in the growth rate of the formation of S corporations in the last few years in the United States?

The acceptance of limited liability companies (LLCs) in all states

Identify a true statement about a proprietorship and regular partnership.

There will be no distinction between the business entity and the owner(s).

Which of the following is true about limited partners in a general partnership

They are liable for only their contribution to the partnership.

Peter, an entrepreneur, plans to select a board of directors for his new venture. A guideline to follow when he chooses members of the board is that he should Blank______.

find candidates using referrals of business associates or from any of the external advisors such as banks or investors

An S corporation integrates the tax advantages of Blank

a partnership and a corporation

Identify the functions served by a board of directors in an organization.

Creating a network of information sources for the entrepreneurs Examining operating and capital budgets Building longer-term strategic plans for growth and expansion

Liability is a critical reason for establishing a Blank______ rather than any other form of business.

Corporation

What are the functions the management team of an organization must accomplish?

Maintenance of profitability by making adjustments to the organization's plan based on changes in the environment and market Execution of the organization's business plan Recognition of the basic changes in the business as they occur

Which of the following is an act passed due to irregularities in accounting, fraud, bankruptcy, insider trading, excessive management compensation, and other illegal or unethical practices that have become newsworthy in the years leading up to 2002?

Sarbanes-Oxley Act

What are the factors that form the basis of the ability of entrepreneurs to raise capital in a proprietorship and a partnership? (Check all that apply.)

The personal capability of the entrepreneurs The success of the venture

What was the impact of the passage of the Small Business Job Protection Act in 1996 on the rules governing an S corporation?

The restrictions that existed in regard to the number of shareholders and classes of stock were loosened.

True or false: In a partnership, the distribution of profits and losses is based on the partnership agreement.

True

True or false: It is mandatory for the members of a limited liability company (LLC) to file estimated taxes on a regular basis.

True

True or false: The relationship of an entrepreneur of a new venture and external advisors can be enhanced by seeking out the best advisors and involving them thoroughly and at an early stage of the development of the venture.

True

Owners are liable only for the amount of their investment unless there is negligence or fraud involved in the form of business called a Blank______, as it is an entity that is taxable and absorbs liability.

corporation

Identify a true statement about an organization's outside advisors such as accountants, bankers, lawyers, advertising agencies, and market researchers.

finds solutions to conflicts among owners or shareholders

An advantage of a limited liability company (LLC) over an S corporation is that an LLC Blank

may have tax advantages depending on the state in which the business operates

In the context of the liability of owners, a true statement about a limited liability partnership (LLP) is that it Blank______.

provides partners with an advantage to protect their personal assets from liability risk