Ent Ch. 10

Upon the death of a partner, the insurance proceeds can be used to keep the business going or to buy out the deceased partner's interest under a/an ____. a. buy/sell agreement b. partnership agreement c. ostensible authority d. sole proprietorship e. none of these choices

a. buy/sell agreement

The U.S. Supreme Court has defined the ____ as an artificial being, invisible, intangible, and existing only in contemplation of the law. a. corporation b. sole proprietorship c. partnership d. joint venture e. closely held corporation

a. corporation

A corporation established for charitable, public (scientific, literary, or educational), or religious purposes or for mutual benefit (trade associations, tennis clubs), as recognized by federal and state laws, is a ____. a. nonprofit corporation b. joint venture c. syndicate operation d. limited partnership e. sole proprietorship

a. nonprofit corporation

Only about 25 percent of all U.S. businesses are ____, but they account for 67 percent of all sales transactions. a. nonprofits b. LLCs c. corporations d. sole proprietorship e. none of these choices

a. nonprofits

State law permits certain professionals, such as health care professionals, engineers, accountants, and lawyers, to form corporations called ____. a. professional service corporations b. S-corporations c. C-corporations d. DBAs e. ostensible authorities

a. professional service corporations

Often small businesses such as pizza parlors and boutiques are run as ____. a. sole proprietorships b. silent partnerships c. general partnerships d. nonprofit businesses e. an LLC

a. sole proprietorships

To operate as a sole proprietor requires nothing more than a ____. a. stock certificate b. "certificate of doing business under an assumed name" c. limited liability certificate d. retained earnings statement e. visit to an attorney

b. "certificate of doing business under an assumed name"

____ pay taxes on profits and their shareholders pay taxes on dividends they receive, resulting in double taxation. a. S-corporations b. C-corporations c. LLCs d. foreign corporations e. none of these choices

b. C-corporations

A corporation that is chartered in the state in which it will do business and issue stock is a/an ____. a. foreign corporation b. domestic corporation c. secret partnership d. alien corporation e. closely held corporation

b. domestic corporation

In a/an ____, all partners assume unlimited personal liability and responsibility for the management of the business. a. limited partnerships b. general partnership c. ostensible authority d. sole proprietorship e. LLC

b. general partnership

When one or more people agree to assume unlimited personal liability and responsibility for management of the business, a ____ exists. a. secret partnership b. general partnership c. silent partnership d. joint venture e. LLC

b. general partnership

All of the following are types of nonprofit organizations except ____. a. religious organizations b. novelty shops c. schools d. museums e. shelters

b. novelty shops

____ partners typically provide capital but do not actively participate in the management of the business. a. secret b. silent c. dormant d. limited e. general

b. silent

Each partner owns and has use of the property acquired by the partnership, unless otherwise stated in ____. a. the corporate charter b. the partnership agreement c. the commercial code d. proprietary bylaws e. SEC regulations

b. the partnership agreement

A financial vehicle that enjoys limited liability in that its owners are liable for its debts and obligations only to the limit of their investment is a ____. a. sole proprietorship b. S-corporation c. C-corporation d. joint venture e. limited partnership

c. C-corporation

In a/an ____, corporate stock is owned privately by a few individuals and is not traded publicly on a securities exchange. a. partnership b. sole proprietorship c. closely held corporation d. open corporation e. limited partnership

c. closely held corporation

Sole proprietorships offer several advantages, which include all of the following except ____. a. they are easy and inexpensive to create b. they give the owner complete authority c. dividends are paid to owners d. the income from the business is taxed only once; at the owner's personal income tax rate e. there are no major reporting requirements, as with a corporation

c. dividends are paid to owners

A ____ corporation is chartered in a state other than in the one in which it will do business. a. closely held b. domestic c. foreign d. S- e. C-

c. foreign

Income derived from for-profit activities in a nonprofit corporation is subject to ____. a. withholdings b. distribution c. income taxation d. reinvestment e. dividend payments

c. income taxation

____ make(s) all partners responsible for the obligations that each incurs in the course of doing business. a. limited partnerships b. general partnership c. ostensible authority d. sole proprietorship e. limited liability

c. ostensible authority

Professionals such as lawyers, doctors, and accountants frequently employ the legal structure of a ____. a. sole proprietorship b. S-corporation c. partnership d. C-corporation e. none of these choices

c. partnership

When two or more people share the assets, liabilities, and profits of the business, the legal structure is a ____. a. sole proprietorships b. corporation c. partnerships d. limited partnership e. none of these choices

c. partnerships

If a nonprofit corporation is ever dissolved, its assets must be distributed ____. a. to the owners b. at public auction c. to another tax-exempt organization d. to the shareholders e. to the federal government

c. to another tax-exempt organization

By creating a corporation and issuing stock, the entrepreneur is giving up a measure of control to the ____. a. creditors b. government c. partnership d. board of directors e. SEC

d. board of directors

___ life insurance is a policy on the life of principal members of the partnership, usually the senior partners. a. principal b. uniform partnership c. first-partner d. key-person e. none of these choices

d. key-person

A corporate form that enjoys the pass-through tax benefits of partnerships in addition to the limited liability of a C-corporation is known as a ____. a. multinational corporation b. secret partnership c. silent partnership d. limited liability company (LLC) e. closely held partnership

d. limited liability company (LLC)

Which of the following statements is not true of an S-corporation? a. it may have no more than 100 shareholders b. shareholders must be U.S. citizens or residents c. profits and losses must be allocated in proportion to shareholder interests d. partnerships may be shareholders e. shareholders may not deduct losses in an amount greater than their original investment

d. partnerships may be shareholders

The owner is the only person responsible for the activities of the business in a ____. a. limited partnership b. nonprofit business c. dormant partnership d. sole proprietorship e. limited liability company

d. sole proprietorship

More than 76 percent of all businesses in the United States are ____. a. limited partnerships b. nonprofit businesses c. dormant partnerships d. sole proprietorships e. limited liability companies

d. sole proprietorships

In forming a ____, the entrepreneur gives up proprietary interest in the organization and dedicates all the assets and resources of the corporation to tax-exempt activities. a. sole proprietorship b. LLC c. C-corporation d. S-corporation e. nonprofit corporation

e. nonprofit corporation

A high-growth venture cannot be started as a sole proprietorship.

false

LLCs are becoming a popular vehicle for companies that may have global investors, because the C- corporation does not permit foreign ownership.

false

Nonprofit corporations are not allowed to make a profit, according to the Internal Revenue Service.

false

The law requires a partnership to draw up a written partnership agreement based on the Uniform Partnership Act.

false

Common stockholders are entitled to vote at stockholder meetings.

true

DBA stands for a certificate of doing business under an assumed name.

true

Having a strategic plan in place for the venture enables the entrepreneur to choose a legal form that won't have to be changed or one that can easily be shifted to when the time is right.

true

In a sole proprietorship, the owner is the only person responsible for the activities of the business and, therefore, is the only one to enjoy the profits and suffer the losses.

true

In terms of its treatment of income, expenses, and taxes, a partnership is essentially a sole proprietorship consisting of more than one person.

true

Sole proprietorships, partnerships, S-corporations, and limited liability companies all permit pass- through earnings and losses, but S-corporations and LLCs offer more protection from liability.

true