EXAM 3 PART2

27) 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) losses are shared in the same proportion as profits

26) 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) A general partnership may be formed with little or no formality.

28) 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) The name selected by the partnership cannot indicate that it is a corporation.

5) 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) Creditors can recover claims against the business from the sole proprietor's personal assets.

24) 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) general partnership

30) 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) one year

20) The designation for a business that is operating under a trade name is ____.

DOING BUSINESS AS.

12) A sole proprietorship cannot be easily transferred when the owner desires to do so.

FALSE

14) In a sole proprietorship, the business is considered a separate legal entity.

FALSE

18) A sole proprietor has limited personal liability.

FALSE

13) A sole proprietor is legally responsible for the business's contracts.

TRUE

15) No federal or state government approval is required for creating a sole proprietorship.

TRUE

16) If no other form of business organization is chosen while obtaining a license, the business is by default a sole proprietorship.

TRUE

17) A sole proprietorship can operate under the name of the sole proprietor or a trade name.

TRUE

19) A sole proprietorship does not pay taxes at the business level.

TRUE

3) An entrepreneur is a person who forms and operates a business.

TRUE

22) The sole proprietor has ___ liability.

UNLIMITED PERSONAL

10) 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) It does not have a separate legal existence.

6) 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) It is not considered a separate legal entity.

7) 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) No state government approval is required.

1) 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 person who forms and operates a business

23) List the advantages and disadvantages of a sole proprietorship.

ADVANTAGES: -Doesn't cost a lot and its easy. -Owner can make all management decisions. -Has the right to receive all business profits. -Can sell to any one easily without approval. DISADVANTAGES: -Owner is fully responsible for loans or contracts, not companies liabilities.

9) 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) Orlando's savings account

4) ________ 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) Sole proprietorships

29) 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) a partnership that is authorized to deal in real estate

8) 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) a sole proprietorship

2) Which of the following is a major form of conducting business? A) an institution B) a charity C) a corporation D) a trust

C) a corporation

25) 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) profit

11) 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) the sole proprietor's personal income tax filing

21) A(n) ___is a document that is filed with the state that designates a trade name of a business.

FICTITIOUS BUSINESS NAME STATEMENT