BUS 2500 Ch 9
In an S corporation, the maximum number of shareholders is limited to
100
Which of the following forms of business has the most freedom in terms of selling one's interest in the business?
A 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 assumes personal liability. He or she is not considered a limited partner.
Identify a true statement about the ownership pattern of limited liability partnerships (LLPs).
In LLPs, a partnership is considered a legal entity.
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
True or false: An entrepreneur should be able to assign responsibility to people in order to create a vibrant organizational culture.
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
What are the factors that form the basis of the ability of entrepreneurs to raise capital in a proprietorship and a partnership?
The success of the venture The personal capability of the entrepreneurs
Identify a true statement about a proprietorship and regular partnership.
There will be no distinction between the business entity and the owner(s).
Identify the forms of business that are the least attractive for raising capital, primarily owing to the problem of personal liability.
A partnership A proprietorship
Which of the following is the least expensive form of business to start?
A proprietorship
A general partnership?
Death or withdrawal leads to the termination of the partnership unless the partnership agreement states otherwise
Selection criteria?
Defines a set of guidelines for choosing individuals for each position
Organization structure?
Explains members' jobs and the communication and relationship these jobs have with each other
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
Identify a true statement about an organization's outside advisors such as accountants, bankers, lawyers, advertising agencies, and market researchers.
They are not part of the organization's formal board of advisors.
Identify a true statement about limited partners in a general partnership.
They lack control over business decisions.
What are the legal requirements owners should fulfill before forming a corporation?
Owners should meet the state statutory needs. Owners should register the name and articles of incorporation.
Liability is a critical reason for establishing a _____ rather than any other form of business.
corporation
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
A corporation?
A form of business with a separate legal entity that is run by stockholders having limited liability
A proprietorship?
A form of business with single owner who has unlimited liability, controls all decisions, and receives all profits
A partnership?
A form of business with two or more individuals having unlimited liability who have pooled resources to own a business
basic legal forms of business formation?
Corporation Partnership Proprietorship
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.
A limited liability partnership (LLP)?
Death or withdrawal does not affect the continuity of the business.
Identify 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.
What happens to a sole proprietorship if its owner dies?
It results in the termination of the business.
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
Rewarding?
Provides member with promotions, bonuses, praise, and so on
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.
Which of the following is true about limited partners in a general partnership?
They are liable for only their contribution to the partnership.
most common form of corporation, regulated by statute and treated as a separate legal entity for liability and tax purposes.
c corporation
Owners are liable only for the amount of their investment unless there is negligence or fraud involved in the form of business called a _____ as it is an entity, which is taxable and absorbs liability.
corporation
Shareholders are allowed to transfer their shares in a business at any time without consent from the other shareholders in the form of business called a _____.
corporation
A special type of corporation where profits are distributed to stockholders and taxed as personal income is called a(n)
s corporation