chapter 5

Which of the following is a disadvantage of​ partnerships?

unlimited liability

Which one of the following statements is NOT an accurate description of​ corporations?

Corporations can change from private to public ownership but not from public to private ownership.

Which of the following is a characteristic of a general​ partnership?

The partners have joint liability for the​ firm's financial obligations.

Which form of business has most of the characteristics of a regular corporation but adds the legal constraint that the company has to follow a specified nonfinancial​ goal?

benefit corporation

A​ ________ has unlimited​ liability, but the various​ _______ who own the stock face only limited liability.

corporation; shareholders

What is a disadvantage of operating a sole​ proprietorship?

finite life span

Federal law now requires that a majority of the directors on the board of a corporation be​ _______.

independent

​A(n) _____________ occurs when an individual or a group of people buy a​ company's publicly traded stock mainly by using borrowed funds.

leveraged buyout

An S corporation is a​ ________.

corporation allowed to sell stock to a limited number of investors while enjoying the​ pass-through taxation of a partnership

Which of the following is an advantage of​ corporations?

longevity

Which form of business is also known as a closely held​ corporation?

private corporation

Which one of the following statements is NOT accurate in relation to shareholders and their conduct in a​ corporation?

Because shareholders elect the​ directors, the shareholders are the final governing body of the corporation.

A business structure in which every partner is liable only for his or her own activities and at least partially liable for the partnership as a whole is known as a​ __________.

limited liability partnership

A business with one or more general partners with the same unlimited liability as a sole proprietor is known as a​ __________.

limited partnership

A carefully written partnership agreement can maximize the advantages of the partnership structure and minimize the potential disadvantages. Which of the following points will help in writing an effective partnership​ agreement?

Address the hopes of each​ owner, decision-making​ strategies, and succession and exit strategies.

Which one of the following statements is NOT accurate in relation to the responsibilities of the board of directors of a​ corporation?

Much of the attention focused on corporate reform in recent years has zeroed in on boards being not too closely allied with management.

Which term describes the ability of people to easily and quickly convert their shares into cash by selling them on the open​ market?

liquidity

Two businesses coming together to form a single company is known as​ a(n) __________.

merger

Every public corporation is susceptible to a takeover. Which of the following is a defense against unwanted​ takeovers?

poison pill

Which of the following is a disadvantage of​ partnerships?

potential for conflict

Investors who purchase shares of stock in a company are called​ ________.

shareholders

A business that is owned by one individual is a​ __________.

sole proprietorship

Which of the following is a disadvantage of​ corporations?

Reporting requirements

Which statement describes the advantage of operating a sole​ proprietorship?

Sole proprietors have more privacy and generally are not required to report anything to anyone.

Which one of the following statements describes a disadvantage of operating a sole​ proprietorship?

Sole proprietorships have fewer financial resources and fewer ways to get additional funds from lenders or investors.