ICS 392: Chapter 9

In a limited partnership, the limited partners are equally liable for the debts of the partnership.

FALSE

In a partnership, the general partners usually share the amount of personal liability according to their capital contributions.

FALSE

Once the board of advisors have been hired, the entrepreneur should not question their advice.

FALSE

Shares of stock are issued to members of a limited liability company.

FALSE

Stockholders in a corporation share day-to-day control of the entrepreneur.

FALSE

The limited liability company is automatically taxed as a corporation.

FALSE

In the partnership, profit and loss distribution is determined by the partnership agreement

TRUE

Shareholders in an S corporation have the same liability protection as shareholders in a C corporation.

TRUE

The corporation can be created only by statute.

TRUE

The corporation has the most continuity of the forms of business.

TRUE

The corporation is considered a legal person that is taxable and absorbs liability

TRUE

The sole proprietorship form of ownership gives owners the most control of business operations.

TRUE

The standard term of a limited liability company is 30 years.

TRUE

Which type of ownership is the most expensive to start? A. Corporation B. General partnership C. Limited partner D. Sole proprietorship

A. Corporation

_____________ have unlimited liability for the actions of the business. A. Limited liability company members B. Corporate shareholders C. General partners D. Limited partners

C. General partners

A_____ can raise capital through bonds, stock and debt. A. sole proprietorship B. partnership C. corporation D. LLP

C. corporation

Corporations distribute profits to owners through: A. bonds. B. taxes. C. dividends. D. interest.

C. dividends.

In an S corporation, the transfer of interest can occur: A. only with the consent of the other shareholders. B. only if there is a charter provision for doing so. C. only as long as the buyer is an individual. D. depending on the agreement.

C. only as long as the buyer is an individual.

In an S corporation: A. gains or losses of the business are separate from the personal income of the shareholder. B. shareholders retain unlimited liability. C. only one class of stock is permitted. D. most fringe benefits for shareholders can be deducted.

C. only one class of stock is permitted.

In which form of organization would it be possible for individuals that don't have any ownership stake in the business to make decisions? A. Sole proprietorship B. Limited partnership C. General partnership D. Corporation

D. Corporation

In which of the legal forms of ownership is transferability of interest the easiest? A. Sole proprietorship B. Limited partnership C. General partnership D. Corporation

D. Corporation

The _________ imposes oversight responsibilities on members of the board of directors. A. Social Security Act B. Fair Labor Practices Act C. Taft-Hartley Act D. Sarbanes-Oxley

D. Sarbanes-Oxley

Which type of ownership is the least expensive to start? A. Corporation B. General partnership C. Limited partner D. Sole proprietorship

D. Sole proprietorship

Sole proprietorships: A. have no time limit on how long they may exist. B. are perpetual. C. continue even upon the death of the owner. D. allow a member of the deceased partner's family take over as a partner.

D. allow a member of the deceased partner's family take over as a partner.

. S corporation status means: A. shareholders do not have limited liability. B. the corporation is subject to a minimum tax of 34 percent. C. consent by a majority of shareholders is required for the election of this form of business. D. the corporation pays no tax.

D. the corporation pays no tax.

. In a partnership, the death of a general partner generally does not result in termination of the partnership.

FALSE

. The limited liability company is the only form of organization that allows members to share liability.

FALSE

Corporations are not able to distribute profits to shareholders.

FALSE

In a limited liability partnership (LLP), the death or withdrawal of a partner dissolves the partnership.

FALSE

The S corporation can deduct most fringe benefits for shareholders.

FALSE

The S corporation cannot have more than 75 shareholders.

FALSE

The Sarbanes-Oxley Act reduced the responsibilities of the board of directors.

FALSE

The board of directors should be an even number of members.

FALSE

The most expensive type of business to start is the partnership.

FALSE

The only source of capital for a corporation is the sale of shares of stock.

FALSE

The partnership is the most attractive type of business formation for raising capital.

FALSE

Transferability of interest is easiest in a limited partnership.

FALSE

. Both partnerships and proprietorships serve as nontaxable conduits of income for their owners.

TRUE

. In a limited liability company, every member has limited liability.

TRUE

. In an S Corporation, ownership can be freely transferred as long as the buyer is an individual.

TRUE

A board of advisors has less decision making authority than a board of directors does.

TRUE

Corporations distribute profits primarily through dividends.

TRUE

In an LLP, the transfer of interest of one limited partner is typically not allowed.

TRUE

In an S Corporation, ownership can be freely transferred as long as the buyer is an individual.

TRUE

In order for a corporation to be legally formed the owners have to register the name and articles of incorporation and meet statutory requirements.

TRUE

In a limited partnership, the limited partners: A. are liable only for the amount of their capital contributions. B. share the amount of personal liabilities equally. C. have only insurance as protection against liability suits. D. are allowed to decide on the amount of individual liabilities.

A. are liable only for the amount of their capital contributions

A board of directors should not: A. have members with unlimited terms. B. have an odd number of members. C. be comprised of external advisors. D. be compensated with anything other than stock.

A. have members with unlimited terms.

The board of directors: A. lacks voting authority. B. has responsibilities to represent all shareholders. C. is less objective than the entrepreneur. D. are always volunteers and need not be compensated.

A. lacks voting authority.

A limited liability corporation A. laws governing its formation differ from state to state. B. members may transfer their interests at any time. C. members are not allowed to share income, profit, expense, deduction, loss and credit among themselves. D. owners are called shareholders.

A. laws governing its formation differ from state to state.

In a ________ capital losses can be carried forward indefinitely. A. sole proprietorship B. partnership C. corporation D. LLP

A. sole proprietorship

The difference between a board of directors and a board of advisors is that: A. the board of advisors meets less frequently. B. the board of directors lacks voting authority. C. the board of directors is subject to less pressure of litigation. D. the board of advisors are compensated.

A. the board of advisors meets less frequently.

Which of the following types of ownership has the most continuity? A. General partnership B. Corporation C. Limited partner D. Sole proprietorship

B. Corporation

Liability is one of the most critical reasons for establishing a: A. limited liability company. B. corporation. C. partnership. D. sole proprietorship.

B. corporation.

A limited liability corporation A. has unlimited liability. B. is automatically taxed as a partnership. C. is decreasing in popularity among venture capitalists. D. had been the most popular choice of organization structure by new ventures and small businesses.

B. is automatically taxed as a partnership.