BGEN 361 Ch. 36

Which of the following requires a filing with the state in order to be created? (Choose 2 answers.)

1. An LLC 2. A corporation

Which of the following are advantages of operating as a sole proprietorship? Choose 2 answers.

1. Forming a sole proprietorship is simple and relatively inexpensive. 2. Sole proprietorships are not taxed.

A sole proprietorship is similar to a partnership in: (Choose 2 answers.)

1. liability for debt. 2. how taxes are paid directly by the owner, not the company.

Which of the following are TWO disadvantages of a sole proprietorship? (Choose 2 answers.)

1. limited capital 2. personal liability for debts

A sole proprietorship has flexibility in decisions regarding: (Choose 2 answers.)

1. pricing of services or goods sold. 2. when to schedule vacation.

Evelyn decides to open a business selling her one-of-a-kind cupcakes. Evelyn will be the sole owner of the business, although she will have a few employees. Evelyn plans to operate the business under the name "Cupcake Dreams." To legally operate her business, Evelyn will need to:

1. register her business name. 2. file an operating agreement. 3. X file a certificate of organization. 4. X do nothing, because it is a sole proprietorship.

franchise

Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright in the selling of goods or services.

Which statement is true about creating a sole proprietorship?

No documentation is required to create a sole proprietorship.

Which of the following is required to create a sole proprietorship?

Nothing

franchisor

One licensing another (the franchisee) to use the owner's trademark, trade name, or copyright in the selling of goods or services.

franchisee

One receiving a license to use another's (the franchisor's) trademark, trade name, or copyright in the sale of goods and services.

entrepreneur

One who initiates and assumes the financial risk of a new business enterprise and undertakes to provide or control its management.

Which of the following is a disadvantage of operating as a sole proprietorship?

The owner of a sole proprietorship is personally liable for all business debts.

sole proprietorship

The simplest form of business organization, in which the owner is the business. The owner reports business income on his or her personal income tax return and is legally responsible for all debts and obligations incurred by the business.

You plan to open a tattoo parlor, and you are trying to decide the best form of business entity to use. You decide on a sole proprietorship (a solely-owned business), because you want all the profits from the business and you don't want anyone telling you how to run your business. Do you think there might be any disadvantages to creating your tattoo parlor as a sole proprietorship?

Yes. As a sole proprietor, you can be held personally liable for all the business's debts, and your options for raising capital will be limited.

For tax purposes, sole proprietorships:

are pass-through entities.

Roy owns an engine repair shop, Roy's Custom Repair. Roy's customer Floyd is in the shop one day and trips over a tool lying on the ground. Floyd hits his head on the concrete floor and sustains massive injuries. Floyd sues Roy's Custom Repair for his injuries. If Floyd's lawsuit is successful, Floyd can recover from:

both Roy's Custom Repair and Roy personally.

What is the combination of factors that sets sole proprietorships apart from all other business entities?

ease of formation, along with receiving all of the profit

A sole proprietorship differs from a corporation in:

how stock is sold.

Myra owns a tanning salon called Bronze Beauties as a sole proprietorship. Myra has six employees who work at the salon. Myra contracts COVID-19 and, after battling the disease for six weeks, she dies, leaving behind a spouse and three children. Upon Myra's death, the Bronze Beauties tanning salon:

is automatically dissolved.

Tala operates Sunshine Event Planning as a sole proprietorship. Lately, Tala has become dissatisfied with her employee, Leon. Leon continually refuses to follow directions, calls in late to work, and generally is not performing up to Tala's standards. Before Tala can fire Leon, she must obtain approval from:

no one.

In order to capitalize a sole proprietorship, an owner is likely to:

pay out of their own pocket or undertake personal debt.

Johnson lives near Dollywood, a popular theme park in Tennessee. Johnson decides to begin a new money-making venture selling screen printed t-shirts from a booth just down the road from the theme park, to take advantage of the traffic that flows by on its way to the park. Johnson's t-shirts, however, will not be Dollywood-themed t-shirts; they will be Johnson's own creations. Johnson's daughter Susan helps him in his new venture by manning the booth from time to time, but Johnson has total control over everything about the business—from ordering the t-shirts, paying the bills, pricing the t-shirts, paying the taxes on his sales, and receiving all the profits from the venture. Even though Johnson put no thought into what kind of business venture he was creating when he started his business, Johnson has effectively created a:

sole proprietorship.

The simplest form of business to establish is a:

sole proprietorship.

A sole proprietorship differs from a limited liability company (LLC) in:

the documentation required for formation.

A sole proprietorship differs from a partnership in:

the number of owners.