BMGT 400 Exam 2 SB Chapter 9

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

Which is the most appealing form of business for raising capital due to its advantages regarding personal liability?

A corporation

Which of the following business forms is considered a partnership-corporation hybrid?

A limited liability company (LLC)

Which of the following is the least expensive form of business to start?

A proprietorship

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.

Identify a true statement about limited partners in a general partnership.

They lack control over business decisions.

What is the primary concern of an organization's manager as an entrepreneur?

To cope up with changes in the environment and attempt to find new ideas

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: In a partnership, the distribution of profits and losses is based on the partnership agreement.

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

An S corporation integrates the tax advantages of

a partnership and a corporation

An advantage of an S corporation over a C corporation is that

capital gains or losses from the S corporation are considered personal income or losses by the shareholders on a pro rata basis

Shareholders are allowed to transfer their shares in a business at any time without consent from the other shareholders in the form of a business called a

corporation

An advantage of a limited liability company (LLC) over an S corporation is that an LLC

may have tax advantages depending on the state in which the business operates

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 management control in a corporation.

It is separated based on the types of business decisions.

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.

Which of the following is a disadvantage of an S corporation?

An S corporation may not deduct most fringe benefits for shareholders.

A(n) _________ is the most common form of corporation, regulated by statute and treated as a separate legal entity for liability and tax purposes.

C corporation

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

Identify a true statement about a proprietorship and regular partnership.

There will be no distinction between the business entity and the owner(s).

Which of the following is true about limited partners in a general partnership?

They are liable for only their contribution to the partnership.

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

A function served by a board of directors in an organization is that it

finds solutions to conflicts among owners or shareholders