Chapter 4 Study Questions

Double taxation is a drawback of corporation business ownership.

True

Legally the sole proprietor of a business is the business.

True

Most businesses incorporate in the states where they do most of their business.

True

Most corporations grow by expanding their own present operations.

True

Non-profit laws are only federal and thus, the same laws exist in all fifty states.

True

One or more members of a board of directors are required for a corporation.

True

Shares of ownership of a corporation are called stock.

True

Small businesses generally only issue common stock.

True

Which of the following is not a disadvantage of a corporation?

raising money

Which of the following is not a right of a corporation?

the right to all profits

Corporations have all of the following rights except

the right to the pursuit of happiness.

A major disadvantage of sole proprietorships is that profits earned by a sole proprietorship are subject to the special state and federal income taxes that corporations pay.

False

A partnership can have a legal limit of no more than 12 partners.

False

A sole proprietorship is usually operated by more than one person.

False

A syndicate is a long-term, permanent association of individuals or firms.

False

Banks are more open to lending money to sole proprietorships than to any other type of business.

False

Limited partners participate in day-to-day business activities and operations.

False

The vast majority of economists and financial analysts agree that mergers are good for the U.S. economy.

False

Corporations make up about ________ percent of all business and account for ________ of all sales revenues.

19% 82%

There are approximately ________ million nonfarm sole proprietorships in the United States.

23

There are approximately ________ partnerships in the United States.

3 million

A joint venture can occur with a minimum of three groups or partners.

False

Which of the following is not true regarding limited-liability companies?

LLCs cannot live beyond the death of their owners.

Which of the following types of business ownership is the easiest to start?

Sole proprietorship

A vertical merger occurs between firms that operate at different but related levels of production and marketing.

True

At least one general partner must be responsible for the debts of the limited partnership.

True

Corporate officers are appointed by the board of directors.

True

If you earn 90 cents for each stock share that you own in XYZ corporation, you have earned a

dividend

Which of the following is not a qualification for S-corporation status?

no more than 12 stockholders

The retention of all profits is an advantage of the ________ business ownership model.

sole proprietorship

Unlimited liability is the biggest disadvantage of the ________ form of business ownership.

sole proprietorship