Chapter 6: Corporate Forms of Business Ownership

13. Does a joint venture occur when two major contractors agree to connect two cities by building a tunnel under a river?

yes

14. Do virtual corporations tend to be temporary relationships? .

yes

15. Is a limited liability company taxed as if it were a sole proprietorship or partnership?

yes

16. Is a major strength of an LLC its limited liability feature? .

yes

20. Does a cooperative provide members with both cost and profit advantages that they would not have individually? .

yes

3. Is it possible for a corporation to be sued in its own name?

yes

4. Can a person who buys only one share of stock become an owner of a corporation?

yes

Cooperative

A business owned and operated by its user-members for the purpose of supplying themselves with goods or services

Corporation

A business owned by a group of people and by the state in which it is located to act as though it were a single person, separate from its owners

Quasi-public corporation

A business that is important to society but lacks the profit potential to attract private investors, often operated by local, state, or federal government

Charter

A certificate of incorporation

Close corporation (closely held corporation

A corporation that does not offer its shares of stock for public sale

Open corporation (publicly owned corporation)

A corporation that offers its shares of stock for public sale

Prospectus

A formal summary of the chief features of the business and its stock offering

Virtual corporation

A network of companies that form alliances among themselves as needed to take advantage of fast-changing market conditions

Limited liability company (LLC)

A special type of corporation allowed by states that is taxed as if it were a sole proprietorship or partnership

Capital stock

General term applied to the shares of ownership of a corporation

Stockholders

Owners of a corporation

Board of directors

The ruling body of the corporation

Officers

The top executives who are hired to manage the business

Shares

What ownership is divided into

10. When shares are transferred, must the transfer of ownership be indicated in the records of the corporation?

yes

18. Does a nonprofit corporation pay dividends to shareholders?

no

Joint venture

An agreement among two or more businesses to work together to provide a good or service

Nonprofit corporation

An organization that does not pay taxes and does not exist to make a profit

Dividends

Profits that are distributed to stockholders on a per-share basis

11. A corporation with taxable earnings of $74,000 has a tax rate of 15% on the first $50,000 and a 25% tax rate on the next $25,000. The federal income taxes will amount to (a) $13,500, (b) $17,100, (c) $18,500, (d) $29,600

(a) $13,500,

12. An agreement that involves two or more businesses to make or sell a good or service is called (a) a corporation, (b) a joint venture, (c) a nonprofit organization, (d) an LLC

(b) a joint venture,

3. An official document giving power to run a corporation is a (a) stock certificate, (b) charter, (c) proxy, (d) shareholder certificate.

(b) charter

7. Which statement is true about obtaining money in corporations? (a) Corporations have a more difficult time than proprietorships in raising capital. (b) Partnerships have an easier time raising money than do corporations. (c) Corporations can borrow money more easily than do partnerships. (d) Proprietorships and partnerships have an easier time raising money than do corporations

(c) Corporations can borrow money more easily than do partnerships.

1. Corporations tend to be (a) many in number and small in size, (b) many in number and large in size, (c) few in number and large in size, (d) few in number and small in size

(c) few in number and large in size,

4. Shareholders of a corporation are often called (a) boards, (b) officers, (c) owners, (d) buyers.

(c) owners,

15. The TVA is an example of a (a) close corporation, (b) open corporation, (c) quasi-public corporation, (d) virtual corporation.

(c) quasi-public corporation,

6. Unissued shares are the (a) shares bought by the organizers, (b) shares bought by the shareholders, (c) shares that might be sold and used to expand the business at a later date, (d) shares bought by the board of directors

(c) shares that might be sold and used to expand the business at a later date,

13. A virtual corporation (a) is not a form of joint venture, (b) does not include business partners who are competitors, (c) takes advantage of fast-changing market conditions, (d) operates solely on its own to take advantage of special opportunities

(c) takes advantage of fast-changing market conditions,

9. When an owner of a corporation dies, (a) the business automatically ends (b) the corporation must be changed to either a partnership or a sole proprietorship, (c) the life of the corporation is not affected, (d) the corporation must bechanged to a closely held corporation

(c) the life of the corporation is not affected,

14. In order to form an LLC, what is the maximum number of stockholders that the firm can have? (a) 5, (b) 15, (c) 25, (d) 35

(d) 35

10. Taxes that are unique to a corporation are (a) a filing fee for a charter and an organization tax; (b) a filing fee and an annual state tax; (c) a filing fee, an organization tax, and an annual state tax (d) a filing fee, an organization tax, an annual state tax, and a federal income tax

(d) a filing fee, an organization tax, an annual state tax, and a federal income tax

5. Net proceeds refer to the (a) cash received from the sale of all assets, (b) accumulation of capital, (c) payment of all debts, (d) cash received from the sale of all assets minus the payments of all debts

(d) cash received from the sale of all assets minus the payments of all debts

Proxy

A written authorization for someone to vote on behalf of the person signing the proxy

8. People who invest in a corporation are (a) legally liable for the debts of the corporation beyond their investment in the shares purchased, (b) not taxed on dividends received, (c) provided one vote regardless of the number of shares held, (d) financially liable up to the amount originally invested.

(d) financially liable up to the amount originally invested.

2. In a recent year, corporate sales of goods and services were about (a) four times more than sales from partnerships, (b) eight times more than sales from partnerships, (c) twelve times more than sales from partnerships, (d) sixteen times more than sales from partnerships

(d) sixteen times more than sales from partnerships

Subchapter S corporation

A special type of corporation tax status that offers liability protection but allows taxation like a partnership, avoiding double taxation

17. Do large corporations and multinational firms usually qualify as LLCs?

no

19. Is a "quasi-public corporation" operated only by state governments? .

no

2. Is a corporation allowed to make contracts but not borrow money?

no

5. Is a dividend the amount of money a person pays to buy a share of stock?

no

6. Could a stockholder be responsible for all the debts of a corporation?

no

7. Can creditors collect from stockholders if the corporation fails?

no

9. Can a corporation make important changes in the purpose of its business without changing its charter?

no

1. Although a corporation is owned by a group of people, does it act as if it were a single person?

yes

11. Is the annual state tax rate for corporations based on profits? .

yes

12. Is it possible for some corporations to avoid double taxation?

yes

8. Are the members of the board of directors elected by stockholders?

yes