CH 10

A corporation established for charitable, public (scientific, literary, or educational), or religious purposes or for mutual benefit (trade associations, tennis clubs), as recognized by federal and state laws, is a ____. a. nonprofit corporation b. joint venture c. syndicate operation d. limited partnership e. sole proprietorship

A

Often small businesses such as pizza parlors and boutiques are run as ____. a. sole proprietorships b. silent partnerships c. general partnerships d. nonprofit businesses e. an LLC

A

Only about 25 percent of all U.S. businesses are ____, but they account for 67 percent of all sales transactions. a. nonprofits b. LLCs c. corporations d. sole proprietorships e. None of these choices

A

A financial vehicle that enjoys limited liability in that its owners are liable for its debts and obligations only to the limit of their investment is a ____. a. sole proprietorship b. S-corporation c. C-corporation d. joint venture e. limited partnership

C

If a nonprofit corporation is ever dissolved, its assets must be distributed ____. a. to the owners b. at public auction c. to another tax-exempt organization d. to the shareholders e. to the federal government

C

In a/an ____, corporate stock is owned privately by a few individuals and is not traded publicly on a securities exchange. a. partnership b. sole proprietorship c. closely held corporation d. open corporation e. limited partnership

C

A corporation that is chartered in the state in which it will do business and issue stock is a/an ____. a. foreign corporation b. domestic corporation c. secret partnership d. alien corporation e. closely held corporation

B

All of the following are types of nonprofit organizations except ____. a. religious organizations b. novelty shops c. schools d. museums e. shelters

B

Each partner owns and has use of the property acquired by the partnership, unless otherwise stated in ____. a. the corporate charter b. the partnership agreement c. the commercial code d. proprietary bylaws e. SEC regulations

B

Professionals such as lawyers, doctors, and accountants frequently employ the legal structure of a ____. a. sole proprietorship b. S-corporation c. partnership d. C-corporation e. None of these choices

C

When two or more people share the assets, liabilities, and profits of the business, the legal structure is a ____. a. sole proprietorship b. corporation c. partnership d. limited partnership e. None of these choices

C

____ make(s) all partners responsible for the obligations that each incurs in the course of doing business. a. Limited partnerships b. General partnership c. Ostensible authority d. Sole proprietorship e. Limited liability

C

In forming a ____, the entrepreneur gives up proprietary interest in the organization and dedicates all the assets and resources of the corporation to tax-exempt activities. a. sole proprietorship b. LLC c. C-corporation d. S-corporation e: non profit

E

10. Nonprofit corporations are not allowed to make a profit, according to the Internal Revenue Service.

F

4. A high-growth venture cannot be started as a sole proprietorship.

F

6. The law requires a partnership to draw up a written partnership agreement based on the Uniform Partnership Act.

F

8. LLCs are becoming a popular vehicle for companies that may have global investors, because the C-corporation does not permit foreign ownership.

F

2. Sole proprietorships, partnerships, S-corporations, and limited liability companies all permit pass-through earnings and losses, but S-corporations and LLCs offer more protection from liability.

T

3. In a sole proprietorship, the owner is the only person responsible for the activities of the business and, therefore, is the only one to enjoy the profits and suffer the losses.

T

State law permits certain professionals, such as health care professionals, engineers, accountants, and lawyers, to form corporations called ____. a. professional service corporations b. S-corporations c. C-corporations d. DBAs e. ostensible authorities

A

The U.S. Supreme Court has defined the ____ as an artificial being, invisible, intangible, and existing only in contemplation of the law. a. corporation b. sole proprietorship c. partnership d. joint venture e. closely held corporation

A

Upon the death of a partner, the insurance proceeds can be used to keep the business going or to buy out the deceased partner's interest under a/an ____. a. buy/sell agreement b. partnership agreement c. ostensible authority d. sole proprietorship e. None of these choices

A

In a/an ____, all partners assume unlimited personal liability and responsibility for the management of the business. a. limited partnerships b. general partnership c. ostensible authority d. sole proprietorship e. LLC

B

To operate as a sole proprietor requires nothing more than a ____. a. stock certificate b. "Certificate of Doing Business Under an Assumed Name" c. limited liability certificate d. retained earnings statement e. visit to an attorney

B

When one or more people agree to assume unlimited personal liability and responsibility for management of the business, a ____ exists. a. secret partnership b. general partnership c. silent partnership d. joint venture e. LLC

B

____ partners typically provide capital but do not actively participate in the management of the business. a. Secret b. Silent c. Dormant d. Limited e. General

B

____ pay taxes on profits and their shareholders pay taxes on dividends they receive, resulting in double taxation. a. S-corporations b. C-corporations c. LLCs d. Foreign corporations e. None of these choices

B

A ____ corporation is chartered in a state other than in the one in which it will do business. a. closely held b. domestic c. foreign d. S- e. C-

C

Income derived from for-profit activities in a nonprofit corporation is subject to ____. a. withholding b. distribution c. income taxation d. reinvestment e. dividend payments

C

A corporate form that enjoys the pass-through tax benefits of partnerships in addition to the limited liability of a C-corporation is known as a ____. a. multinational corporation b. secret partnership c. silent partnership d. limited liability company (LLC) e. closely held partnership

D

By creating a corporation and issuing stock, the entrepreneur is giving up a measure of control to the ____. a. creditors b. government c. partnership d. board of directors e. SEC

D

More than 76 percent of all businesses in the United States are ____. a. limited partnerships b. nonprofit businesses c. dormant partnerships d. sole proprietorships e. limited liability companies

D

Which of the following statements is not true of an S-corporation? a. It may have no more than 100 shareholders. b. Shareholders must be U.S. citizens or residents. c. Profits and losses must be allocated in proportion to shareholder interests. d. Partnerships may be shareholders. e. Shareholders may not deduct losses in an amount greater than their original investment.

D

____ life insurance is a policy on the life of principal members of the partnership, usually the senior partners. a. Principal b. Uniform partnership c. First-partner d. Key-person e. None of these choices

D

5. In terms of its treatment of income, expenses, and taxes, a partnership is essentially a sole proprietorship consisting of more than one person.

T

7. Common stockholders are entitled to vote at stockholder meetings.

T

9. Having a strategic plan in place for the venture enables the entrepreneur to choose a legal form that won't have to be changed or one that can easily be shifted to when the time is right.

T

DBA stands for a certificate of doing business under an assumed name.

T