Chapter 3 True or False
A buy-sell agreement states what a business can do and provides other organizational and financial information.
False
A partnership is easier to form, operate, and terminate than a proprietorship.
False
An equal partnership between owners is advisable in order to facilitate decision-making.
False
In a corporation, personal property of the owners can be taken to pay the debts of the business.
False
Once the choice of a legal form for a new business has been made, it cannot be changed until the business is dissolved or sold.
False
The owners of any corporation are usually the corporate officers.
False
Partnerships account for significant revenues in services, trade, and construction
False.
The board of directors conducts the day-to-day operations of a business.
False; company management conducts day-to-day operations
A limited partnership firm is managed by the concerned limited partners
False; it is managed by general partners
Limited-liability companies are permissible only in a few states in the United States.
False; they are permissible across the US
In a limited partnership, the general partners have limited personal liability for the debts of the business.
False; they have unlimited personal liability
A cooperative is a business owned by two or more persons who have unlimited liability for its debt and obligations.
False; this is a partnership
The cooperative form of business is usually associated with the purchasing, selling, and financing of farm equipment and materials.
True
The main disadvantage of a corporation is double taxation.
True
The traditional form of a corporation is called a C corporation.
True
Usually, income derived from a joint venture is taxed as if the organization were a partnership.
True
A buy-sell agreement details the terms by which stockholders can buy out each other's interest.
True
A corporation is considered by law to be a unique entity, separate and apart from those who own it.
True
A proprietorship legally ends with the owner's death, and some legal action must be taken to restart it.
True
An advantage of a corporation is that large amounts of capital can be raised easily.
True
Articles of incorporation are the instrument by which a corporation is formed under the corporation laws of a given state.
True
From a legal standpoint, in a proprietorship, a business and its owner are one and the same and cannot be separated.
True
In a corporation, the shareholders elect a board of directors to oversee major policies and decisions.
True
In a partnership, each partner is responsible for the acts of all the other partners.
True
In an S corporation, all shareholders involved in the firm must be individuals, estates, or some type of personal trust.
True
Partnerships are more effective than proprietorships in raising funds.
True
Proprietorship is the most popular form of business in the United States.
True
Proprietorship is the oldest and most prevalent form of ownership in the United States.
True
The Uniform Partnership Act (UPA) governs the operations of partnerships in the absence of other expressed agreements.
True
The articles of copartnership should be drawn during the preoperating period and should show the rights, duties, and responsibilities of each partner.
True