Chapter 4 Quiz

Which of the following is a MAJOR DISADVANTAGE of a sole proprietorship?

It has unlimited liability.

A ______ is popular form of small business ownership that combines many of the advantages of corporations, partnerships, and sole proprietorships, while avoiding many of the disadvantages (especially unlimited liability) of these types of ownership structures

Limited Liability Company (LLC)

How can the following quotation best be explained: "Stockholders control the activities of a corporation"?

Stockholders elect the board of directors, and this board is responsible for appointing corporate officers who manage the daily business of the corporation.

The ____ is a legal document that lists and explains the terms of the partnership

articles of partnership

The order of difficulty and expense, from most to least, when forming a business organization is as follows:

corporation, partnership, sole proprietorship

The person who assumes full co-ownership of a partnership, including unlimited liability, is a

general partner

Legally, a partnership must

have at least one general partner

A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n)

open corporation

Unlimited liability means

the owner is responsible for all business debts

Which of the following is a MAJOR DISADVANTAGE of partnerships?

unlimited liability