Question 1

Tracy is considering expanding his business and has several potential new investors in mind.He originally wanted to form an S-corporation to protect the liability of the investors, but he is now considering a limited-liability company instead because he knows there can be only ____ stockholders in an S-corporation.
A) 10
B) 25
C) 50
D) 100
E) 108

Accepted Answer

S-corporations are limited to 100 shareholders, making them less flexible than limited liability companies (LLCs) when it comes to the number of investors or partners.

Question 2

Twenty-five young investors decided that they want to start a dating service; however, they do not want to be held personally liable for losses of the company.They want to avoid double taxation.Which type of business organisation would best fit the needs of these individuals?
A) Corporation
B) Closed corporation
C) Partnership
D) S-corporation
E) Limited cooperative

Accepted Answer

An S-corporation would best fit their needs as it provides limited liability protection to its shareholders and avoids double taxation by allowing income to pass through to the shareholders' personal tax returns.

Question 3

Which of the following has a restriction on the number of owners, members, or stockholders?
A) S-corporation
B) Not-for-profit corporation
C) Open corporation
D) Limited-liability company
E) Cooperative

Accepted Answer

An S-corporation has a restriction on the number of shareholders, which cannot exceed 100.

Question 4

With regard to limited-liability companies, which of the following statements is false?
A) Many experts believe that an LLC is nothing more than an S-corporation.
B) An LLC can have no more than 100 stockholders.
C) An LLC avoids double taxation.
D) An LLC provides limited-liability protection to the personal assets of the owners.
E) When compared to regular corporations, there are fewer government regulations that apply to LLCs.

Accepted Answer

The answer of With regard to limited-liability companies, which of...

Question 5

Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid double taxation.Which type of business ownership would you recommend?
A) Regular corporation
B) General partnership
C) Sole trader
D) S-corporation
E) Not-for-profit corporation

Accepted Answer

An S-corporation provides limited liability for its owners while avoiding double taxation. It allows for profits and losses to pass through to the individual tax returns of the owners, avoiding corporate tax at the entity level.

Question 6

An association of individuals or firms formed for the purpose of performing a business function for all members is known as a
A) conglomerate merger.
B) cooperative.
C) joint venture.
D) vertical merger.
E) syndicate.

Accepted Answer

A cooperative is an association of individuals or firms formed for the purpose of performing a business function for all members. The other options are different types of mergers or partnerships between companies, but do not necessarily involve a group of individuals or firms working together for a common purpose.

Question 7

A corporation organised to provide a social, educational, religious, or other nonbusiness service is known as a(n)
A) authority.
B) merger.
C) quasi-government corporation.
D) S-corporation.
E) not-for-profit corporation.

Accepted Answer

A not-for-profit corporation is organised to provide a social, educational, religious, or other nonbusiness service. It is exempt from paying federal and state income taxes and is typically funded by donations, grants, and fundraising activities.

Question 8

What do experts believe is likely to become one of the most popular types of business organisations?
A) Limited-liability companies
B) S-corporations
C) Partnerships
D) Sole traders
E) Corporations

Accepted Answer

Limited-liability companies (LLCs) are becoming an increasingly popular choice for businesses due to their flexible management structure and limited liability protection for individual members. This allows for the advantages of a corporation (protection of personal assets, perpetual existence) while avoiding some of the drawbacks (double taxation, complex management structure).

Question 9

A partnership formed to operate for a specific time period or to accomplish a specific purpose is known as a
A) conglomerate.
B) cooperative.
C) joint venture.
D) corporation.
E) joint merger.

Accepted Answer

A joint venture is a partnership between two or more individuals or businesses who come together to operate for a specific time period or to achieve a specific goal or purpose. It is different from a regular partnership because it is usually for a limited duration or a specific project, whereas a regular partnership is ongoing.

Question 10

The citizens of a number of small rural towns have decided to form an association that will allow them to purchase electricity at a much cheaper rate than they are currently paying.This alliance is referred to as a(n)
A) joint venture.
B) syndicate.
C) cooperative.
D) private corporation.
E) S-corporation.

Accepted Answer

A cooperative is a type of business or organization owned and operated by a group of individuals who share a common goal or interest. In this case, the citizens of small rural towns are forming a cooperative to purchase electricity at a cheaper rate. The cooperative allows them to pool their resources and negotiate a better deal than they could individually.

Question 11

To raise capital, Candace Tyson and Martha Black plan to sell stock to between 108 and 200 investors.They also want to avoid double taxation.Which type of business ownership would you recommend?
A) Regular corporation
B) S-corporation
C) Cooperative
D) Limited-liability company
E) Limited partnership

Accepted Answer

The answer of To raise capital, Candace Tyson and Martha...

Question 12

Kim, Sandra, Jerry, and Wilma belong to a business that buys groceries in bulk, then distributes them to members.This type of business is called a
A) cooperative.
B) quasi-government corporation.
C) producer cooperative.
D) buying corporation.
E) consumer corporation.

Accepted Answer

The type of business described is a cooperative, which is a jointly owned and democratically controlled enterprise that operates for the benefit of its members.

Question 13

Genetech, a biotechnology firm engaging in the new field of genetic engineering, has asked your advice about remaining independent and temporarily gaining access to the marketing and manufacturing expertise it lacks from another firm.You would suggest
A) forming a limited-liability company.
B) forming a joint venture.
C) forming an S-corporation.
D) merging with a company with the necessary expertise.
E) starting a cooperative.

Accepted Answer

A joint venture allows for two or more firms to come together and share resources and knowledge while still remaining independent. This would allow Genetech to temporarily gain access to the expertise it lacks from another firm without giving up control or ownership. Additionally, a joint venture can be structured to have limited duration, which would allow Genetech to reassess its needs and options at the end of the agreement.

Question 14

Not-for-profit organisations must meet specific guidelines in order to obtain tax-exempt status.These guidelines are structured by the
A) board of directors.
B) U.S.Uniform Partnership Act.
C) U.S.Bureau of the Census.
D) Chamber of Commerce.
E) Internal Revenue Service.

Accepted Answer

Not-for-profit organisations must meet specific guidelines set by the Internal Revenue Service (IRS) to obtain tax-exempt status. The IRS oversees the tax laws related to non-profit organisations and provides guidance on the requirements for obtaining and maintaining tax-exempt status.

Question 15

A limited-liability company is
A) taxed like a corporation.
B) taxed like a partnership.
C) similar to a cooperative.
D) always used to organise charitable organisations.
E) the result of a horizontal merger.

Accepted Answer

A limited-liability company (LLC) is typically taxed like a partnership, where the income is passed through to the owners and taxed on their personal tax returns.

Question 16

Habitat for Humanity and Girl Scouts are both examples of
A) cooperatives.
B) quasi-government corporations.
C) limited-liability corporations
D) cooperatives
E) not-for-profit corporations.

Accepted Answer

Habitat for Humanity and Girl Scouts are both not-for-profit corporations, as they operate with the primary goal of serving their communities rather than maximizing profits for shareholders.

Question 17

Walters Company, LLC, is a wholesale distributor of industrial packaging.A primary advantage that Walters enjoys as an LLC that corporations do not have is
A) ease of formation.
B) limited liability.
C) avoiding double taxation.
D) one class of outstanding stock.
E) income taxes.

Accepted Answer

LLCs avoid the double taxation that corporations are subject to because they can choose to be taxed as a pass-through entity. This means profits are taxed only once at the individual members' level, not at both the corporate and individual levels as with traditional corporations.

Question 18

The Smithsonian Institution exists to preserve historical and cultural items of value and to share those items with the public; it does not exist to maximise the wealth of any shareholders.This entity is organised as a(n)
A) cooperative.
B) quasi-government corporation.
C) S-corporation.
D) not-for-profit corporation.
E) closed corporation.

Accepted Answer

The statement about the Smithsonian Institution's purpose suggests that it is a not-for-profit corporation, which means that it is organized to serve a charitable or educational purpose rather than for the benefit of shareholders. Choices A, C, and E all refer to different types of for-profit corporations, while choice B is not accurate as the Smithsonian Institution is not a true government agency, although it is funded in part by the federal government.

Question 19

Because of rising fuel costs, a group of farmers have organised a retail gasoline outlet so they can make more reasonable purchases.This type of business is referred to as a(n)
A) syndicate.
B) cooperative.
C) joint venture.
D) corporation.
E) S-corporation.

Accepted Answer

The described business is a cooperative since it is a group of farmers working together to purchase gasoline at a lower cost. A syndicate is a group of individuals or organizations working together to achieve a specific goal, usually involving finance or investment. A joint venture is a business partnership between two or more parties for a specific project. A corporation and S-corporation are types of business structures with their own legal and tax implications, but they do not necessarily apply to the given scenario.

Question 20

If Avon and Merck joined together to produce a cream that slows down the aging process, this would be called a(n)
A) cooperative.
B) joint venture.
C) combined corporation.
D) S-corporation.
E) partnership.

Accepted Answer

A joint venture is a business venture undertaken by two or more companies to achieve a specific objective such as creating a new product or entering a new market. In this case, Avon and Merck are combining their resources and expertise to produce a new cream that slows down the aging process. This would be an example of a joint venture.

Quiz 4: Types of Business Ownership

Twenty-five young investors decided that they want to start a dating service; however, they do not want to be held personally liable for losses of the company.They want to avoid double taxation.Which type of business organisation would best fit the needs of these individuals?

Which of the following has a restriction on the number of owners, members, or stockholders?

With regard to limited-liability companies, which of the following statements is false?

Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid double taxation.Which type of business ownership would you recommend?

An association of individuals or firms formed for the purpose of performing a business function for all members is known as a

A corporation organised to provide a social, educational, religious, or other nonbusiness service is known as a(n)

What do experts believe is likely to become one of the most popular types of business organisations?

A partnership formed to operate for a specific time period or to accomplish a specific purpose is known as a

The citizens of a number of small rural towns have decided to form an association that will allow them to purchase electricity at a much cheaper rate than they are currently paying.This alliance is referred to as a(n)

To raise capital, Candace Tyson and Martha Black plan to sell stock to between 108 and 200 investors.They also want to avoid double taxation.Which type of business ownership would you recommend?

Kim, Sandra, Jerry, and Wilma belong to a business that buys groceries in bulk, then distributes them to members.This type of business is called a

Genetech, a biotechnology firm engaging in the new field of genetic engineering, has asked your advice about remaining independent and temporarily gaining access to the marketing and manufacturing expertise it lacks from another firm.You would suggest

Not-for-profit organisations must meet specific guidelines in order to obtain tax-exempt status.These guidelines are structured by the

A limited-liability company is

Habitat for Humanity and Girl Scouts are both examples of

Walters Company, LLC, is a wholesale distributor of industrial packaging.A primary advantage that Walters enjoys as an LLC that corporations do not have is

The Smithsonian Institution exists to preserve historical and cultural items of value and to share those items with the public; it does not exist to maximise the wealth of any shareholders.This entity is organised as a(n)

Because of rising fuel costs, a group of farmers have organised a retail gasoline outlet so they can make more reasonable purchases.This type of business is referred to as a(n)

If Avon and Merck joined together to produce a cream that slows down the aging process, this would be called a(n)