Question 1

Which of the following statements about a partnership is true?
A)Partnerships,like sole traders,are not regulated by statute.
B)Due to ongoing disclosure requirements,secrecy is generally difficult to maintain.
C)Partners have a heavier tax burden than a sole trader.
D)Liability of partners for partnership debts is unlimited and personal.

Accepted Answer

Partnership debts are the joint responsibility of all partners, and each partner's liability is both unlimited and personal. This means that creditors can pursue each partner's personal assets to settle partnership debts. Choices A, B, and C are all false; partnerships are regulated by statute, secrecy can be maintained to a certain extent, and tax burdens may vary depending on the circumstances.

Question 2

In which of the following business entities would the creditors be able to recover moneys owed to them by the business from the proprietors of the business?
A)The trading trust where a company is used to conduct the business.
B)The limited liability company.
C)The sole trader.
D)None of the above.

Accepted Answer

In a sole trader business entity, the proprietor (owner) is personally liable for any debts or losses incurred by the business. Therefore, creditors can recover moneys owed to them from the proprietor's personal assets. In a trading trust (A) or a limited liability company (B), the owners or shareholders generally have limited liability and their personal assets are not at risk in the event of the company's debts or losses.

Question 3

Which of the following is NOT a requirement for the creation of a trust?
A)A trustee.
B)A beneficiary.
C)A trust deed.
D)Trust property.

Accepted Answer

A trust deed is not a mandatory requirement for the creation of a trust. Trusts can be created orally or through a written statement without the need for a formal trust deed, as long as the intent to create a trust, the trust property, a trustee, and a beneficiary are clearly identified.

Question 4

Which of the following statements about a trust is true?
A)A trust is administered and controlled by a trustee.
B)The trust is the most complex of business structures.
C)A trust is a creation of equity.
D)All of the above.

Accepted Answer

Trusts are administered by trustees, are a creation of equity, and can be complex in structure, making all the provided statements true.

Question 5

Which of the following statements about a partnership is NOT true?
A)Partners must keep their capital separate for tax purposes.
B)It can be difficult to sell a share in a partnership.
C)Partners are unable to contract with the firm.
D)Partnerships can be cheap and quick to establish.

Accepted Answer

Partners in a partnership are not required to keep their capital separate for tax purposes. In fact, the income from the partnership is typically passed through to the individual partners, who then report it on their personal tax returns. This is different from corporations, where the entity itself is taxed separately from its owners.

Question 6

Which of the following statements about a sole trader is NOT true?
A)A sole trader may have difficulty in raising business capital.
B)The sole trader must generally consult with customers,creditors and employees in deciding what the business will and will not do.
C)Anyone with contractual capacity can be a sole trader.
D)The liability of a sole trader is unlimited and personal.

Accepted Answer

As a sole trader, the individual has complete control over decision-making regarding the business, without the need to consult with customers, creditors, or employees. However, this may also mean that they bear the entire risk and responsibility of the business's success or failure.

Question 7

Define a sole trader and discuss its advantages and disadvantages.

Accepted Answer

The answer of Define a sole trader and discuss its...

Question 8

Which of the following statements about a sole trader is true?
A)A sole trader with employees must change to a different business structure.
B)Every sole trader must register their business name.
C)There are no special requirements to start operating a business if the sole trader uses their own name.
D)The sole trader must generally consult with customers,creditors and employees in deciding what the business will and will not do.

Accepted Answer

A sole trader using their own name does not need to register a separate business name, unlike other business structures. However, if they use a different name, they are required to register it. There are also no special requirements to start operating the business if they use their own name, but they may need to comply with certain licensing and regulatory requirements depending on the industry they are in.

Question 9

Which of the following is NOT an advantage of a trading trust?
A)Protection of privacy.
B)Opportunity for wealth transfer between generations.
C)Protection of assets against creditors.
D)Personal control over trust activities.

Accepted Answer

A trading trust may limit personal control over trust activities as decisions are made by the trustee(s) on behalf of the beneficiaries. The other options listed are advantages of a trading trust.

Question 10

Which of the following statements about a sole trader is NOT true?
A)All profits made by the business belong to the business and form part of the business' own income.
B)Because there are no special statutory disclosure requirements,secrecy can be maintained by the sole trader.
C)There are no special requirements to start operating a business if the sole trader uses their own name.
D)The sole trader generally has complete control over what the business will and will not do.

Accepted Answer

In a sole proprietorship, all profits made by the business belong to the sole trader personally, not to the business as a separate entity, because legally, the business and the owner are considered the same entity.

Question 11

In choosing a business entity which of the following is NOT a factor in making the decision?
A)Tax implications.
B)Limiting potential liability.
C)Government approval.
D)Opportunity to raise capital.

Accepted Answer

All other factors (tax implications, limiting potential liability, and opportunity to raise capital) are usually considered when choosing a business entity. However, government approval is not a factor as long as the selected entity is recognized and legal under the laws of the jurisdiction in which the business operates.

Question 12

Explain how and why a sole trader might adopt a discretionary trust as their business structure.

Accepted Answer

The answer of Explain how and why a sole trader...

Question 13

Which of the following statements about a sole trader is NOT true?
A)Most small businesses fail within the first five years of their establishment.
B)The death of the sole trader usually means the death of the business.
C)The degree of personal involvement by the sole trader can make the business difficult to sell.
D)Sole traders have limited liability for the debts of the business.

Accepted Answer

Sole traders have unlimited liability, meaning they are personally responsible for all the debts of the business, which is a disadvantage of this business structure. Options A, B, and C are true statements about sole traders.

Question 14

Which of the following statements about a sole trader is NOT true?
A)Anyone capable of entering into a contract can operate a business as a sole trader.
B)A sole trader may have difficulty in raising business capital.
C)Sole traders have unlimited liability for the debts of the business.
D)The business of a sole trader can sue and be sued in its own name.

Accepted Answer

Sole traders operate their businesses as individuals, not as separate legal entities. Therefore, any legal action taken by or against the business is actually taken by or against the individual owner, not the business itself.

Question 15

A corporation is an entity separate from its:
A)members and shareholders but not its directors.
B)members but not its shareholders or directors.
C)members,shareholders and directors.
D)shareholders but not its members or directors.

Accepted Answer

A corporation is considered a separate legal entity from its members, shareholders, and directors. This means it has its own rights and liabilities distinct from those of the people and entities that own, control, or manage it.

Question 16

The shareholders of a company with share capital are its members.

Accepted Answer

Shareholders of a company with share capital are also referred to as members, as they own a portion of the company through their shares.

Question 17

Which are the three certainties that are necessary for the creation of an express trust?
A)Intention to create a trust,agreement and consideration.
B)Intention to create a trust,plus certainty of the identity of the property and beneficiaries.
C)Intention to create a trust,consent of the beneficiaries and agreement of the trustee.
D)Consideration,knowledge on the part of the beneficiaries and certainty of duration.

Accepted Answer

The three certainties necessary for the creation of an express trust are:
1. Intention to create a trust - This means that the person creating the trust (the settlor) must have a clear intention to create a trust rather than any other type of legal arrangement.
2. Certainty of the identity of the property - The property or assets that are to be held in the trust must be clearly identified and distinguishable from any other property or assets.
3. Certainty of the beneficiaries - The beneficiaries or those who will benefit from the trust must be clearly identified or at least capable of being identified.

Question 18

Which of the following statements about a corporation is NOT true?
A)A corporation can sue and be sued.
B)A corporation has perpetual succession.
C)There are onerous administrative and reporting requirements.
D)Share transfer requirements are complex.

Accepted Answer

The complexity of share transfer requirements varies significantly among corporations and is not inherently true for all corporations. Many corporations, especially publicly traded ones, have mechanisms in place to facilitate relatively easy transfer of shares. This contrasts with the perception that share transfer is universally complex across all corporations.

Question 19

A partnership is the relationship that exists between persons carrying on a business in common with a view to profit.

Accepted Answer

This is the legal definition of a partnership.

Question 20

Although a company is a distinct legal entity,it is not separate from its shareholders.

Accepted Answer

Although the company is a separate legal entity, it is considered distinct and separate from its shareholders. Shareholders are only liable for the debts and obligations of the company up to the amount of their investment in the company.

Quiz 21: Choosing a Business Entity

Which of the following statements about a partnership is true?

In which of the following business entities would the creditors be able to recover moneys owed to them by the business from the proprietors of the business?

Which of the following is NOT a requirement for the creation of a trust?

Which of the following statements about a trust is true?

Which of the following statements about a partnership is NOT true?

Which of the following statements about a sole trader is NOT true?

Define a sole trader and discuss its advantages and disadvantages.

Which of the following statements about a sole trader is true?

Which of the following is NOT an advantage of a trading trust?

Which of the following statements about a sole trader is NOT true?

In choosing a business entity which of the following is NOT a factor in making the decision?

Explain how and why a sole trader might adopt a discretionary trust as their business structure.

Which of the following statements about a sole trader is NOT true?

Which of the following statements about a sole trader is NOT true?

A corporation is an entity separate from its:

The shareholders of a company with share capital are its members.

Which are the three certainties that are necessary for the creation of an express trust?

Which of the following statements about a corporation is NOT true?

A partnership is the relationship that exists between persons carrying on a business in common with a view to profit.

Although a company is a distinct legal entity,it is not separate from its shareholders.