Question 1

A joint venture is different from a partnership in that the joint venture:
A)can be formed only by two individuals.
B)is formed for a specific purpose.
C)continues indefinitely.
D)requires that profits be shared equally.

Accepted Answer

A joint venture is formed for a specific purpose, which may be a one-time project or a limited period of time. A partnership, on the other hand, is generally formed for an indefinite period of time with the intention of making a profit. Therefore, option B is the correct choice. Option A is incorrect since a joint venture can be formed by two or more individuals or entities. Option C is incorrect since joint ventures are typically formed for a specific purpose and do not continue indefinitely. Option D is incorrect since profits can be shared in any agreed-upon manner, and it does not have to be equal in a joint venture.

Question 2

Which of the following is true about choosing a limited liability company form of ownership?
A)It has no disadvantages except its newness.
B)It is ideal for a new company but difficult to convert to with an existing company.
C)It is inexpensive,easy to form,and covered by little regulation due to its newness.
D)It's an excellent conversion vehicle for existing businesses that are suffering from double taxation but problematic for sole proprietorships.

Accepted Answer

While a limited liability company (LLC) is a popular choice for new businesses, it can be difficult to convert an existing company to this form of ownership. However, it offers numerous advantages such as limited liability protection for owners and flexible tax options.

Question 3

________ partners are not active in a business but generally are known to be members of the partnership.
A)Dormant
B)General
C)Silent
D)Limited

Accepted Answer

Silent partners are those who are not involved in the day-to-day operations of the business but are still known to be part of the partnership. They typically provide capital or other resources and receive a share of the profits. Dormant partners are those who are not active and not known to be members of the partnership. General partners are actively involved in the business and have unlimited liability, while limited partners are not involved in the day-to-day operations and have limited liability.

Question 4

Shares the corporation itself owns are called:
A)preferred stock.
B)bonds.
C)treasury stock.
D)common stock.

Accepted Answer

Treasury stock refers to shares of a company's own stock that it has repurchased from the open market or from shareholders.

Question 5

The ________ is a document that states in writing all of the terms of operating the partnership for the protection of each partner involved.
A)Certificate of Incorporation
B)Partnership agreement
C)Certificate for Conducting Business as Partners
D)Partnership document

Accepted Answer

A partnership agreement is a legal document that outlines the terms and conditions agreed upon by partners in a partnership. It includes details such as the purpose of the partnership, each partner's roles and responsibilities, the distribution of profits and losses, decision-making procedures, mechanisms for resolving disputes, and the duration and termination of the partnership. This agreement is vital for protecting the interests of all partners involved and is legally binding. A Certificate of Incorporation is a document issued by the state that recognizes a corporation as a legal entity. A Certificate for Conducting Business as Partners is not a standard legal document used in partnerships. A Partnership document is too vague and can encompass a wide range of documents related to partnerships.

Question 6

Corporations can also stimulate managers' and employees' incentive on the job by creating an ________ (ESOP).
A)Entrepreneur Stock Ownership Plan
B)Employee Stock Ownership Plan
C)Employee Shares Ownership Plan
D)Entrepreneur Shares Ownership Plan

Accepted Answer

An Employee Stock Ownership Plan (ESOP) is a type of employee benefit plan that provides employees with an ownership interest in the company by giving them shares of stock. This can serve as an incentive for employees to work hard and help the company succeed, as they stand to benefit financially from their efforts.

Question 7

A limited liability company differs from an S-corporation in:
A)that it is not subject to the same amount of restrictions.
B)its ability to attract and accumulate capital.
C)that ownership is not transferable through the sale of stock.
D)that it is limited to only one class of stock.

Accepted Answer

The answer of A limited liability company differs from an...

Question 8

An S-corporation form of ownership overcomes which disadvantage of the regular or "C" corporation form of ownership?
A)The double taxation issue
B)The expense and difficulty of formation
C)The amount of regulation and red tape involved in its operation
D)The potential loss of control by the founder

Accepted Answer

The S-corporation form of ownership overcomes the disadvantage of double taxation that regular or "C" corporation form of ownership faces. In an S-corporation, profits and losses are passed through to shareholders and are reported on their individual tax returns, avoiding the double taxation issue.

Question 9

To maintain control over their ownership,many closely held corporations exercise this right,known as:
A)right of first refusal.
B)right of refusal.
C)control rights.
D)corporate rights.

Accepted Answer

The right of first refusal allows the existing shareholders of a company to have the first opportunity to purchase any additional shares that become available for sale. This helps maintain their control over the ownership of the company by ensuring that outside investors cannot simply buy up a majority share without the consent of the existing shareholders.

Question 10

________ corporations have shares that are controlled by a relatively small number of people - family members,relatives,or friends.
A)Closely held
B)Domestic
C)Foreign
D)Alien

Accepted Answer

Closely held corporations are those in which the shares are held by a small group of people, usually family members, relatives, or friends. These corporations are often privately owned and not traded on public stock exchanges. Domestic and foreign corporations refer to the location of the corporation's headquarters or the country in which it is incorporated. Alien corporation refers to a corporation that is owned by foreign investors or operates in a foreign country.

Question 11

A limited liability company is formed under:
A)a Certificate of Incorporation.
B)a Partnership Agreement.
C)Articles of Organization.
D)the Revised Uniform Partnership Act.

Accepted Answer

A limited liability company (LLC) is formed under Articles of Organization. The other options listed are for forming different business entities, such as a corporation or partnership, and are not applicable to forming an LLC.

Question 12

Which form of ownership is the least costly to form?
A)Sole Proprietorship
B)Corporations
C)Partnership
D)Limited Liability Corporation

Accepted Answer

Sole proprietorship is the least costly to form because it is a business owned and managed by a single individual, with no legal distinction between the owner and the business entity. There are no legal fees, filing fees, or documentation requirements associated with forming a sole proprietorship, making it a simple and inexpensive option for small business owners.

Question 13

In a closely held corporation,one of the steps that should be taken to avoid legal difficulties is:
A)hold annual meetings to elect officers are directors.
B)make sure that the stockholders make all the major decisions.
C)mingle corporate assets and the personal assets.
D)None of the above

Accepted Answer

Holding annual meetings to elect officers and directors is important in a closely held corporation to ensure that proper corporate governance is followed and to avoid potential legal issues that can arise from a lack of proper corporate compliance. It also helps to establish clear lines of authority and decision-making within the company. Option B is incorrect because while stockholders have a voice in major decisions, they do not make all the decisions. Option C is incorrect because mingling corporate and personal assets is not only unethical, but it can also lead to potential legal issues and liability. Option D is incorrect because there is a correct answer to this question.

Question 14

The ________ is a document that states in writing all of the terms of operating a business among the partners.
A)Sole Proprietorship Agreement
B)Articles of Corporations
C)Partnership Agreement
D)Limited Liability Corporation Agreement

Accepted Answer

A partnership agreement is a legal document that defines the terms of a business partnership, including the roles and responsibilities of each partner, profit and loss allocation, decision-making processes, and dispute resolution methods. This agreement is important to ensure that all partners have a clear understanding of the business operations and can work together effectively. The other options, Sole Proprietorship Agreement, Articles of Corporations, and Limited Liability Corporation Agreement, are legal documents that pertain to specific business structures and do not apply to partnerships.

Question 15

One major advantage of the ________ is that once the owner has paid all of the company's expenses,he/she can keep the remaining profits (less taxes,of course).
A)Partnership
B)Corporation
C)Sole Proprietorship
D)Limited Liability Company

Accepted Answer

In a sole proprietorship, the owner has complete control over the profits and can keep all of the earnings after expenses have been paid. This is different from partnerships and corporations where profits are usually shared among multiple parties or shareholders. Additionally, sole proprietorships have lower startup costs and less paperwork compared to other business entities.

Question 16

The ________ codifies the body of law dealing with partnerships in the United States.
A)Small Business Partnership Agreement
B)Uniform Partnership Act (UPA)
C)Partnership Agreement
D)None of the above

Accepted Answer

The Uniform Partnership Act (UPA) codifies the body of law dealing with partnerships in the United States. A Small Business Partnership Agreement and Partnership Agreement are legal documents that partners create to govern their partnership, but they do not codify law. Therefore, options A and C are not the best choices. Option D is incorrect because there is a specific codified body of law for partnerships in the United States.

Question 17

One disadvantage of the proprietorship is:
A)the least regulated form of business ownership.
B)limited personal liability.
C)excessive access to capital.
D)limited skills and abilities.

Accepted Answer

The limited skills and abilities of the proprietor can hinder the success of the business, as they may not possess all the necessary knowledge and expertise in various areas such as finance, marketing, and operations. This can lead to poor decision-making and ultimately affect the profitability of the business.

Question 18

The limited liability company is most like a(n):
A)general partnership.
B)master partnership.
C)sole proprietorship.
D)S-corporation.

Accepted Answer

The limited liability company (LLC) shares similarities with an S-corporation in terms of providing limited liability protection for its owners while also allowing for pass-through taxation. LLCs and S-corporations also have similar governance structures and operating agreements. However, the LLC has more flexibility in terms of ownership and management than an S-corporation. The other options, general partnership, master partnership, and sole proprietorship do not provide limited liability protection.

Question 19

An owner should choose an S-corporation form of ownership when he/she:
A)has an established company that is suffering losses due to double taxation.
B)is starting up a company and anticipating either net losses or high profits with large dividends.
C)owns a company in which net profits before any compensation to shareholders are less than $100,000 per year.
D)has an existing sole proprietorship and wants to lower the tax bill through deducting fringe benefits as business expenses.

Accepted Answer

The answer of An owner should choose an S-corporation form...

Question 20

In a joint venture,individuals join together in co-ownership for:
A)continuous operation.
B)six to twelve months.
C)a given limited purpose.
D)perpetuity.

Accepted Answer

In a joint venture, individuals join together for a given limited purpose. The purpose could be a specific project or business opportunity, and once that purpose is completed, the joint venture can be dissolved. Therefore, choice C is the best answer.

Quiz 3: Choosing a Form of Ownership

A joint venture is different from a partnership in that the joint venture:

Which of the following is true about choosing a limited liability company form of ownership?

________ partners are not active in a business but generally are known to be members of the partnership.

Shares the corporation itself owns are called:

The ________ is a document that states in writing all of the terms of operating the partnership for the protection of each partner involved.

Corporations can also stimulate managers' and employees' incentive on the job by creating an ________ (ESOP) .

A limited liability company differs from an S-corporation in:

An S-corporation form of ownership overcomes which disadvantage of the regular or "C" corporation form of ownership?

To maintain control over their ownership,many closely held corporations exercise this right,known as:

________ corporations have shares that are controlled by a relatively small number of people - family members,relatives,or friends.

A limited liability company is formed under:

Which form of ownership is the least costly to form?

In a closely held corporation,one of the steps that should be taken to avoid legal difficulties is:

The ________ is a document that states in writing all of the terms of operating a business among the partners.

One major advantage of the ________ is that once the owner has paid all of the company's expenses,he/she can keep the remaining profits (less taxes,of course) .

The ________ codifies the body of law dealing with partnerships in the United States.

One disadvantage of the proprietorship is:

The limited liability company is most like a(n) :

An owner should choose an S-corporation form of ownership when he/she:

In a joint venture,individuals join together in co-ownership for: