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Exam 4: Types of Business Ownership

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Question 71

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B&G, Inc. A year ago, Kevin went to work for B&G, Inc.He has worked for the finance department ever since he started.He noticed that the corporation was only taxed as though it were a partnership.This was something that he found very odd when he first started working for the company, but he later realised it was a fairly common practice.He recognised that this was one of the advantages of this type of corporation. While the job was challenging, Kevin was not happy.He wanted to work for a company whose main goal was to provide service to the community, not to make a profit.However, Kevin felt that, considering his present financial situation, he had to continue working for B&G, Inc.A week later, Kevin discovered there was going to be a merger between B&G, Inc.and one of its major competitors.Kevin's boss informed him that he would be getting a promotion and a raise.While he was excited about making more money, he still was not happy.He knew then that he would not be working for the company for long. -Refer to B&G, Inc.Which of these features does not belong to this type of corporation?

A) No double taxation
B) Management flexibility
C) Limited liability
D) Personal asset protection
E) Many Internal Revenue tax regulations

F) A) and D)
G) A) and E)

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Question 72

Multiple Choice

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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

F) C) and D)
G) A) and B)

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Question 73

Multiple Choice

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After Flora has gotten all the money she can from the bank and still cannot keep up with her fast-growing business, what is she most likely to do next if she wants her company to continue growing?

Goodwill Industries is an example of a(n)

Ted's partnership agreement with two other men was a bit unsound.One of the problems the men were encountering was uneven productivity among the partners.The agreement required each partner to contribute to every aspect of the business to receive an equal portion of the profits.This agreement did not reflect the idea that

A technique used to gather enough stockholder votes to control a targeted company is a

A business partnership that is owned and managed like a corporation but taxed like a partnership is called a(n)

Corporate officers are elected by the stockholders.

Surplus funds of a not-for-profit organisation are distributed to members of the board of directors.

A horizontal merger is a merger between firms in completely unrelated industries.

How might a sole trader have a possible tax advantage?

Ordinary share carries all the following rights except the right to

Suppose Bill Gates, founder of Microsoft, is interested in a small software company.He may offer to purchase the stock of this company at a price that is just high enough to tempt the current stockholders.This action would be called a

Although a partnership pays no income tax, the Internal Revenue Service requires partnerships to file an annual information return that states the amount of distributions made to each partner.

Compared to a corporation, a partnership is more difficult and expensive to establish.

A ____ is a form that enables stockholders to allow someone else to vote for them.

Samantha's Dilemma Samantha graduated from college and needed to decide where she wanted to work.She had several options.Her aunt Julie owned and operated a small business that she started about twenty years ago.Julie, an individual owner of her business, informed Samantha that she could work for her.On one hand, Samantha thought it would be a great opportunity to be able to work for her aunt, learn the business, and then run the business when her aunt retired.On the other hand, she also felt that she wanted something a little more challenging; a job where she could really use her education.Her other option would be to work for a company that a friend and her husband had started and jointly owned.It was a rapidly growing company with plenty of opportunity for advancement.However, Samantha had some reservations about this choice because she was not sure she wanted to work for friends.Her last option was to work for a large retail company, headquartered in Maryland, which had stores across the UK. After much consideration, Samantha decided she didn't want an opportunity and a job because someone knew her.She wanted to prove how motivated and hard-working she was.Once she weighed all the advantages and disadvantages of her different options, she decided to work for the large retail company so that she could gain the most experience for herself. -Refer to Samantha's Dilemma.If Samantha worked for the large retail company in Philadelphia, what type of corporation would that be?

The form of business organisation most heavily regulated by the government is the

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

Unlike a person, a corporation exists only on paper.