Question 1

What does double taxation mean?

Accepted Answer

A)   Companies must pay taxes on their income, and then employees must pay taxes on their salaries and wages.
B)   Companies have to pay both sales taxes and income taxes.
C)   Companies must pay taxes on their earnings, and then stockholders pay taxes on their dividends.
D)   Suppliers tax their customers, and in turn these businesses tax the ultimate consumer.
E)   Companies must pay taxes on corporate income and then additional taxes on distributions to profit stockholders.F) C) and E)
G) A) and C)

Question 2

Experts predict that mergers in the first part of the twenty-first century will be the result of cash-rich companies looking to acquire businesses that will enhance their position in the marketplace.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

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.F) A) and D)
G) B) and E)

Question 4

Why is a sole proprietorship the most flexible type of business?

Accepted Answer

A sole proprietorship is considered the most flexible type of business structure for several reasons:

1. **Ease of Formation and Closure**: A sole proprietorship is the simplest and least expensive business structure to establish. There are no formal or legal steps such as drafting articles of incorporation, bylaws, or holding organizational meetings. In most cases, the owner needs only to obtain the necessary licenses or permits to start operations. Similarly, closing the business is straightforward, as there are no complex dissolution procedures.

2. **Complete Control**: The owner has full authority to make all decisions regarding the business. This includes managing the business operations, making strategic decisions, and deciding on the direction and growth of the business. There is no need to consult with partners, shareholders, or a board of directors.

3. **Simplified Tax Reporting**: A sole proprietorship does not pay taxes as a separate business entity. Instead, the owner reports business income and losses on their personal income tax return, which simplifies the tax filing process. This is known as "pass-through" taxation, where the business itself is not taxed, only the individual's income.

4. **Flexibility in Management**: The owner can run the business as they see fit without the need for formal management structures or policies. This allows for quick decision-making and the ability to adapt to changes in the market or industry.

5. **Personalized Service**: As the sole proprietor is often the face of the business, they can provide a personal touch to their services or products, which can be an advantage in building customer relationships and loyalty.

6. **Retention of Profits**: The owner enjoys the benefit of retaining all the profits generated by the business, without having to share them with other stakeholders or investors.

7. **Privacy**: A sole proprietorship can offer more privacy than a corporation or a limited liability company (LLC) because there is less required disclosure of financial information and the details of the business operations.

However, it's important to note that while a sole proprietorship offers flexibility, it also comes with unlimited personal liability. This means that the owner is personally responsible for all debts and legal actions against the business. This risk can be mitigated by proper insurance and careful business management, but it is a significant factor to consider when choosing a business structure.

Question 5

How would you go about incorporating a business? Describe the information contained in a corporate charter.

Accepted Answer

Incorporating a business involves severa...

Question 6

Every partnership must have at least one limited partner.

Accepted Answer

A) True 
 B)False

Question 7

Boeing is incorporated in Seattle, Washington.It has a large facility in Huntsville and Alabama where it is considered as a(n)  _____.

Accepted Answer

A)   outsider
B)   domestic corporation
C)   foreign corporation
D)   tax write-off
E)   alien corporationF) All of the above
G) A) and B)

Question 8

According to the text, which of the following statements is false?

Accepted Answer

A)   The sole proprietor is often the sole manager.
B)   Many sole proprietors cannot afford to hire the help they need.
C)   Potential employees often feel there is no room for advancement in a sole proprietorship.
D)   When compared to larger businesses, the lure of employee benefits is one reason why people go to work for sole proprietorships.
E)   The sole proprietor often finds it hard to keep competent employees.F) A) and B)
G) A) and E) D

Question 9

A ____ invests money in the business but has no management responsibility.

Accepted Answer

A)   general partner
B)   limited partner
C)   sole proprietor
D)   nominal partner
E)   stockbrokerF) C) and D)
G) B) and E)

Question 10

Most stockholders attend a corporation's annual meeting and vote in person.

Accepted Answer

A) True 
 B)False  False

Question 11

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 maximize the wealth of any shareholders.This entity is known as a(n)  _____.

Accepted Answer

A)   partnership
B)   quasi-government corporation
C)   S-corporation
D)   not-for-profit corporation
E)   closed corporationF) B) and E)
G) B) and C)

Question 12

Which of the following is not a disadvantage of sole proprietorships?

Accepted Answer

A)   unlimited liability
B)   lack of capital
C)   double taxation
D)   lack of continuity
E)   limited management skillsF) B) and E)
G) C) and E)

Question 13

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

Accepted Answer

A)   All stockholders vote on all the major issues and problems that a company faces on a monthly basis.
B)   Stockholders are intricately involved in the daily operations of a corporation.
C)   Stockholders elect the board of directors, and this board is responsible for appointing corporate officers who manage the daily business of the corporation.
D)   Stockholders vote for the members of the board of directors, and this board makes all the daily business decisions for the corporation.
E)   Stockholders usually call company management and tell executives better ways to run the organization.F) C) and D)
G) A) and E)

Question 14

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 realized it was a fairly common practice.He recognized 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?

Accepted Answer

A)   no double taxation
B)   management flexibility
C)   limited liability
D)   personal asset protection
E)   many Internal Revenue tax regulationsF) All of the above
G) A) and B)

Question 15

A limited-liability company with at least two members is

Accepted Answer

A)   taxed like a corporation.
B)   taxed like a partnership.
C)   similar to a cooperative.
D)   always used to organize charitable organizations.
E)   the result of a horizontal merger.F) A) and D)
G) D) and E)

Question 16

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

Accepted Answer

A)   conglomerate merger
B)   cooperative
C)   joint venture
D)   vertical merger
E)   syndicateF) A) and B)
G) A) and C)

Question 17

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 United States.
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.Based on the information provided, what type of business does Samantha's aunt operate?

Accepted Answer

A)   incorporation
B)   partnership
C)   franchise
D)   corporation
E)   sole proprietorshipF) B) and D)
G) B) and C)

Question 18

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.

Accepted Answer

A)   10
B)   25
C)   50
D)   100
E)   108F) B) and E)
G) B) and D)

Question 19

The form of business organization that accounts for almost 83 percent of all sales revenues in the United States is the _____.

Accepted Answer

A)   sole proprietorship
B)   partnership
C)   corporation
D)   joint venture
E)   syndicateF) A) and D)
G) A) and C)

Question 20

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

Accepted Answer

A)   co-owners' agreement
B)   charter
C)   will
D)   articles of partnership
E)   formation contractF) C) and E)
G) A) and D)

Exam 4: Choosing a Form of Business Ownership

What does double taxation mean?

Correct Answer
verified

Experts predict that mergers in the first part of the twenty-first century will be the result of cash-rich companies looking to acquire businesses that will enhance their position in the marketplace.

Correct Answer
verified

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

Correct Answer
verified

Why is a sole proprietorship the most flexible type of business?

How would you go about incorporating a business? Describe the information contained in a corporate charter.

Correct Answer
Answered by ExamLex AI
Incorporating a business involves severa...
View Answer

Every partnership must have at least one limited partner.

Correct Answer
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Boeing is incorporated in Seattle, Washington.It has a large facility in Huntsville and Alabama where it is considered as a(n) _____.

Correct Answer
verified

According to the text, which of the following statements is false?

Correct Answer
verified
D

A ____ invests money in the business but has no management responsibility.

Correct Answer
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Most stockholders attend a corporation's annual meeting and vote in person.

Correct Answer
verified
False

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 maximize the wealth of any shareholders.This entity is known as a(n) _____.

Correct Answer
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Which of the following is not a disadvantage of sole proprietorships?

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

Correct Answer
verified

Correct Answer
verified

A limited-liability company with at least two members is

Correct Answer
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An association of individuals or firms formed for the purpose of performing a business function for its members is known as a _____.

Correct Answer
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Correct Answer
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Correct Answer
verified

The form of business organization that accounts for almost 83 percent of all sales revenues in the United States is the _____.

Correct Answer
verified

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

Correct Answer
verified

Exam 4: Choosing a Form of Business Ownership

What does double taxation mean?

Correct AnswerverifiedShow Answer

Experts predict that mergers in the first part of the twenty-first century will be the result of cash-rich companies looking to acquire businesses that will enhance their position in the marketplace.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Why is a sole proprietorship the most flexible type of business?

How would you go about incorporating a business? Describe the information contained in a corporate charter.

Correct AnswerAnswered by ExamLex AIIncorporating a business involves severa...View AnswerShow Answer

Every partnership must have at least one limited partner.

Correct AnswerverifiedShow Answer

Boeing is incorporated in Seattle, Washington.It has a large facility in Huntsville and Alabama where it is considered as a(n) _____.

Correct AnswerverifiedShow Answer

According to the text, which of the following statements is false?

Correct AnswerverifiedD

A ____ invests money in the business but has no management responsibility.

Correct AnswerverifiedShow Answer

Most stockholders attend a corporation's annual meeting and vote in person.

Correct AnswerverifiedFalse

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 maximize the wealth of any shareholders.This entity is known as a(n) _____.

Correct AnswerverifiedShow Answer

Which of the following is not a disadvantage of sole proprietorships?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A limited-liability company with at least two members is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The form of business organization that accounts for almost 83 percent of all sales revenues in the United States is the _____.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
Answered by ExamLex AI
Incorporating a business involves severa...
View Answer

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D

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False

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