Question 1

An S Corporation cannot have more than ____ shareholders.

Accepted Answer

A) 100 
B) 75 
C) 50 
D) 25 
A) 100 
B) 75 
C) 50 
D) 25 A

Question 2

A "socially conscious organization" is a non-profit organization that pledges to use 10% of its revenues to benefit environmental or social causes.

Accepted Answer

A) True 
 B)False  False

Question 3

To become a "socially conscious organization," typically three-fourths of the investors must approve,and they must undergo a certification process.

Accepted Answer

A) True 
 B)False  False

Question 4

The business form that is taxed as a partnership and gives all owners limited liability,is:

Accepted Answer

A) a close corporation. 
B) a limited partnership. 
C) a limited liability company. 
D) a general partnership. 
A) a close corporation. 
B) a limited partnership. 
C) a limited liability company. 
D) a general partnership.

Question 5

Martin,Leah,and Pablo are considering forming a business.What factors should they consider in making a choice of organization?

Accepted Answer

A) Ease of creation and operation. 
B) Whether there is personal liability for the owners. 
C) How the owners will be taxed. 
D) All of the above. 
A) Ease of creation and operation. 
B) Whether there is personal liability for the owners. 
C) How the owners will be taxed. 
D) All of the above.

Question 6

The advantage of a corporation over a partnership is:

Accepted Answer

A) shares are easily transferable to another person. 
B) perpetual existence. 
C) it is easier to raise funds. 
D) All the above. 
A) shares are easily transferable to another person. 
B) perpetual existence. 
C) it is easier to raise funds. 
D) All the above.

Question 7

What is a limited liability company? Explain the advantages and disadvantages of this type of business ownership?

Accepted Answer

A limited liability company (LLC)is a re

Question 8

Corporations have perpetual existence.

Accepted Answer

A) True 
 B)False

Question 9

To be a close corporation,the business must be small,with no more than 20 owners and no more than $500,000 in gross annual income.

Accepted Answer

A) True 
 B)False

Question 10

LLCs have become popular for all except which of the following reasons:

Accepted Answer

A) management flexibility. 
B) tax status as a partnership. 
C) uniformity of law. 
D) limited liability. 
A) management flexibility. 
B) tax status as a partnership. 
C) uniformity of law. 
D) limited liability.

Question 11

Which of the following would not be personally liable for the debts of the business?

Accepted Answer

A) A sole proprietor. 
B) A partner in a general partnership. 
C) A general partner in a limited liability limited partnership. 
D) A general partner in a limited partnership. 
A) A sole proprietor. 
B) A partner in a general partnership. 
C) A general partner in a limited liability limited partnership. 
D) A general partner in a limited partnership.

Question 12

Limited liability is a major advantage of a partnership as compared to a corporation.

Accepted Answer

A) True 
 B)False

Question 13

Debra and Lawrence have an equal partnership.This year,after expenses,the partnership had a profit of $200,000.Debra and Lawrence will each pay taxes on:

Accepted Answer

A) whatever they receive from the partnership. 
B) $50,000. 
C) $100,000. 
D) None of the above.The partnership itself will pay the taxes on the business's profit. 
A) whatever they receive from the partnership. 
B) $50,000. 
C) $100,000. 
D) None of the above.The partnership itself will pay the taxes on the business's profit.

Question 14

All of the following are characteristics of a closely held corporation EXCEPT:

Accepted Answer

A) the shares are publicly traded. 
B) the corporation can typically operate without a board of directors. 
C) the shareholders usually restrict share transfer. 
D) minority shareholders are provided more protection than in regular corporations. 
A) the shares are publicly traded. 
B) the corporation can typically operate without a board of directors. 
C) the shareholders usually restrict share transfer. 
D) minority shareholders are provided more protection than in regular corporations.

Question 15

Daniel,his parents,and three brothers own all the stock of their family farm corporation.This corporation,which is taxed as a corporation,is probably:

Accepted Answer

A) an S corporation. 
B) a C corporation. 
C) a closely held corporation. 
D) an LLC. 
A) an S corporation. 
B) a C corporation. 
C) a closely held corporation. 
D) an LLC.

Question 16

The Federal Trade Commission requires franchisors to:

Accepted Answer

A) give prospective franchisees an offering circular at least 14 business days prior to the signing of a contract or payment of any money. 
B) disclose the exact amount of the initial investment required. 
C) disclose any litigation the company has ever been involved in 
D) disclose how many franchisees have gone out of business in the prior five years. 
A) give prospective franchisees an offering circular at least 14 business days prior to the signing of a contract or payment of any money. 
B) disclose the exact amount of the initial investment required. 
C) disclose any litigation the company has ever been involved in 
D) disclose how many franchisees have gone out of business in the prior five years.

Question 17

A limited liability company,unlike a Subchapter S corporation,can have members that are corporations,partnerships,or nonresident aliens.

Accepted Answer

A) True 
 B)False

Question 18

The Federal Trade Commission will not allow the sale of franchises that are unfair to the franchisee.

Accepted Answer

A) True 
 B)False

Question 19

The form of business ownership that is the most easily transferable is the:

Accepted Answer

A) general partnership. 
B) corporation. 
C) limited liability company. 
D) limited partnership. 
A) general partnership. 
B) corporation. 
C) limited liability company. 
D) limited partnership.

Question 20

Seventy farmers in Morgan County joined together to hire Rusty to spray their crops one time (with his dustcropper plane).These farmers have formed a:

Accepted Answer

A) business trust. 
B) cooperative. 
C) franchise. 
D) joint venture. 
A) business trust. 
B) cooperative. 
C) franchise. 
D) joint venture.

Exam 28: Starting a Business

An S Corporation cannot have more than ____ shareholders.

A "socially conscious organization" is a non-profit organization that pledges to use 10% of its revenues to benefit environmental or social causes.

To become a "socially conscious organization," typically three-fourths of the investors must approve,and they must undergo a certification process.

The business form that is taxed as a partnership and gives all owners limited liability,is:

Martin,Leah,and Pablo are considering forming a business.What factors should they consider in making a choice of organization?

The advantage of a corporation over a partnership is:

What is a limited liability company? Explain the advantages and disadvantages of this type of business ownership?

Corporations have perpetual existence.

To be a close corporation,the business must be small,with no more than 20 owners and no more than $500,000 in gross annual income.

LLCs have become popular for all except which of the following reasons:

Which of the following would not be personally liable for the debts of the business?

Limited liability is a major advantage of a partnership as compared to a corporation.

Debra and Lawrence have an equal partnership.This year,after expenses,the partnership had a profit of $200,000.Debra and Lawrence will each pay taxes on:

All of the following are characteristics of a closely held corporation EXCEPT:

Daniel,his parents,and three brothers own all the stock of their family farm corporation.This corporation,which is taxed as a corporation,is probably:

The Federal Trade Commission requires franchisors to:

A limited liability company,unlike a Subchapter S corporation,can have members that are corporations,partnerships,or nonresident aliens.

The Federal Trade Commission will not allow the sale of franchises that are unfair to the franchisee.

The form of business ownership that is the most easily transferable is the:

Seventy farmers in Morgan County joined together to hire Rusty to spray their crops one time (with his dustcropper plane).These farmers have formed a:

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