Question 1

Which of the following transactions would be considered by the IRS to be a taxable sale of assets? Changing the form of business from:

Accepted Answer

A)  a corporation to an LLC. 
B)  a partnership to an LLC. 
C)  an LLC to a corporation. 
D)  All of the above. 
A)  a corporation to an LLC. 
B)  a partnership to an LLC. 
C)  an LLC to a corporation. 
D)  All of the above.

Question 2

All the business forms listed below have limited liability except the:

Accepted Answer

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

Question 3

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 4

The term "S Corporation" comes from:

Accepted Answer

A)  the Internal Revenue Code. 
B)  the FTC rules. 
C)  the U.S. Constitution. 
D)  state corporation law. 
A)  the Internal Revenue Code. 
B)  the FTC rules. 
C)  the U.S. Constitution. 
D)  state corporation law.

Question 5

Rachel and Cyndi started a retail business called Zebra Toy Company.The business is operated as a partnership.Under partnership law:

Accepted Answer

A)  Rachel is personally liable for any business contracts entered into by Cyndi. 
B)  Rachel is personally liable for any business debts, regardless of whether she or Cyndi created the obligation. 
C)  Rachel is personally liable for any negligent act committed by Cyndi in the scope of the business activity. 
D)  All the above. 
A)  Rachel is personally liable for any business contracts entered into by Cyndi. 
B)  Rachel is personally liable for any business debts, regardless of whether she or Cyndi created the obligation. 
C)  Rachel is personally liable for any negligent act committed by Cyndi in the scope of the business activity. 
D)  All the above.

Question 6

Seventy farmers in Morgan County joined together to gain the advantages of purchasing seed and fertilizer in bulk and of obtaining better prices when distributing and selling their crops.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.

Question 7

Franchise fees can be costly,but they are usually payable over a number of years,after profits are generated from the business.

Accepted Answer

A) True 
 B)False

Question 8

To form an LLC,a charter and an operating agreement must be filed with the Secretary of State in the jurisdiction where the business will operate.

Accepted Answer

A) True 
 B)False

Question 9

Filings are required to form and operate a limited liability partnership.

Accepted Answer

A) True 
 B)False

Question 10

Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Accepted Answer

A sole proprietorship is an unincorporat

Question 11

Cooperatives may be either incorporated or unincorporated businesses.

Accepted Answer

A) True 
 B)False

Question 12

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 13

James was a partner in a large firm.He died unexpectedly.His son,Frank,wanted to take over for his father in the partnership and was well qualified to do the work his father had done.Which statement best describes Frank's rights in the partnership if he inherits the interest?

Accepted Answer

A)  Frank has a right to take over for his father in the partnership. 
B)  Frank is entitled to the value in the partnership, but not to become a full partner. 
C)  Frank has no rights to his father's partnership interest. 
D)  None of the above. 
A)  Frank has a right to take over for his father in the partnership. 
B)  Frank is entitled to the value in the partnership, but not to become a full partner. 
C)  Frank has no rights to his father's partnership interest. 
D)  None of the above.

Question 14

The most common form of business ownership is the corporation.

Accepted Answer

A) True 
 B)False

Question 15

E.I.James is a writer with a best selling novel.He wishes to create a corporation called "James,Inc." He will be the only shareholder.Can James incorporate his business of writing?

Accepted Answer

A)  Yes, this would be the incorporation of a sole proprietorship. 
B)  No, the law requires at least two people to be shareholders of a corporation. 
C)  No, the law does not permit a person to, in effect, incorporate himself. 
D)  Only if he forms an S Corporation. 
A)  Yes, this would be the incorporation of a sole proprietorship. 
B)  No, the law requires at least two people to be shareholders of a corporation. 
C)  No, the law does not permit a person to, in effect, incorporate himself. 
D)  Only if he forms an S Corporation.

Question 16

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Accepted Answer

A)  sole proprietorship. 
B)  partnership. 
C)  joint venture. 
D)  limited liability company. 
A)  sole proprietorship. 
B)  partnership. 
C)  joint venture. 
D)  limited liability company.

Question 17

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 18

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 19

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 20

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

Exam 31: Starting A Business

Which of the following transactions would be considered by the IRS to be a taxable sale of assets? Changing the form of business from:

All the business forms listed below have limited liability except the:

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.

The term "S Corporation" comes from:

Rachel and Cyndi started a retail business called Zebra Toy Company.The business is operated as a partnership.Under partnership law:

Seventy farmers in Morgan County joined together to gain the advantages of purchasing seed and fertilizer in bulk and of obtaining better prices when distributing and selling their crops.These farmers have formed a:

Franchise fees can be costly,but they are usually payable over a number of years,after profits are generated from the business.

To form an LLC,a charter and an operating agreement must be filed with the Secretary of State in the jurisdiction where the business will operate.

Filings are required to form and operate a limited liability partnership.

Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Cooperatives may be either incorporated or unincorporated businesses.

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

James was a partner in a large firm.He died unexpectedly.His son,Frank,wanted to take over for his father in the partnership and was well qualified to do the work his father had done.Which statement best describes Frank's rights in the partnership if he inherits the interest?

The most common form of business ownership is the corporation.

E.I.James is a writer with a best selling novel.He wishes to create a corporation called "James,Inc." He will be the only shareholder.Can James incorporate his business of writing?

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

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:

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

The advantage of a corporation over a partnership is:

An S Corporation cannot have more than ____ shareholders.

Introduction To Law

Business Ethics And Social Responsibility

Dispute Resolution

Common Law,Statutory Law,And Administrative Law

Constitutional Law

Intentional Torts And Business Torts

Negligence And Strict Liability

Crime

International Law

Introduction To Contracts

Agreement

Consideration

Legality

Capacity And Consent

Written Contracts

Third Parties

Performance And Discharge

Remedies

Practical Contracts

Introduction To Sales

Ownership And Risk

Warranties And Product Liability

Performance And Remedies

Secured Transactions

Creating A Negotiable Instrument

Liability For Negotiable Instruments

Accountants' Liability

Agency Law

Employment Law

Labor Law

Partnerships

Life And Death Of A Corporation

Corporate Management

Shareholders

Securities Regulation

Bankruptcy

Antitrust

Consumer Law

Environmental Law

Cyberlaw

Intellectual Property

Real Property And Tenant-landlord Law

Personal Property And Bailment

Planning For The Future: Wills,Trusts,And Insurance

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