Exam 12: Payroll Taxes

If a company is able to consider someone providing services as a contractor, instead of an employee, the company can avoid paying social security and unemployment taxes related to that person.

The key consideration in deciding if someone is an independent contractor is whether the payer has the right to control or direct only the result of the work, but not what will be done and how it will be done.

Explain why some companies may want to treat people who work for them as independent contractors, rather than as employees.

It is possible for a corporation to have different types of shares, with different voting rights.

Which of the following statements is true about preferred stock?

A person who wants to join a general partnership can "buy out" any of the current partners, and that person will become a full partner without any need to ask permission of the other general partners.

Which of the following types of business organizations is subject to "double taxation" of business income?

A disadvantage of a general partnership, compared to a regular corporation, is that:

Legally, the key fact that separates "independent contractors" from "employees" is whether the people work at least 35 hours per week.

A shareholder in a corporation must receive permission from the company before selling his or her shares.

Companies must withhold social security taxes on payments to independent contractors.

In the Rebeli case, the owners were worried that their business could fail, and they could go bankrupt. Describe any two steps the owners tried to use in the first year to lower their personal risk.

Cheapo Corp. claims that the people who work for it are independent contractors, not employees. By classifying them this way, Cheapo is able to pay lower amounts for

One of the normal rights of a shareholder in a corporation is to receive some information about the company.

There is double taxation of partnership income, once as the partnership earns it, and once as the money is distributed to the partners.

Debt financing is more risky than financing with equity.

The law limits the number of maximum number of shareholders of an S corporation.

Under the law, there is no upper limit to the number of shareholders of an S corporation.

The law requires employers to both withhold social security taxes from employees' pay, and also to pay an employer portion of the social security tax.

In its first year, NewBiz enterprises loses money. Which type of owner would not be able to reduce his or her taxable income that year to reflect his or her share of the losses?