Question 1

What are the main advantages and disadvantages of partnerships?

Accepted Answer

The main advantages of a partnership are:
• easily formed;
• formation costs are low;
• partnerships are not a tax paying entity;
• typically each partner is equal;
• it may operate in more than one state without a license;
• partnerships are usually less regulated than corporations.
The main disadvantages of a partnership are:
• limited number of partners;
• can be dissolved anytime a partner leaves the partnership;
• unlimited liability;
• partners are taxed on their share of the profits even if they did not receive them.

Question 2

A business might shift away from the proprietorship form as it becomes more successful.

Accepted Answer

A) True 
 B)False  True

Question 3

All partners in a general partnership have unlimited liability for their organization's debts.

Accepted Answer

A) True 
 B)False  True

Question 4

In the current business environment, there is an increased focus on legal liability for directors and officers.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following requires organizers to file articles of organization with state official for formation?

Accepted Answer

A)  Limited partnership 
B)  Partnership 
C)  Limited liability company 
D)  Sole proprietorship 
E)  S corporation 
A)  Limited partnership 
B)  Partnership 
C)  Limited liability company 
D)  Sole proprietorship 
E)  S corporation

Question 6

What are the steps that must be taken in order to form a corporation and what are the typical types of costs involved?

Accepted Answer

The articles of incorporation must be dr

Question 7

The IRS treats LLCs as taxable entities.

Accepted Answer

A) True 
 B)False

Question 8

The crucial issue with the continuity factor of a business's organizational form is:

Accepted Answer

A)  management style. 
B)  profit distribution. 
C)  the method by which the business can be dissolved. 
D)  the method of customer service observed. 
E)  the control exercised by managers. 
A)  management style. 
B)  profit distribution. 
C)  the method by which the business can be dissolved. 
D)  the method of customer service observed. 
E)  the control exercised by managers.

Question 9

Which of the following is true about a general partnership?

Accepted Answer

A)  It is dissolved any time there is a change in partners. 
B)  It can be transferred to new owners without affecting the original agreement. 
C)  It has no liability. 
D)  It is taxed as an entity. 
E)  It requires permission from each state in which it does business during formation. 
A)  It is dissolved any time there is a change in partners. 
B)  It can be transferred to new owners without affecting the original agreement. 
C)  It has no liability. 
D)  It is taxed as an entity. 
E)  It requires permission from each state in which it does business during formation.

Question 10

If a corporate entity is disregarded by officers or directors so that there is such a unity of ownership and interest that separateness of the corporation has ceased to exist, the corporate veil may be pierced based on the:

Accepted Answer

A)  alter-ego theory. 
B)  negligent conduct theory. 
C)  corporate confusion theory. 
D)  corporate envelopment theory. 
E)  corporate doppelganger theory. 
A)  alter-ego theory. 
B)  negligent conduct theory. 
C)  corporate confusion theory. 
D)  corporate envelopment theory. 
E)  corporate doppelganger theory.

Question 11

What are the techniques employed by corporations to avoid double taxation?

Accepted Answer

Corporations have employed a variety of

Question 12

Any operating loss suffered by an S corporation is shared and immediately deductible on the returns of its shareholders.

Accepted Answer

A) True 
 B)False

Question 13

A dissolution is any change in the ownership of an organization that changes the legal existence of the organization.

Accepted Answer

A) True 
 B)False

Question 14

One of the advantages for a proprietor is that he may transfer the ownership of his proprietorship whenever desired.

Accepted Answer

A) True 
 B)False

Question 15

Partnership is the most easily formed business organization compared to all others.

Accepted Answer

A) True 
 B)False

Question 16

What must a corporation do if it wishes to conduct business in states other than the state of incorporation?

Accepted Answer

If a corporation wishes to conduct busin

Question 17

For limited partners to retain their status of limited liability, the partnership must evidence _____ compliance with all technical requirements of the limited partnership law.

Accepted Answer

A)  complete 
B)  nominal 
C)  minor 
D)  reasonable 
E)  substantial 
A)  complete 
B)  nominal 
C)  minor 
D)  reasonable 
E)  substantial

Question 18

Explain why corporations are said to be double taxed.

Accepted Answer

When it occurs, double taxation for a co

Question 19

Which of the following is true about the trends in operating business organizations?

Accepted Answer

A)  With the recent financial crises, public attention is moving toward management of limited partnerships. 
B)  Shareholders are losing interest and are becoming less active. 
C)  The Dodd-Frank Act has mandated rules that prevent shareholders from including their own board candidates in proxy materials. 
D)  In many cases, corporations and individuals reasonably have an equal claim to rights and protections under the law. 
E)  The focus on legal liability for directors and officers is decreasing. 
A)  With the recent financial crises, public attention is moving toward management of limited partnerships. 
B)  Shareholders are losing interest and are becoming less active. 
C)  The Dodd-Frank Act has mandated rules that prevent shareholders from including their own board candidates in proxy materials. 
D)  In many cases, corporations and individuals reasonably have an equal claim to rights and protections under the law. 
E)  The focus on legal liability for directors and officers is decreasing.

Question 20

Although expensive to create, the use of sole proprietorships is becoming all the more common.

Accepted Answer

A) True 
 B)False

Exam 14: Business Organizations

What are the main advantages and disadvantages of partnerships?

A business might shift away from the proprietorship form as it becomes more successful.

All partners in a general partnership have unlimited liability for their organization's debts.

In the current business environment, there is an increased focus on legal liability for directors and officers.

Which of the following requires organizers to file articles of organization with state official for formation?

What are the steps that must be taken in order to form a corporation and what are the typical types of costs involved?

The IRS treats LLCs as taxable entities.

The crucial issue with the continuity factor of a business's organizational form is:

Which of the following is true about a general partnership?

If a corporate entity is disregarded by officers or directors so that there is such a unity of ownership and interest that separateness of the corporation has ceased to exist, the corporate veil may be pierced based on the:

What are the techniques employed by corporations to avoid double taxation?

Any operating loss suffered by an S corporation is shared and immediately deductible on the returns of its shareholders.

A dissolution is any change in the ownership of an organization that changes the legal existence of the organization.

One of the advantages for a proprietor is that he may transfer the ownership of his proprietorship whenever desired.

Partnership is the most easily formed business organization compared to all others.

What must a corporation do if it wishes to conduct business in states other than the state of incorporation?

For limited partners to retain their status of limited liability, the partnership must evidence _____ compliance with all technical requirements of the limited partnership law.

Explain why corporations are said to be double taxed.

Which of the following is true about the trends in operating business organizations?

Although expensive to create, the use of sole proprietorships is becoming all the more common.

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