Question 1

__________ is the simplest and most prevalent form of business enterprise in the United States.

Accepted Answer

A)  S corporation 
B)  Partnership 
C)  Sole proprietorship 
D)  Joint venture 
A)  S corporation 
B)  Partnership 
C)  Sole proprietorship 
D)  Joint venture

Question 2

Which of the following is true regarding taxation of losses of a C corporation?

Accepted Answer

A)  The operating loss is passed on to shareholders,but the corporation itself does not realize any benefit. 
B)  The operating loss is recognized at the corporate level,and shareholders also receive a tax benefit. 
C)  The operating loss will be recognized at the corporate level,shareholders receive no tax benefit,and the corporation receives no benefit until it has operating income against which its prior losses can be deducted. 
D)  The operating loss is not recognized at the corporate level; and although shareholders may receive a deduction,they must wait until they receive some amount of profit from the corporation at which point they can deduct up to 10 percent of the losses per year. 
A)  The operating loss is passed on to shareholders,but the corporation itself does not realize any benefit. 
B)  The operating loss is recognized at the corporate level,and shareholders also receive a tax benefit. 
C)  The operating loss will be recognized at the corporate level,shareholders receive no tax benefit,and the corporation receives no benefit until it has operating income against which its prior losses can be deducted. 
D)  The operating loss is not recognized at the corporate level; and although shareholders may receive a deduction,they must wait until they receive some amount of profit from the corporation at which point they can deduct up to 10 percent of the losses per year.

Question 3

In most states,partnership agreements may:

Accepted Answer

A)  not alter the obligation of equal fiduciary duty. 
B)  prescribe the standards by which the performance of good faith is to be measured. 
C)  eliminate the obligation of good faith. 
D)  reduce the duty of care. 
A)  not alter the obligation of equal fiduciary duty. 
B)  prescribe the standards by which the performance of good faith is to be measured. 
C)  eliminate the obligation of good faith. 
D)  reduce the duty of care.

Question 4

In most jurisdictions,there is no quorum unless the holders of at least _____ of the outstanding shares are present in person or by proxy.

Accepted Answer

A)  25 percent 
B)  33 percent 
C)  50 percent 
D)  75 percent 
A)  25 percent 
B)  33 percent 
C)  50 percent 
D)  75 percent

Question 5

If a business is operated by a partnership,LLC,or S corporation,then operating losses will be passed through to the individual partners or shareholders.

Accepted Answer

A) True 
 B)False

Question 6

Cumulative voting allows a greater control by the management interests of a corporation.

Accepted Answer

A) True 
 B)False

Question 7

Under the Revised Uniform Partnership Act,which all states have adopted,a general partnership agreement may be express or implied.

Accepted Answer

A) True 
 B)False

Question 8

A creditor of a sole proprietorship may seek recovery only from business assets of the sole proprietorship,not from personal assets of the sole proprietor.

Accepted Answer

A) True 
 B)False

Question 9

The main issue in CASE 19.3 Burwell v.Hobby Lobby Stores,Inc.(2014)involved a question of whether the requirements for contraception under the Affordable Care Act (Obamacare)violated the due process rights of Hobby Lobby Stores.

Accepted Answer

A) True 
 B)False

Question 10

An S corporation would likely be used as the corporate form for a business intending to raise money from venture capitalists.

Accepted Answer

A) True 
 B)False

Question 11

Define a joint venture and list the elements necessary for a finding of a joint venture.

Accepted Answer

A joint venture is a one-time partnershi

Question 12

__________ refers to a method by which courts hold shareholders individually liable for claims against a corporation.

Accepted Answer

A)  Reverse liability 
B)  Piercing the corporate veil 
C)  Upholding the ethical theory 
D)  Unveiling 
A)  Reverse liability 
B)  Piercing the corporate veil 
C)  Upholding the ethical theory 
D)  Unveiling

Question 13

An S corporation cannot have more than one class of stock.

Accepted Answer

A) True 
 B)False

Question 14

Limited partnerships are often used to raise capital because their limited liability for limited partners makes them attractive to investors.

Accepted Answer

A) True 
 B)False

Question 15

A shareholder who cannot be present at a meeting can vote by __________,that is,by a written authorization for another person to vote on his or her behalf.

Accepted Answer

A)  proxy 
B)  allowance 
C)  record 
D)  nomination 
A)  proxy 
B)  allowance 
C)  record 
D)  nomination

Question 16

A corporation is a private entity that can be created by a mere handshake,as long as the shareholders have completed a certificate of incorporation.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is NOT true regarding limited partnerships?

Accepted Answer

A)  General partners of a limited partnership assume no liability for partnership obligations beyond the amount of capital they contributed. 
B)  Limited partners assume liability for all partnership debts. 
C)  Limited partners are responsible for the management of the partnership. 
D)  Limited partnerships are often used to raise capital. 
A)  General partners of a limited partnership assume no liability for partnership obligations beyond the amount of capital they contributed. 
B)  Limited partners assume liability for all partnership debts. 
C)  Limited partners are responsible for the management of the partnership. 
D)  Limited partnerships are often used to raise capital.

Question 18

Which of the following is NOT an element of a merger?

Accepted Answer

A)  The merger agreement is negotiated by the boards of the two companies. 
B)  Consummation of a merger generally depends on approval of the transaction by the boards and the shareholders of both companies. 
C)  A merged corporation must adopt a name that does not belong to either of the parties to the merger. 
D)  The disappearing corporation relinquishes its separate corporate existence and becomes part of the surviving corporation. 
A)  The merger agreement is negotiated by the boards of the two companies. 
B)  Consummation of a merger generally depends on approval of the transaction by the boards and the shareholders of both companies. 
C)  A merged corporation must adopt a name that does not belong to either of the parties to the merger. 
D)  The disappearing corporation relinquishes its separate corporate existence and becomes part of the surviving corporation.

Question 19

What does the term "reverse piercing" reference in regard to a corporation and its shareholders?

Accepted Answer

A)  Holding a corporation liable for debts of a shareholder 
B)  Holding a shareholder liable for debts of a corporation 
C)  Holding a corporation liable for debts of a shareholder and holding a shareholder liable for debts of a corporation 
D)  Holding a corporation liable for debts of a shareholder,holding a shareholder liable for debts of a corporation,and holding officers liable for debts of a corporation. 
A)  Holding a corporation liable for debts of a shareholder 
B)  Holding a shareholder liable for debts of a corporation 
C)  Holding a corporation liable for debts of a shareholder and holding a shareholder liable for debts of a corporation 
D)  Holding a corporation liable for debts of a shareholder,holding a shareholder liable for debts of a corporation,and holding officers liable for debts of a corporation.

Question 20

An L3C indicates a low-profit,low-liability corporation.

Accepted Answer

A) True 
 B)False

Exam 19: Forms Of Business Organizations

__________ is the simplest and most prevalent form of business enterprise in the United States.

Which of the following is true regarding taxation of losses of a C corporation?

In most states,partnership agreements may:

In most jurisdictions,there is no quorum unless the holders of at least _____ of the outstanding shares are present in person or by proxy.

If a business is operated by a partnership,LLC,or S corporation,then operating losses will be passed through to the individual partners or shareholders.

Cumulative voting allows a greater control by the management interests of a corporation.

Under the Revised Uniform Partnership Act,which all states have adopted,a general partnership agreement may be express or implied.

A creditor of a sole proprietorship may seek recovery only from business assets of the sole proprietorship,not from personal assets of the sole proprietor.

The main issue in CASE 19.3 Burwell v.Hobby Lobby Stores,Inc.(2014)involved a question of whether the requirements for contraception under the Affordable Care Act (Obamacare)violated the due process rights of Hobby Lobby Stores.

An S corporation would likely be used as the corporate form for a business intending to raise money from venture capitalists.

Define a joint venture and list the elements necessary for a finding of a joint venture.

__________ refers to a method by which courts hold shareholders individually liable for claims against a corporation.

An S corporation cannot have more than one class of stock.

Limited partnerships are often used to raise capital because their limited liability for limited partners makes them attractive to investors.

A shareholder who cannot be present at a meeting can vote by __________,that is,by a written authorization for another person to vote on his or her behalf.

A corporation is a private entity that can be created by a mere handshake,as long as the shareholders have completed a certificate of incorporation.

Which of the following is NOT true regarding limited partnerships?

Which of the following is NOT an element of a merger?

What does the term "reverse piercing" reference in regard to a corporation and its shareholders?

An L3C indicates a low-profit,low-liability corporation.

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