91) The Uniform Partnership Act covers three elements of a partnership; the common ownership
interest, sharing profits or losses, and management participation rights.
Topic: Uniform Partnership Act
AACSB: Analytic Skills
92) There is no legal limit to the number of general partners a partnership must have, but it must
have one.
Topic: Advantages of the Partnership: Ability to Attract Limited Partners
AACSB: Analytic Skills
93) A limited partner is liable only for the amount he has invested in the business.
Topic: Advantages of the Partnership: Limited Partners
AACSB: Analytic Skills
94) A limited partner does not have the right to manage the business in any way and still
maintain limited status.
Topic: Advantages of the Partnership: Limited Partners
AACSB: Analytic Skills
95) One of the advantages of a partnership over a proprietorship is the increased sources of
capital and credit it offers.
Topic: Advantages of the Partnership: Larger Pool of Capital
AACSB: Analytic Skills
96) The partnership, like the proprietorship, avoids the disadvantage of double taxation.
Topic: Advantages of the Partnership: Taxation
AACSB: Analytic Skills
97) In a partnership, the general partner(s) share their unlimited liability for the business debts
with both silent and dormant partners.
Topic: Disadvantages of the Partnership: Unlimited Liability….
AACSB: Analytic Skills
21
98) Each partner is an agent for the business and can legally bind other partners to business
agreements.
Topic: Disadvantages of the Partnership: Partners are Bound by the Law of Agency
AACSB: Analytic Skills
99) A partnership cannot be dissolved except in the case of the general partner’s expressed wish
that the partnership cease.
Topic: Disadvantages of the Partnership: Partners are Bound by the Law of Agency
AACSB: Analytic Skills
100) In a limited partnership, the “limited partner” is primarily an investor and can lose only the
amount invested in the business.
Topic: Limited Partnerships
AACSB: Analytic Skills
101) A partner cannot legally bind the other partners to a business agreement.
Topic: Disadvantages of the Partnership: Partners are Bound by the Law of Agency
AACSB: Analytic Skills
102) A foreign corporation is one chartered in a foreign country.
Topic: The Corporation
AACSB: Analytic Skills
103) A corporation formed and chartered in Kansas is considered a domestic corporation when
doing business in Kansas.
Topic: The Corporation
AACSB: Analytic Skills
104) Most states do not require a Certificate of Incorporation or a charter to be filed.
Topic: The Corporation: Requirements for Incorporation
AACSB: Analytic Skills
22
105) Stockholders in the corporation have the same kind of liability as do general partners in a
partnership.
Topic: Advantages of the Corporation: Limited Liability of Stockholders
AACSB: Analytic Skills
106) Ownership of a corporation can easily be transferred through the sale of stock.
Topic: Advantages of the Corporation: Ability to Continue Indefinitely
AACSB: Analytic Skills
107) To avoid becoming liable for corporate actions, officers should ensure that they hold annual
meetings, keep minutes of those meetings, make sure the board of directors makes all decisions,
etc.
Topic: The Corporation: Requirements for Incorporation
AACSB: Analytic Skills
108) “Double taxation” refers to the fact that the corporation itself must pay taxes on its net
profits, and the stockholders must also pay taxes on the portion of those same profits distributed
to them as dividends.
Topic: Disadvantages of the Corporation: Double Taxation
AACSB: Analytic Skills
109) Owners/founders can be minority stockholders in a corporation but never lose their final
authority or control over business decisions because they are the owners.
Topic: Disadvantages of the Corporation: Potential Loss of Control by the Founders
AACSB: Analytic Skills
110) An S-corporation maintains the advantages of the corporate form of ownership while having
the ability to be taxed as a partnership.
Topic: The S-Corporation
AACSB: Analytic Skills
23
111) The LLC operating agreement is similar to a corporation’s bylaws.
Topic: The Limited Liability Company
AACSB: Analytic Skills
112) An S-corporation can issue both voting and non-voting common stock to its shareholders.
Topic: The S-Corporation
AACSB: Analytic Skills
113) Like “C” corporations, S-corporations must pay taxes on any assets that have appreciated in
value and are sold.
Topic: Advantages of an S Corporation
AACSB: Analytic Skills
114) S-corporation status usually benefits start-up companies anticipating losses, and highly
profitable firms with substantial dividends to pay out to shareholders.
Topic: Advantages of an S Corporation
AACSB: Analytic Skills
115) Small companies that anticipate net losses are ideally suited for S-corporation status.
Topic: The S-Corporation
AACSB: Analytic Skills
116) A “limited liability company” is legally treated just like a limited partnership.
Topic: Limited Liability Company
AACSB: Analytic Skills
117) It is relatively easy and inexpensive to convert existing businesses into LLCs.
Topic: Limited Liability Company
AACSB: Analytic Skills
24
118) Traditionally, social enterprises were always established as for-profit corporations.
Topic: Social Enterprises
AACSB: Analytic Skills
119) A nonprofit organization uses its revenues to pursue social value rather than to create
personal value for investors.
Topic: Nonprofit Organizations
AACSB: Analytic Skills
120) If the partners fail to create an agreement, the UPA says that the partners share equally in
the partnership’s profits, even if their original capital contributions are unequal.
Topic: The Partnership: The Uniform Partnership Act
AACSB: Analytic Skills
121) The Supreme Court has defined a partnership as “an artificial being, invisible, intangible,
and existing only in contemplation of the law.”
Topic: The Corporation
122) Failing to keep corporate and personal funds separate is most often a problem in closely
held corporations.
Topic: The Corporation
123) An S-corporation can have more than 75 shareholders.
Topic: The S-Corporation
124) The Internal Revenue Service requires partnerships to designate one person to be
responsible for handling the partnership’s tax matters.
Topic: The Partnership
25
125) In most cases of sole proprietorship, an entrepreneur can complete all of the necessary
paperwork in a single day!
Topic: The Sole Proprietorship
126) There are no restrictions on how partners distribute the company’s profits as long as they are
consistent with the partnership agreement and do not violate the rights of any partner.
Topic: The Partnership
127) If a limited partner spent more than 500 hours in the company, he/she will be treated as
general partner and will lose their limited liability protection.
Topic: The Partnership
128) The corporation, like the proprietorship, avoids the “double taxation” disadvantage
associated with the partnership form of ownership.
Topic: The Corporation
129) Partners can make provisions in the partnership agreement to avoid dissolution due to death
only if all parties agree to accept as partners those who inherit the deceased’s interest.
Topic: The Partnership
130) Like a proprietorship or partnership, in which the death of a founder ends the business, the
corporation doesn’t live beyond the lives of those who gave it life.
Topic: The Corporation
131) Unlike a limited partnership, which prohibits limited partners from participating in day-to-
day management of the business, an LLC does not restrict its members’ ability to become
involved in managing the company.
Topic: The Limited Liability Company
26
132) What are the nine general factors an entrepreneur should consider when choosing the form
of small business ownership? List and explain at least six of them.
Topic: Introduction
AACSB: Communication
133) Why would an entrepreneur choose a sole proprietorship? What drawbacks should be
considered?
Topic: The Sole Proprietorship
AACSB: Reflective Thinking
27
134) Identify what items are included in a standard partnership agreement.
Topic: The Partnership
AACSB: Communication
135) What advantages does a partnership offer the entrepreneur over forming a sole
proprietorship?
Topic: Advantages of the Partnership
AACSB: Reflective Thinking
28
136) What are the pluses and minuses for the owners of a company in choosing to incorporate
their business?
Topic: The Corporation
AACSB: Reflective Thinking
137) Why would someone choose an S-corporation? Discuss who can, how it is done, how it is
different from or similar to other types of corporations, and its advantages and disadvantages.
Topic: The S-Corporation
AACSB: Reflective Thinking
138) What is a limited liability company (LLC) and why would an entrepreneur choose it as a
form of ownership?
Topic: The Limited Liability Company
AACSB: Reflective Thinking
139) What are for-profit social ventures? What is meant by their “double bottom line focus?
Topic: For-Profit Social Ventures
AACSB: Reflective Thinking
29