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37) Partnerships are organized as either ________ or ________ partnerships.
A) specific; general
B) narrow; broad
C) inward; outward
D) general; limited
E) partial; full
38) A(n) ________ details the responsibilities and the ownership shares of the partners involved
with an organization.
A) partnership agreement
B) industry contract
C) business pledge
D) business agreement
E) partnership pledge
39) Which of the following is NOT an advantage of a general partnership?
A) Business losses can be deducted against the partners’ other sources of income.
B) The skills and abilities of more than one individual are available to the firm.
C) The liquidity of each partner’s investment is low.
D) Creating one is relatively easy and inexpensive compared to a C corporation or limited
liability company.
40) A ________ partnership is a modified form of a general partnership.
A) restricted
B) limited
C) partial
D) constrained
E) fractional
41) Which of the following statements about limited partnerships is incorrect?
A) A limited partnership is a modified form of a general partnership.
B) Limited partnerships are common in real estate and oil and gas exploration.
C) A limited partnership is usually formed to raise money or to spread out the risk of a venture
without forming a corporation.
D) Both the limited partners and the general partners are responsible for the debts and
obligations of the partnership.
42) A ________ sets forth the rights and duties of the general and limited partners, along with
the details of how the partnership will be managed and eventually dissolved.
A) partnership accord
B) restricted partnership agreement
C) business partnership agreement
D) limited partnership concurrence
E) limited partnership agreement
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43) According to the textbook, ________ are common in real estate development, oil and gas
exploration, and motion picture ventures.
A) sole proprietorships
B) limited liability companies
C) subchapter S corporations
D) limited partnerships
E) general partnerships
44) A separate legal entity organized under the authority of a state is referred to as a ________.
A) limited partnership
B) conglomerate
C) general partnership
D) sole proprietorship
E) corporation
45) Corporations are organized as either ________ corporations or ________ corporations.
A) permanent; temporary
B) general; limited
C) voluntary; statutory
D) C; subchapter S
E) regular; limited liability
46) Large firms like Apple, Facebook, General Electric, and Microsoft, that trade on organized
stock exchanges, are ________.
A) limited partnerships
B) limited liability companies
C) subchapter S corporations
D) C corporations
E) general partnerships
47) Most C corporations have two classes of stock— ________ and ________.
A) premium; normal
B) common; preferred
C) standard; substandard
D) regular; special
E) ordinary; distinct
48) Which of the following is true regarding common and preferred stock?
A) Preferred stock is rarely issued.
B) Common stock is rarely issued.
C) Common stock is issued more broadly than preferred stock.
D) Preferred stock is issued more broadly than common stock.
E) Common and preferred stock are issued in the same amount.
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49) ________ stock is typically issued to conservative investors who have preferential rights
over common stockholders in regard to dividends and to the assets of the corporation in the event
of liquidation.
A) Restricted
B) Partial
C) Preferred
D) Common
E) Limited liability
50) Which of the following statements is incorrect regarding common stock?
A) Common stock is issued more narrowly than preferred stock.
B) The common stockholders have voting rights.
C) The common stockholders get paid after the creditors in the event of the liquidation of the
corporation.
D) Common stock is the form of stock that most shareholders of a corporation own.
E) The common stockholders elect the board of directors.
51) A corporation is formed by filing ________ with the Secretary of State’s office in the state of
incorporation.
A) a certificate of intent to incorporate
B) articles of business
C) corporate credentials
D) a corporation permit
E) articles of incorporation
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52) A disadvantage of C corporations is that they are subject to ________, which means that a
corporation is taxed on its net income and when the same income is distributed to shareholders in
the form of dividends it is taxed again on shareholders’ personal income tax returns.
A) double taxation
B) dual toll
C) double duty
D) double assessment
E) dual harm
53) Corporations that trade their stock on organized exchanges like the New York Stock
Exchange and the NASDAQ are called ________ corporations.
A) national
B) civil
C) public
D) premier
E) common
54) In a ________ corporation, the voting stock is held by a small number of individuals and is
very thinly or infrequently traded.
A) public
B) private
C) narrow
D) cautious public
E) closely-held
55) If the owners of a corporation don’t file their annual paperwork, neglect to pay their annual
fees, or commit fraud, a court could ignore the fact that a corporation has been established and
the owners could be held personally liable for the actions of the corporation. This chain of events
is referred to as ________.
A) vacating the corporate status
B) yielding the corporate privilege
C) surrendering the corporate shield
D) piercing the corporate veil
56) ________ are a special form of incentive compensation. These plans provide employees the
option or right to buy a certain number of shares of their company’s stock at a stated price over a
certain period of time.
A) Corporate options
B) Collective plans
C) Share plans
D) Stock options
57) Which of the following is a disadvantage of a C Corporation?
A) Income is subject to double taxation.
B) Limited liability
C) Raising capital is easier than a partnership or sole proprietorship.
D) Stock is liquid if traded on a major stock exchange.
58) Which of the following is an advantage of a C Corporation?
A) Setting up and maintaining one is more difficult than for a sole proprietorship or a
partnership.
B) Stock is liquid if traded on a major stock exchange.
C) Business losses cannot be deducted against the shareholders’ other sources of income.
D) Income is subject to double taxation.
E) Small shareholders typically have little voice in the management of the firm.
59) A ________ combines the advantages of a partnership and a C corporation.
A) subchapter S corporation
B) limited partnership
C) general partnership
D) sole proprietorship
E) subchapter K corporation
60) Which of the following is NOT one of the standards that a business must meet to qualify for
status as a subchapter S corporation?
A) The business must be a subsidiary of another corporation.
B) All shareholders must agree to have the corporation formed as a subchapter S corporation.
C) It can have no more than 100 members (husbands and wives count as one member).
D) It can have only one class of stock issued and outstanding.
E) The shareholders must be U.S. citizens.
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61) The ________ is a form of business organization that is rapidly gaining popularity in the
United States. The concept originated in Germany and was first introduced in the United States
in the state of Wyoming.
A) limited partnership
B) general partnership
C) limited liability company
D) subchapter S corporation
62) In which form of business ownership are the owners called “members”?
A) general partnership
B) limited partnership
C) limited liability company
D) subchapter C corporation
63) Choosing a legal entity for a firm is a one-time event. Once a form of legal entity has been
chosen, it cannot be changed.
64) A disadvantage of a sole proprietorship is that it is subject to double taxation.
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65) A disadvantage of a general partnership is that the liquidity of each partner’s investment is
66) The major difference between a general and a limited partnership is that a limited partnership
includes two classes of owners–general and limited partners.
67) Corporations are organized as either C corporations, T corporations, or subchapter S
68) It is usually easier for a corporation to raise investment capital than a sole proprietorship or a
general partnership because the shareholders are not liable beyond their investment in the firm.
69) The vast majority of corporations in the United States are public corporations.
70) Stock options are a special form of incentive compensation.
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71) A subchapter S corporation combines the advantages of a partnership and a C corporation.
72) Few entrepreneurial firms start as subchapter S corporations.
73) The limited liability corporation is a form of business organization that is rapidly losing
popularity in the United States.
74) Describe what is meant by a “general partnership” and a “limited partnership.” Describe the
major difference between the two.
75) What is meant by the term “piercing the corporate veil”? How can the corporate veil be
pierced?