85. Which of the following states offers the lowest organizational costs for corporations?
a. Delaware
b. Georgia
c. Michigan
d. New York
e. Alaska
86. In the state in which it is incorporated, a business is known as a(n)
a. S-corporation.
b. resident corporation.
c. public corporation.
d. foreign corporation.
e. domestic corporation.
87. Boeing is incorporated in Seattle, Washington. It has a large facility in Huntsville, Alabama, and is considered a(n)
because it conducts business within Alabama.
a. outsider
b. domestic corporation
c. foreign corporation
d. tax write-off
e. alien corporation
88. Walmart is incorporated in Arkansas, the state of its origins and headquarters. Within Arkansas, Walmart is
classified as a(n) corporation.
a. privately-held
b. foreign
c. alien
d. domestic
e. hometown
89. In all states besides the one in which it is incorporated, a business is known as a(n)
a. S-corporation.
b. resident corporation.
c. public corporation.
d. foreign corporation.
e. domestic corporation.
90. Sears Holding Corporation is incorporated in Delaware, but when it operates in Illinois and Texas, it is considered
a(n) corporation in those states.
a. domestic
b. foreign
c. alien
d. small
e. mid–sized
91. Mercedes-Benz, which is chartered as a corporation in Germany but conducts much of its business in the United
States, is known as a(n) in the United States.
a. foreign corporation
b. alien corporation
c. domestic corporation
d. S-corporation
e. private corporation
92. When starting a corporation, people submit articles of incorporation to
a. a county judge.
b. the secretary of state.
c. the U.S. Attorney General.
d. the Department of Commerce.
e. the Small Business Administration.
93. Before Troy can incorporate his advertising business in Champaign, Illinois, he must have a(n)
the ____.
a. articles of incorporation; U.S. Corporate Business Administration
b. corporate charter; Champaign city mayor
c. agreement; Secretary of Commerce of the United States
d. articles of incorporation; stockholders
e. articles of incorporation; secretary of state of Illinois
approved by
94. A contract between a business and a state recognizing the business as an artificial person is known as the
a. articles of partnership.
b. articles of incorporation.
c. S-corporation.
d. stock certificate.
e. proxy.
95. Common stock carries all the following rights except the right to
a. vote on changes to the corporate charter.
b. share in profits.
c. receive information about the corporation.
d. receive part of the profit before other classes of stock.
e. attend the annual stockholders’ meeting.
96. Amy owns 100 shares of General Electric preferred stock. She wants to attend the annual stockholder meeting to
cast her vote on company issues. Based on your knowledge from school, you caution Amy that
a. people with fewer than 1,000 shares of stock cannot vote.
b. stockholders are not allowed to attend the annual meetings.
c. most preferred stock does not have voting rights.
d. only institutional investors are allowed to attend the meetings.
e. she can vote only by proxy and not in person.
97. What is the significance of the name preferred stock?
a. It is the type of stock that most investors would rather have.
b. Its claims on dividends are paid before those of common stock.
c. The overall return on preferred stock is higher than that on common stock.
d. This stock is available only to select individuals associated with the company.
e. This stock provides the most powerful voting rights.
98. A distribution of earnings to the stockholders of a corporation is a(n)
a. par distribution.
b. dividend.
c. earnings per share.
d. distributed payment.
e. common payment.
99. A is a form that enables stockholders to allow someone else to vote for them.
a. waiver
b. rights transfer
c. proxy
d. voter registration
e. dividend
100. Mark owns stock in Walgreens. He has the right to vote on company issues and examine corporate records, and he
receives dividends from Walgreens’ profits. What type of stock does Mark own?
a. Common
b. “A” class
c. Proxy
d. Dividend
e. Preferred
101. Your friend Steve owns a considerable amount of common stock in Microsoft, a computer software company. He
wants to cast his votes on various issues at the annual stockholders’ meeting in Seattle, but he does not have the
time to travel a great distance to the meeting. Instead of attending the meeting, Steve decides to register his votes
by
a. registered mail.
b. preemptive right.
c. proxy.
d. power of attorney.
e. preferred stock.
102. Wade serves on Foot Locker’s board of directors. How did Wade get this position?
a. He volunteered for the assignment.
b. He was appointed by the chief executive officer.
c. He was assigned by the Federal Trade Commission.
d. Through default as the largest stockholder, Wade got the position.
e. He was elected by the company’s stockholders.
103. How can the following quotation best be explained: “Stockholders control the activities of a corporation”?
a. All stockholders vote on all the major issues and problems that a company faces on a monthly basis.
b. Stockholders are intricately involved in the daily operations of a corporation.
c. Stockholders elect the board of directors, and this board is responsible for appointing corporate officers who
manage the daily business of the corporation.
d. Stockholders vote for the members of the board of directors, and this board makes all the daily business
decisions for the corporation.
e. Stockholders usually call company management and tell executives better ways to run the organization.
104. The top governing body of a corporation is known as the
a. incorporators.
b. stockholders.
c. management.
d. officers.
e. board of directors.
105. Corporate officers are
a. listed in the corporate charter.
b. elected by stockholders.
c. appointed by the board of directors.
d. appointed by management.
e. elected by incorporators.
106. Which of the following is not a disadvantage of the corporate form of ownership?
a. Difficulty of formation
b. Limited liability
c. Expense of incorporation and selling stock
d. Lack of secrecy
e. Double taxation
107. The retail card and gift shop chain that Heidi started has since been incorporated. Which of the following best
describes the limited liability that Heidi has as the primary stockholder in this corporation?
a. Heidi has no responsibility if the business fails and will still be able to get her initial investment back.
b. Heidi may have to give up her car and house if the corporation fails in order to cover the debts of the
corporation.
c. The other stockholders will be able to seize Heidi‘s personal money but not her primary residence in the
event that the business fails.
d. Heidi’s personal assets will be protected in the event that the corporation fails, although she could lose her
entire investment.
e. Heidi will only be liable for losses that develop from decisions she made about the daily business operations.
108. The most effective form of business organization for raising capital is the
a. joint venture.
b. syndicate.
c. sole proprietorship.
d. partnership.
e. corporation.
109. Which of the following is an advantage of the corporate form of organization?
a. Ownership of stock is easy to transfer.
b. Forming a corporation is a complex and costly process.
c. The corporation and its stockholders pay taxes on profits.
d. A corporation must submit detailed information to government agencies.
e. It is difficult to keep operations confidential because of required reports.
110. When Alyssa decides that she no longer wants her Radio Shack stock, she will discover that a related benefit of a
corporation is
a. the ease of transfer of ownership.
b. its perpetual life.
c. limited liability.
d. specialized management.
e. avoiding double taxation.
111. Unless specified in the charter, a corporation has a
a. legal life of one decade.
b. life of seventeen years, which is renewable.
c. life of fifty years.
d. perpetual life.
e. legally recognized life, which varies from state to state.
112. Tiffany is about to finish her degree in business management and wants to find a job that will provide her with
opportunities to advance within an organization. What type of business organization should Tiffany work for?
a. A sole proprietorship
b. A small family-owned business that is incorporated
c. A partnership
d. A corporation
e. An unlimited partnership
113. The order of difficulty and expense, from most to least, when forming a business organization is as follows:
a. corporation, sole proprietorship, partnership.
b. corporation, partnership, sole proprietorship.
c. partnership, corporation, sole proprietorship.
d. partnership, sole proprietorship, partnership.
e. sole proprietorship, partnership, corporation.
114. All of the following are disadvantages of corporations except
a. perpetual life.
b. double taxation.
c. lack of secrecy.
d. expensive formation.
e. heavy government regulation.
115. Which of the following is a disadvantage of the corporate form of organization?
a. Both the corporation and its stockholders are taxed on profits retained and distributed.
b. Ownership of stock is easy to transfer.
c. More capital can be raised by the corporate form.
d. Corporations can hire better managers.
e. The organization survives its owners.
116. The form of business organization that experiences double taxation is the
a. partnership.
b. corporation.
c. venture company.
d. syndicated partnership.
e. sole proprietorship.
117. What does double taxation mean?
a. Companies must pay taxes on their income, and then employees must pay taxes on their salaries and wages.
b. Companies have to pay both sales taxes and income taxes.
c. Companies must pay taxes on their earnings, and then stockholders pay taxes on their dividends.
d. Suppliers tax their customers, and in turn these businesses tax the ultimate consumer.
e. Companies must pay taxes on corporate income and then additional taxes on distributions to profit
stockholders.
118. Shane is looking for ways to get more capital for his appliance sales and service business. He is very protective of
his company‘s information and fears that it will get into the wrong hands. Shane would probably not want to
a. hire new employees.
b. incorporate his company.
c. get a loan from a bank.
d. take on a trustworthy friend as a partner.
e. use a computerized accounting system.
119. The form of business organization most heavily regulated by the government is the
a. partnership.
b. corporation.
c. joint venture.
d. syndicate.
e. sole proprietorship.
120. Judy Barnes, Betty Turley, and Bob Turner want to obtain limited liability for their business, but they want to avoid
double taxation. Which type of business ownership would you recommend?
a. Regular corporation
b. General partnership
c. Sole proprietorship
d. S-corporation
e. Not-for-profit corporation
121. Which of the following is a requirement for an S-corporation?
a. The S-corporation must be incorporated in Delaware.
b. The S-corporation can have no more than 100 stockholders.
c. Only common and preferred stock can be sold to investors.
d. At least 30 percent of the investors must be nonresident aliens.
e. Only individuals can be stockholders.
122. Twenty-five young investors decided that they want to start a dating service; however, they do not want to be held
personally liable for losses of the company. They want to avoid double taxation. Which type of business
organization would best fit the needs of these individuals?
a. Corporation
b. Closed corporation
c. Partnership
d. S-corporation
e. Limited cooperative
123. Tracy is considering expanding his business and has several potential new investors in mind. He originally wanted to
form an S-corporation to protect the liability of the investors, but he is now considering a limited–liability company
instead because he knows there can be only stockholders in an S-corporation.
a. 10
b. 25
c. 50
d. 100
e. 108
124. A limited-liability company is
a. taxed like a corporation.
b. taxed like a partnership.
c. similar to a cooperative.
d. always used to organize charitable organizations.
e. the result of a horizontal merger.