61) Complementary skills refers to:
A) the sole proprietorship skills.
B) partner’s skills that complement one another.
C) complementary skills offered by the employees.
D) None of the above
62) Which type of ownership is not subject to federal taxation?
A) Sole proprietorship
B) Corporations
C) Partnership
D) Limited liability corporation
63) Corporations that are formed in other countries but do business in the United States are:
A) international partnerships.
B) domestic corporations.
C) foreign corporations.
D) alien corporations.
64) ________ have shares that are controlled by a relatively small number of people, often
family members, relatives, or friends.
A) International partnerships
B) Publicly traded corporations
C) Closely held corporations
D) Privately held corporations
65) Shares the corporation itself owns are called:
A) treasury stock.
B) common stock.
C) preferred stock.
D) bonds.
66) A distinct disadvantage of the corporate form of ownership is:
A) treasury stock.
B) double taxation.
C) stockholder’s liability.
D) All of the above
67) Bylaws are the rules and regulations the officers and directors establish for the corporation’s
internal management and operation.
68) If stockholders in a corporation are displeased with the business’s progress, they can sell their
shares to someone else.
69) A corporation can sell its stock to a limited number of private investors in a private
placement.
70) Closely held corporations have shares that are controlled by a relatively small number of
people, often family members, relatives, or friends.
71) An LLP does pay taxes as a corporation and its income is not passed through to the limited
partners.
72) Silent partners are active in a business but generally are known to be members of the
partnership.
73) By choosing certain forms of ownership, an entrepreneur does not give up some control over
the company.
74) The form of ownership can impact an entrepreneur’s ability to raise start-up capital.
75) One of the first and most fundamental decisions an entrepreneur faces is choosing a form of
ownership.
76) Factors an entrepreneur should consider when choosing a form of ownership should include
but not be limited to: tax considerations, liability exposure, business goals, managerial ability,
etc.
77) While there are many forms of ownership, the three major forms are: proprietorship,
partnership, and S-corporation.
78) The sole proprietorship is the simplest and least expensive form of ownership to begin.
79) While the sole proprietorship is the easiest type of business to get into, it is the most heavily
regulated.
80) In a sole proprietorship, the owner has limited liability.
81) If a sole proprietorship fails, the owner is not liable for its debts since the business is a
separate legal entity.
82) One of the advantages of a sole proprietorship is that skills and capabilities are unlimited
because you, as sole proprietor, are able to assume all of these responsibilities.
83) The sole proprietorship has the least ability to accumulate capital.
84) When the owner of a sole proprietorship dies, the business automatically terminates.
85) The most popular form of ownership in the United States is the partnership.
86) Perhaps the most important feature of a partnership agreement is its ability to resolve
potential sources of conflict among partners.
87) If a partnership agreement does not exist, the partnership will be governed by the Uniform
Partnership Act.
88) The terms of a partnership agreement are legally binding even if some of the items are
illegal.
89) In a partnership, profits (and losses) are shared according to any ratio stated in the articles of
partnership.
90) Partnership agreements do not cover how to dissolve a partnership or sell a partnership
interest.
91) The Uniform Partnership Act covers three elements of a partnership; the common ownership
interest, sharing profits or losses, and management participation rights.
92) There is no legal limit to the number of general partners a partnership must have, but it must
have one.
93) A limited partner is liable only for the amount he has invested in the business.
94) A limited partner does not have the right to manage the business in any way and still
maintain limited status.
95) One of the advantages of a partnership over a proprietorship is the increased sources of
capital and credit it offers.
96) The partnership, like the proprietorship, avoids the disadvantage of double taxation.
97) In a partnership, the general partner(s) share their unlimited liability for the business debts
with both silent and dormant partners.
98) Each partner is an agent for the business and can legally bind other partners to business
agreements.
99) A partnership cannot be dissolved except in the case of the general partner’s expressed wish
that the partnership cease.
100) In a limited partnership, the “limited partner” is primarily an investor and can lose only the
amount invested in the business.
101) A partner cannot legally bind the other partners to a business agreement.
102) A foreign corporation is one chartered in a foreign country.
103) A corporation formed and chartered in Kansas is considered a domestic corporation when
doing business in Kansas.
104) Most states do not require a Certificate of Incorporation or a charter to be filed.
105) Stockholders in the corporation have the same kind of liability as do general partners in a
partnership.
106) Ownership of a corporation can easily be transferred through the sale of stock.
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.
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.
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.
110) An S-corporation maintains the advantages of the corporate form of ownership while
having the ability to be taxed as a partnership.
111) The LLC operating agreement is similar to a corporation’s bylaws.
112) An S-corporation can issue both voting and non-voting common stock to its shareholders.
113) Like “C” corporations, S-corporations must pay taxes on any assets that have appreciated in
value and are sold.
114) S-corporation status usually benefits start-up companies anticipating losses, and highly
profitable firms with substantial dividends to pay out to shareholders.
115) Small companies that anticipate net losses are ideally suited for S-corporation status.
116) A “limited liability company” is legally treated just like a limited partnership.
117) It is relatively easy and inexpensive to convert existing businesses into LLCs.
118) Traditionally, social enterprises were always established as for-profit corporations.
119) A nonprofit organization uses its revenues to pursue social value rather than to create
personal value for investors.
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.
121) The Supreme Court has defined a partnership as “an artificial being, invisible, intangible,
and existing only in contemplation of the law.”
122) Failing to keep corporate and personal funds separate is most often a problem in closely
held corporations.
123) An S-corporation can have more than 75 shareholders.
124) The Internal Revenue Service requires partnerships to designate one person to be
responsible for handling the partnership’s tax matters.
125) In most cases of sole proprietorship, an entrepreneur can complete all of the necessary
paperwork in a single day!
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.
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.
128) The corporation, like the proprietorship, avoids the “double taxation” disadvantage
associated with the partnership form of ownership.
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.
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.
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.
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.
133) Why would an entrepreneur choose a sole proprietorship? What drawbacks should be
considered?
134) Identify what items are included in a standard partnership agreement.
135) What advantages does a partnership offer the entrepreneur over forming a sole
proprietorship?
136) What are the pluses and minuses for the owners of a company in choosing to incorporate
their business?
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.
138) What is a limited liability company (LLC) and why would an entrepreneur choose it as a
form of ownership?
139) What are for-profit social ventures? What is meant by their “double bottom line focus?