Question 1

A company that loses its status as an S corporation may not reelect this status for at least 5 years.

Accepted Answer

A) True 
 B)False

Question 2

Corporations are easy to start and easy to terminate.

Accepted Answer

A) True 
 B)False

Question 3

One reason many companies do not organize themselves as an S corporation is that this form of business

Accepted Answer

A)   is subject to a higher tax rate than a general partnership.
B)   does not provide owners with limited liability.
C)   has a special eligibility restriction, which many businesses are unable to meet.
D)   is much more difficult to set up than C corporations.E) A) and D)
F) B) and C)

Question 4

Stockholders in a corporation normally exert a significant degree of control over the company's daily operations.

Accepted Answer

A) True 
 B)False

Question 5

Payton recently purchased 100 shares of stock in Game Guys, Inc. Payton is a(n) ________ of this company.

Accepted Answer

A)   owner
B)   manager
C)   creditor
D)   partnerE) A) and B)
F) None of the above A

Question 6

A(n)  ________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

Accepted Answer

A)   conditional grant
B)   franchise agreement
C)   trade contract
D)   extended ownership agreementE) B) and C)
F) B) and D)

Question 7

A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners.

Accepted Answer

A) True 
 B)False

Question 8

A ________ is an organization that is owned and controlled by the people who use it-producers, consumers, and workers with similar needs pool their resources for mutual gain.

Accepted Answer

A)   corporation
B)   limited partnership
C)   mutual fund
D)   cooperativeE) A) and B)
F) A) and C)

Question 9

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

Accepted Answer

A) True 
 B)False

Question 10

Setting up a partnership under the terms of a written agreement is a bad idea, because written agreements tend to be too inflexible and impersonal.

Accepted Answer

A) True 
 B)False

Question 11

A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project.

Accepted Answer

A) True 
 B)False

Question 12

One reason that a firm would choose to merge or acquire another company would be to gain market share.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following people would be most interested in participating in a business organized as a cooperative?

Accepted Answer

A)   Eric is interested in the idea of combining his time and resources with others to operate a business providing a good or service that they all will use.
B)   Rose looks to be an owner of a business and share in its profits, but does not want to take an active role in managing the company or participating in its daily operations.
C)   Matteo wants to work for a government-owned business because he believes government ownership ensures a more equitable distribution of income and wealth.
D)   Juliana prefers to work for a charitable organization that emphasizes helping people who are less fortunate than she is.E) B) and C)
F) None of the above

Question 14

Stockholders in a corporation have limited liability.

Accepted Answer

A) True 
 B)False  True

Question 15

A legal entity with authority to act and have liability separate from its owners is called a sole proprietorship.

Accepted Answer

A) True 
 B)False  False

Question 16

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

Accepted Answer

A) True 
 B)False

Question 17

One advantage of a partnership is that there is a simple process for partners to terminate their business.

Accepted Answer

A) True 
 B)False

Question 18

The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives.

Accepted Answer

A) True 
 B)False

Question 19

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Accepted Answer

A) True 
 B)False

Question 20

The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.

Accepted Answer

A) True 
 B)False

Exam 5: How to Form a Business

A company that loses its status as an S corporation may not reelect this status for at least 5 years.

Correct AnswerverifiedShow Answer

Corporations are easy to start and easy to terminate.

Correct AnswerverifiedShow Answer

One reason many companies do not organize themselves as an S corporation is that this form of business

Correct AnswerverifiedShow Answer

Stockholders in a corporation normally exert a significant degree of control over the company's daily operations.

Correct AnswerverifiedShow Answer

Payton recently purchased 100 shares of stock in Game Guys, Inc. Payton is a(n) ________ of this company.

Correct AnswerverifiedA

A(n) ________ is an arrangement whereby someone with a proven idea for a business sells the rights to use the business model, to sell a product or service to others in a given territory.

Correct AnswerverifiedShow Answer

A conventional corporation is a state-chartered legal entity, with authority to act and have liability separate from its owners.

Correct AnswerverifiedShow Answer

A ________ is an organization that is owned and controlled by the people who use it-producers, consumers, and workers with similar needs pool their resources for mutual gain.

Correct AnswerverifiedShow Answer

The stockholders in a corporation elect a board of directors to oversee the company's major policy issues.

Correct AnswerverifiedShow Answer

Setting up a partnership under the terms of a written agreement is a bad idea, because written agreements tend to be too inflexible and impersonal.

Correct AnswerverifiedShow Answer

A limited partnership refers to a partnership set up for a temporary purpose, such as a real estate development project.

Correct AnswerverifiedShow Answer

One reason that a firm would choose to merge or acquire another company would be to gain market share.

Correct AnswerverifiedShow Answer

Which of the following people would be most interested in participating in a business organized as a cooperative?

Correct AnswerverifiedShow Answer

Stockholders in a corporation have limited liability.

Correct AnswerverifiedTrue

A legal entity with authority to act and have liability separate from its owners is called a sole proprietorship.

Correct AnswerverifiedFalse

The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.

Correct AnswerverifiedShow Answer

One advantage of a partnership is that there is a simple process for partners to terminate their business.

Correct AnswerverifiedShow Answer

The companies Ace Hardware, Blue Diamond, and Sunkist are well-known cooperatives.

Correct AnswerverifiedShow Answer

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.

Correct AnswerverifiedShow Answer

The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.

Correct AnswerverifiedShow Answer

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A

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