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Exam 4: Choosing a Form of Business Ownership

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Question 51

Multiple Choice

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How might a sole proprietorship have a possible tax advantage?

A) It does not have to make tax payments until the end of the year.
B) It does not have to pay federal income taxes.
C) It does not have to charge sales tax on its merchandise.
D) It does not pay special state and federal taxes that corporations pay.
E) It is subject to a form of double taxation.

F) B) and C)
G) A) and D)

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Question 52

Multiple Choice

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A voluntary association of two or more people acting as co-owners of a business is known as a

A) partnership.
B) corporation.
C) sole proprietorship.
D) conglomerate.
E) syndicate.

F) B) and E)
G) B) and C)

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Question 53

Multiple Choice

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A corporation organized to provide a social,educational,religious,or other nonbusiness service is known as a(n)

List at least three criteria a corporation must meet for the IRS to grant the business an S-corporation status.

Which of the following has a restriction on the number of owners,members,or stockholders?

Tiffany graduated from college and needed to decide where she wanted to work.She had several options.Her aunt Martha owned and operated a small business that she started about twenty years ago.Martha,an individual owner of her business,informed Tiffany that she could work for her.On one hand,Tiffany thought it would be a great opportunity to be able to work for her aunt,learn the business,and then run the business when her aunt retires.On the other hand,she also felt that she wanted something a little more challenging;a job where she could really use her education.Her other option would be to work for a company that a friend and her husband had started and jointly owned.It was a rapidly growing company with plenty of opportunity for advancement.However,Tiffany had some reservations about this choice because she was not sure she wanted to work for friends.Her last option was to work for a large retail company,headquartered in Maryland,which had stores across the United States. ​After much consideration,Tiffany decided she didn't want an opportunity and a job because someone knew her.She wanted to prove how motivated and hardworking she was.Once she weighed all the advantages and disadvantages of her different options,she decided to work for the large retail company so that she could gain the most experience for herself. -Refer to Tiffany's Dilemma.If Tiffany worked for the large retail company in Philadelphia,what type of corporation would that be?

Lucas owns stock in CVS Health.He has the right to vote on company issues and examine corporate records,and he receives dividends from CVS Health's profits.What type of stock does Lucas own?

How do management tasks differ for a general partner and a limited partner?

A syndicate is a temporary association of individuals or firms organized to perform a specific task that requires a large amount of capital.

A vertical merger is a merger between firms that operate at different but related levels in the production and marketing of a product.

Compared to a corporation,a partnership is more difficult and expensive to establish.

Alexa has a commercial laundry service that has been growing rapidly.She wants to continue to grow the business,but she needs access to more money and does not want to risk her personal assets.Alexa contacts her lawyer to see if all the legal requirements are met to start the process of

If the owner of a sole proprietorship retires or dies,the owner's heirs may take over the business and either sell it or continue to operate it.

​In a 1960s movie,an heiress sends out thousands of letters to shareholders in an attempt to have them vote for her and for the company to remain independent or to give her the right to vote for them.The opponent tried to get the shareholders to vote for his side and asked shareholders to give him the right to vote for them.What kind of corporate takeover technique was this movie about?

A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n)

Unlike a person,a corporation exists only on paper.

Genetech,a biotechnology firm engaging in the new field of genetic engineering,has asked your advice about remaining independent and temporarily gaining access to the marketing and manufacturing expertise it lacks from another firm.You would suggest

A ____ invests money in the business but has no management responsibility.

What is a not-for-profit corporation? Discuss some of the similarities between not-for-profit corporations and for-profit corporations.

Gwyn owns and operates a large hardware store in Missouri that employs about fifty people.He delegates some of the decision making to two managers,but he remains the only owner.Gwyn's business is organized as a