Question 1

Daniel, Thomas, and Lucas are partners in a law firm under a typical partnership agreement in which each owns an equal share of the business. Thomas dies suddenly of a heart attack. What will most likely become of the partnership?

Accepted Answer

A)  It will immediately cease to exist and Daniel and Lucas will have to find new jobs.
B)  Thomas's share of the business will automatically be split between Daniel and Lucas.
C)  Daniel and Lucas will be able to purchase Thomas's interest from his estate.
D)  Daniel and Lucas will have to quickly find a new partner to take Thomas's place.
E)  It will dissolve, and Daniel and Lucas will lose personal property to pay business debts.F) None of the above
G) A) and E)

Question 2

What does double taxation mean?

Accepted Answer

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.F) A) and E)
G) A) and D)

Question 3

All of the following are disadvantages of corporations except

Accepted Answer

A)  perpetual life.
B)  double taxation.
C)  lack of secrecy.
D)  expensive formation.
E)  heavy government regulation.F) A) and B)
G) A) and C)

Question 4

Which of the following is a requirement for an S-corporation?

Accepted Answer

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.F) B) and E)
G) C) and D)

Question 5

The form of business organization most heavily regulated by the government is the

Accepted Answer

A)  partnership.
B)  corporation.
C)  joint venture.
D)  syndicate.
E)  sole proprietorship.F) A) and B)
G) D) and E)

Question 6

A merger between firms in completely unrelated industries is known as a

Accepted Answer

A)  conglomerate merger.
B)  cooperative.
C)  joint venture.
D)  vertical merger.
E)  horizontal merger.F) A) and D)
G) A) and C)

Question 7

The most effective form of business organization for raising capital is the

Accepted Answer

A)  joint venture.
B)  syndicate.
C)  sole proprietorship.
D)  partnership.
E)  corporation.F) B) and D)
G) A) and E)

Question 8

Allied Services is a transportation company that operates in most of the United States. If Allied Services decided to incorporate, in which state would it incorporate?

Accepted Answer

A)  Nebraska, the state in which it started
B)  Whatever state contributes the most to company revenues
C)  The state where the company headquarters are located
D)  Any state that the company chooses
E)  A centrally located state within the United StatesF) A) and B)
G) B) and C)

Question 9

A limited-liability company extends the concept of personal-asset protection to small business owners.

Accepted Answer

A) True 
 B)False

Question 10

As with a sole proprietorship, one disadvantage of a partnership is a lack of continuity.

Accepted Answer

A) True 
 B)False

Question 11

In a limited partnership, a limited partner's name must be included in the partnership's name.

Accepted Answer

A) True 
 B)False

Question 12

What is the primary disadvantage of both a sole proprietorship and a partnership that a corporation overcomes?

Accepted Answer

A)  No access to capital
B)  Taxing complications
C)  Unlimited liability
D)  Ease of start-up
E)  Lack of secrecyF) None of the above
G) B) and D)

Question 13

In your own words, explain the differences among a horizontal merger, a vertical merger, and a conglomerate merger.

Accepted Answer

A horizontal merger is a merger between ...

Question 14

All of the following are disadvantages that Sean should consider before entering a partnership agreement with his cousin except

Accepted Answer

A)  lack of continuity.
B)  effects of disagreements with his cousin.
C)  the inability to get out the money he invests.
D)  unlimited liability.
E)  double taxation.F) B) and E)
G) C) and E)

Question 15

The purchase of one corporation by another is called a merger.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Describe the array of advantages of a corporation.

Accepted Answer

Limited liability is an important advant...

Question 18

Kayla purchases shares of ownership in General Electric. These shares are referred to as

Accepted Answer

A)  ownership documents.
B)  stock.
C)  articles of ownership.
D)  incorporation.
E)  corporate certificates.F) A) and D)
G) A) and C)

Question 19

About 85 percent of all business firms in the United States are sole proprietorships.

Accepted Answer

A) True 
 B)False

Question 20

The major reason why businesses change from sole proprietorships to other forms of ownership is to

Accepted Answer

A)  gain unlimited liability.
B)  avoid unlimited liability.
C)  avoid lack of continuity.
D)  obtain help and eliminate the problem of too much to do in one day.
E)  offer advancement opportunities for employees.F) A) and B)
G) A) and C)

Exam 4: Choosing a Form of Business Ownership

Allied Services is a transportation company that operates in most of the United States. If Allied Services decided to incorporate, in which state would it incorporate?

Correct AnswerverifiedShow Answer

A merger between firms in completely unrelated industries is known as a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Daniel, Thomas, and Lucas are partners in a law firm under a typical partnership agreement in which each owns an equal share of the business. Thomas dies suddenly of a heart attack. What will most likely become of the partnership?

Correct AnswerverifiedShow Answer

Kayla purchases shares of ownership in General Electric. These shares are referred to as

Correct AnswerverifiedShow Answer

Describe the array of advantages of a corporation.

Correct AnswerverifiedLimited liability is an important advant...View AnswerShow Answer

In your own words, explain the differences among a horizontal merger, a vertical merger, and a conglomerate merger.

Correct AnswerverifiedA horizontal merger is a merger between ...View AnswerShow Answer

The purchase of one corporation by another is called a merger.

Correct AnswerverifiedShow Answer

About 85 percent of all business firms in the United States are sole proprietorships.

Correct AnswerverifiedShow Answer

All of the following are disadvantages of corporations except

Correct AnswerverifiedShow Answer

In a limited partnership, a limited partner's name must be included in the partnership's name.

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What does double taxation mean?

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What is the primary disadvantage of both a sole proprietorship and a partnership that a corporation overcomes?

Correct AnswerverifiedShow Answer

The form of business organization most heavily regulated by the government is the

Correct AnswerverifiedShow Answer

Which of the following is a requirement for an S-corporation?

Correct AnswerverifiedShow Answer

The major reason why businesses change from sole proprietorships to other forms of ownership is to

Correct AnswerverifiedShow Answer

The most effective form of business organization for raising capital is the

Correct AnswerverifiedShow Answer

All of the following are disadvantages that Sean should consider before entering a partnership agreement with his cousin except

Correct AnswerverifiedShow Answer

A limited-liability company extends the concept of personal-asset protection to small business owners.

Correct AnswerverifiedShow Answer

As with a sole proprietorship, one disadvantage of a partnership is a lack of continuity.

Correct AnswerverifiedShow Answer

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Limited liability is an important advant...
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A horizontal merger is a merger between ...
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