BUS 100 CH 3 – Flashcards
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The Small Business Administration is the government agency charged with owning small businesses.
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False
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Loans are the most important sources of money for new businesses.
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False
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Lending institutions are more likely to help finance the purchase of an existing business rather than the start-up of a business from scratch.
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True
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Low start-up costs and tax benefits are advantages of sole proprietorships.
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True
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By law, each general partner is liable for all debts incurred in the name of the partnership.
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True
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Corporations enjoy significant tax benefits when compared to sole proprietorships or partnerships.
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False
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An S corporation has stock that is widely held and available for sale to the general public.
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False
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The board of directors of a corporation reports to the officers of the corporation.
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False
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The Internal Revenue Service taxes partners as individuals
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True
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What is the name of the document in which an entrepreneur summarizes his or her business strategy for a proposed new venture?
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business plan
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What is the MOST important source of money for new business start-ups?
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personal resources
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Which of the following types of businesses is MOST common in the United States?
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sole proprietorships
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Which type of business is legally considered a separate entity from its owners and is liable for its own debts?
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corporation
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Who are the owners of a corporation?
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stockholders
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What are shares in a business that the business sells called?
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stocks
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What are specific locations of Ramada, McDonald's, and Subway examples of?
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franchises
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Which of the following is the MOST significant disadvantage of franchising?
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high start-up costs
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Which of the following factors MOST contributes to small business failure?
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managerial incompetence or inexperience
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Which of the following legal forms of business is owned and usually operated by a person who is responsible for its debts?
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sole proprietorship
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What is a major drawback of sole proprietorships?
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unlimited liability
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What type of business has two or more owners who share in the operation of the firm and are financially responsible for its debts?
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partnership
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Lucy has organized her craft shop as a sole proprietorship. Her sister has warned Lucy about the legal principle holding her responsible for paying off all of the debts of the business. What is the name of this principle?
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unlimited liability
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Shirley is opening a flower shop and has decided to operate as a sole proprietorship. Which of the following is NOT an advantage Shirley will have in operating her business?
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limited liability
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Kent and Patrick have decided to start a landscaping business. One of the first things that they do is sign a document that describes the investments and responsibilities of the partners and makes provisions for the allocation of profits and dissolution of the business. What is the name of this document?
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partnership agreement
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American Business Machines is organized as a corporation. Its income will be taxed at the corporate level and also on shareholder returns as dividends. What is this situation known as?
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double taxation
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Which of the following, if true about the owners' plan for the new business, would strengthen the case that it should be registered as an S corporation?
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They do not want the company to have to pay a corporate income tax.
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Which of the following, if true about the owners' plan for the new business, would strengthen the case that it should be registered as a limited liability corporation (LLC)?
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They want the company's profits to be distributed however they choose.
