Chapter 6 Quiz Practice

Flashcard maker : Lily Taylor
Not-for-profit organizations may NOT earn a profit.
True or false?
All of the following are advantages of sole proprietorship EXCEPT ________.
A) single ownership
B) no separate tax form
C) ease of formation
Correct Response
D) limited liability
E) control and flexibility
D) limited liability
Jaden and Noel are starting a computer repair business together. Jaden insists on outlining rules for the departure of partners in the partnership agreement, although Noel does not think it is necessary. Which of the following statements might Jaden use to explain his insistence to Noel?
A) Provisions to remove a partner’s ownership interest are necessary so the business would not have to end.
Jenny and Rose are hairstylists that have decided to open their own salon by starting a general partnership. The first step to ensuring a successful partnership would be to ________.
C) draw up a partnership agreement
Many new business owners prefer a limited liability structure because there are ________.
A) fewer corporate formalities
A sole proprietorship is a common form of business ownership for start-up businesses.
True or false?
Compared to the C corporation, the limited liability company is an attractive form of business ownership because ________.
D) a limited liability company does not require the firm to hold annual meetings and it can avoid double taxation
In a partnership, all profits and losses flow through each partner’s ________.
A) tax returns
Policies regarding all of the following points should be included in a partnership agreement EXCEPT ________.
division of stock
Which of the following moves would MOST likely initiate a hostile takeover?
A) The buying company offers to buy the target company’s stocks at a price higher than their current value.
A cooperative is a type of business that is owned by ________ who use its products or services.
A) members
The profits of a sole proprietorship are taxed as the personal income of the owner.
True or false?
Which of the following is a disadvantage of forming a corporation?
D) double taxation
A company with 200 shareholders can establish itself as an S corporation.
True or false?
A) false
One disadvantage of a sole proprietorship is they usually have limited access to additional financial resources.
True or false?
At a meeting to announce a merger with another company, which of the following buzzwords is a business leader MOST likely to use to justify the decision?
D) synergy
Traci and Sally have considered starting their own business but are concerned about the possibility of losing their personal assets if the business fails. One way for Traci and Sally to avoid this risk would be to organize their company as a ________.
C) corporation
In a general partnership, all partners are guaranteed an equal share of the firm’s profits.
True or false?
Which of the following types of ownership is limited to 100 owners?
B) S corporation
Leslie is excited to begin a personal shopping business. She is planning to have employees and is concerned about losing personal assets should something happen to the business. She would like to focus on profits and building a business but she does not want her business to pay its own taxes. What ownership structure is Leslie’s best choice?
C) S corporation

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