Question 1

Which of the following is not an advantage of a sole trader?

Accepted Answer

A)   It is easy to form and dissolve.
B)   It has unlimited liability.
C)   Profits are taxed as personal income.
D)   There owner has the flexibility of being his or her own boss.
E)   The owner keeps all profits.F) B) and D)
G) A) and D)

Question 2

The amount paid for stock is the most a shareholder can lose in the corporate form of ownership.

Accepted Answer

A) True 
 B)False

Question 3

What do experts believe is likely to become one of the most popular types of business organisations?

Accepted Answer

A)   Limited-liability companies
B)   S-corporations
C)   Partnerships
D)   Sole traders
E)   CorporationsF) A) and B)
G) All of the above

Question 4

Walmart is incorporated in Arkansas, the state of its origins and headquarters.Within Arkansas, Walmart is classified as a(n)  ____ corporation.

Accepted Answer

A)   privately-held
B)   Foreign
C)   Alien
D)   domestic
E)   hometownF) A) and B)
G) A) and C)

Question 5

Prudential and several other large insurance companies have joined together to underwrite an extremely large insurance policy.This sort of association is referred to as a(n)

Accepted Answer

A)   syndicate.
B)   cooperative.
C)   conglomerate.
D)   alliance.
E)   vertical merger.F) B) and E)
G) A) and E)

Question 6

The major reason why businesses change from sole traderships 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 D)
G) A) and E)

Question 7

Because of unlimited liability, it is easy for sole traders to borrow large sums of money.

Accepted Answer

A) True 
 B)False

Question 8

Walters Company, LLC, is a wholesale distributor of industrial packaging.A primary advantage that Walters enjoys as an LLC that corporations do not have is

Accepted Answer

A)   ease of formation.
B)   limited liability.
C)   avoiding double taxation.
D)   one class of outstanding stock.
E)   income taxes.F) D) and E)
G) A) and E)

Question 9

Corporate officers are

Accepted Answer

A)   listed in the corporate charter.
B)   elected by stockholders.
C)   appointed by the board of directors.
D)   appointed by management.
E)   elected by incorporators.F) None of the above
G) B) and E)

Question 10

Most partnerships have ____ partners.

Accepted Answer

A)   Two
B)   Three
C)   Four
D)   Five
E)   more than fiveF) B) and E)
G) B) and D)

Question 11

Kerry wants to start a business to sell handmade jewelry.She is very competent at making the jewelry and teaching others to make it, and she has saved a reasonable amount of money to start the business.Who of the following would make the best partner for Kerry?

Accepted Answer

A)   Bailey, an artist with a real flair for new-aged jewelry design
B)   Ashley, Kerry's best friend who is fun to hang out with and good at solving problems
C)   Natalie, who has business experience with accounting, management, and marketing
D)   Janette, who used to work at the jewelry counter at a department store
E)   Darla, an engineer with industrial management experience but no moneyF) A) and B)
G) B) and D)

Question 12

Keisha Cook and Donnie Blackman decide to go into business together.They start by writing an agreement listing and explaining the terms of the business they will both own, along with each of their responsibilities.Keisha and Donnie created a(n)

Accepted Answer

A)   articles of partnership.
B)   master limited partnership agreement.
C)   licensing agreement.
D)   corporate charter.
E)   division of partnership agreement.F) A) and C)
G) B) and D)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Thomas wants to make money, so he starts his own business as a sole proprietor.He likes this form of business because

Accepted Answer

A)   he will get to keep all of the profits the business makes.
B)   profit is guaranteed since he will be the only owner.
C)   it will provide a steady income for him.
D)   he has to split the profits with only one other person.
E)   he has to pay small dividends to the other owners.F) A) and D)
G) D) and E)

Question 15

A corporation is an artificial person created by law.

Accepted Answer

A) True 
 B)False

Question 16

Mike Nettles approached Nathan Lang about becoming a partner in a firm that destroys environmental waste.While Mike would like to become a partner in the firm, he is concerned about his liability because he has recently inherited a lot of money.In this situation, Mike should become a

Accepted Answer

A)   general partner with a majority ownership interest in the business.
B)   general partner with a minority ownership interest in the business.
C)   limited partner.
D)   joint venturist.
E)   sole trader.F) C) and D)
G) A) and D)

Question 17

Which of the following states offers the lowest organisational costs for corporations?

Accepted Answer

A)   Delaware
B)   Georgia
C)   Michigan
D)   New York
E)   AlaskaF) A) and B)
G) B) and E)

Question 18

Which of the following is not a disadvantage of the corporate form of ownership?

Accepted Answer

A)   Difficulty of formation
B)   Limited liability
C)   Expense of incorporation and selling stock
D)   Lack of secrecy
E)   Double taxationF) A) and E)
G) C) and D)

Question 19

An association of individuals or firms formed for the purpose of performing a business function for all members is known as a

Accepted Answer

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

Question 20

Wade Comer and Tom Busby decide to start a partnership and offer accounting services.Which of the following is the best way to start this partnership?

Accepted Answer

A)   They should orally discuss how they want the partnership to work and who is responsible for certain areas.
B)   They should determine the exact way the business should be run and have a witness listen to their oral discussion.
C)   They should let a third party, such as a consultant or an attorney, draft whatever agreement the consultant or attorney thinks is appropriate.
D)   They should carefully draft an articles of partnership together, outlining each partner's responsibilities and other important information.
E)   With the help of an attorney, they should draft a partnership agreement that states each partner's duties and investments.F) D) and E)
G) C) and D)

Exam 4: Types of Business Ownership

Which of the following is not a disadvantage of the corporate form of ownership?

Correct AnswerverifiedShow Answer

Kerry wants to start a business to sell handmade jewelry.She is very competent at making the jewelry and teaching others to make it, and she has saved a reasonable amount of money to start the business.Who of the following would make the best partner for Kerry?

Correct AnswerverifiedShow Answer

The amount paid for stock is the most a shareholder can lose in the corporate form of ownership.

Correct AnswerverifiedShow Answer

Mike Nettles approached Nathan Lang about becoming a partner in a firm that destroys environmental waste.While Mike would like to become a partner in the firm, he is concerned about his liability because he has recently inherited a lot of money.In this situation, Mike should become a

Correct AnswerverifiedShow Answer

Because of unlimited liability, it is easy for sole traders to borrow large sums of money.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Prudential and several other large insurance companies have joined together to underwrite an extremely large insurance policy.This sort of association is referred to as a(n)

Correct AnswerverifiedShow Answer

Wade Comer and Tom Busby decide to start a partnership and offer accounting services.Which of the following is the best way to start this partnership?

Correct AnswerverifiedShow Answer

An association of individuals or firms formed for the purpose of performing a business function for all members is known as a

Correct AnswerverifiedShow Answer

Most partnerships have ____ partners.

Correct AnswerverifiedShow Answer

A corporation is an artificial person created by law.

Correct AnswerverifiedShow Answer

Walters Company, LLC, is a wholesale distributor of industrial packaging.A primary advantage that Walters enjoys as an LLC that corporations do not have is

Correct AnswerverifiedShow Answer

Which of the following states offers the lowest organisational costs for corporations?

Correct AnswerverifiedShow Answer

Corporate officers are

Correct AnswerverifiedShow Answer

Keisha Cook and Donnie Blackman decide to go into business together.They start by writing an agreement listing and explaining the terms of the business they will both own, along with each of their responsibilities.Keisha and Donnie created a(n)

Correct AnswerverifiedShow Answer

Thomas wants to make money, so he starts his own business as a sole proprietor.He likes this form of business because

Correct AnswerverifiedShow Answer

Which of the following is not an advantage of a sole trader?

Correct AnswerverifiedShow Answer

What do experts believe is likely to become one of the most popular types of business organisations?

Correct AnswerverifiedShow Answer

Walmart is incorporated in Arkansas, the state of its origins and headquarters.Within Arkansas, Walmart is classified as a(n) ____ corporation.

Correct AnswerverifiedShow Answer

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