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Exam 5: Forms of Business Ownership

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Question 1

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All of the following are advantages of a partnership EXCEPT:

A) partnerships are relatively easy and inexpensive to establish.
B) partnerships avoid double taxation since the partnership itself is not subject to federal taxation.
C) partnerships have the greatest ability to accumulate capital of all of the forms of ownership.
D) partnerships offer the ability to combine the management and business skills of two or more people in a complementary and powerful fashion.

E) A) and B)
F) A) and C)

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Question 2

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Which of the following would be most likely to benefit from choosing S corporation status?

A) Startup companies anticipating net losses
B) Corporations where net profits before any compensation to shareholders is less than $100,000 per year
C) Highly profitable firms with substantial dividends to pay out to shareholders
D) A and C only

E) A) and B)
F) A) and C)

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Question 3

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What is a limited liability company? How is one formed? What benefits does an LLC offer?

A professional corporation is created in the same way as a regular corporation,and exists to provide the advantages of corporate ownership,including limited liability,to professionals such as doctors and lawyers.

The corporation has the advantage of transferable ownership,which easily enables the corporation to sell shares to others or to transfer stock through inheritance.

Liquidating an S corporation involves several steps,including paying all taxes and debts,obtaining the written approval of shareholders to dissolve the company,filing a statement of intent to dissolve with the secretary of state's office,and finally distributing all remaining assets of the corporation to shareholders.

One significant advantage of a corporation is the ability to attract capital.

Limited liability partnerships (LLP)are where all partners in a business are limited partners,which offers the advantage of limited liability for the debts of the partnership.

In the ________ form of ownership,the business itself pays income taxes.

Compare and contrast the following forms of ownership: a corporation,an S corporation,and a limited liability company.

The most common form of business ownership that is also the simplest to create is the:

A limited liability company must have at least two owners.

What is a partnership? Explain the advantages and the disadvantages of a partnership.

Which of the following generally is not required by a Certificate of Incorporation?

A joint venture is different from a partnership in that the joint venture:

Stockholders in the corporation have the same kind of liability as do general partners in a partnership.

What is a corporation? Explain the advantages and the disadvantages of a corporation.

Which of the following is not an advantage of the corporate form of ownership?

Defining the duties,responsibilities,contributions,and roles of the partners in a partnership agreement is not necessary since the law covers these provisions automatically.

Most states do not require a Certificate of Incorporation or a charter to be filed for a new corporation.