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Exam 5: Choosing a Form of Ownership

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Question 31

Multiple Choice

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Which of the following is a disadvantage of the corporation form of ownership?

A) An inability to accumulate capital
B) The unlimited liability to the members of the board
C) Double taxation on profits and individuals
D) The lack of continuity

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Question 32

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The Uniform Partnership Act outlines a number of general obligations that partners have such as the obligation to:

A) give other partners complete information about all business affairs.
B) share in the management and operation of the business.
C) be compensated for personal expenses incurred.
D) have access to the business's books and records.

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Question 33

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Sole proprietorships characteristically are:

The partnership,like the proprietorship,avoids the disadvantage of double taxation.

The sole proprietorship has the least ability to accumulate capital.

Partnerships have a number of advantages over other forms of ownership,such as:

Traditionally,________ were always set up as nonprofit corporations.

To avoid becoming liable for corporate actions,officers should ensure that they hold annual meetings,keep minutes of those meetings,make sure the board of directors makes all decisions,etc.

Ownership of a corporation can easily be transferred through the sale of stock.

If stockholders in a corporation are displeased with the business's progress,they can sell their shares to someone else.

If a sole proprietorship fails,the owner is not liable for its debts since the business is a separate legal entity.

While a sole proprietorship gives the owner maximum flexibility in running the business,it also:

Carlos founded the "Taco Factory" 20 years ago as a family-oriented restaurant business.Over the years as he grew the business,he incorporated and sold stock.Recently the stockholders voted to seek liquor licenses and sell beer and hard liquor in the restaurants.Carlos opposed this,citing the history of the restaurant's "family" environment,but was voted down.Carlos experienced which drawback of the corporate form of ownership?

________ partners are not active in a business but generally are known to be members of the partnership.

In a sole proprietorship,the owner has limited liability.

A distinct disadvantage of the corporate form of ownership is:

The most critical disadvantage of the sole proprietorship is:

The most popular form of ownership in the United States is the partnership.

The ________ is the most complex form of ownership and is a separate legal entity in the eyes of the law.

The primary reason entrepreneurs choose to incorporate is because of: