Business Organizing (Overview)

Question 1

Which business organization is regulated the least by the government?

a: Limited Liability Company
b: Corporation
c: Partnership
d: Sole Proprietorship

Answer 1

d: Sole Proprietorship

Question 2

True or False. In a general partnership, each partner is liable for the debt of the company up to the percentage of the company they own.

Answer 2

False

Question 3

What business organization provides the most financial protection for the owners?

a: Sole Proprietorship
b: General partnership
c: Corporation
d: Limited Partnership

Answer 3

c: Corporation

Question 4

True or False. Sole Proprietorships can issue and sell stock in the company to raise capital.

Answer 4

False

Question 5

Can a corporation actually be listed as the sole owner of a property?

Answer 5

Yes

Question 6

True or False. Limited Liability Companies have the ability to be passed down to family members when an owner (member) dies.

Answer 6

False

Question 7

True or False. Sub Chapter “S” Corporations can retain their status no matter how many stockholders they have.

Answer 7

False

Question 8

True or False. If you are naming the Sole Proprietorship something other than your real name, you will need to file a Certificate of Assumed Name with the county clerk’s office.

Answer 8

True

Question 9

A builder’s personal income will be reflected on tax returns except:

a: Sole Proprietorship
b: Partnerships
c: Limited Liability Company’s
d: C-Corporations

Answer 9

d: C-Corporations

Question 10

True or False. A sole proprietorship is not considered to be a legal entity under the law, but rather is an extension of the individual who owns it.

Answer 10

True

Question 11

True or False. Partnerships must file a certificate of co-partnership with the county clerk’s office in the counties in which you will be doing business.

Answer 11

True

Question 12

A 50/50 partnership dissolves and one of the partners does not fulfill his responsibility to pay off creditors. To what extent must the other partner contribute to this debt in order to keep his good name and standing?

a: 50%
b: 75%
c: 100%
d: These things can be negotiated

Answer 12

c: 100%

Question 13

True or False. Corporations are entities that are separate and distinct from their owners. This means that the debt of the company does not transfer to the owners.

Note: Creditor will often require corporations, limited liability company’s and partnerships to sign a personal guarantee for repayment of loans, especially in the early stages of the company’s development.

Answer 13

True

Question 14

C- Corporations are taxed on their earnings at the corporate level and the owners are then taxed on any cash distribution they receive, this is referred to as?

a: A rip off
b: Double taxation
c: Dividend taxation
d: None of the above

Answer 14

b: Double taxation

Question 15

Corporations who qualify can elect to be treated as an _____________ to avoid double taxation.

a: Individual
b: Separate entity
c: S-Corporation
d: LLC

Answer 15

c: S-Corporation

Question 16

True or False. S-Corporations, Partnerships and LLCs must all file income tax returns and pay tax on profits.

Note: Only C-Corporations pay tax on profits.

Answer 16

False

Question 17

True or False. Owners or members of S-Corporations, Partnerships and Limited Liability Company’s who collect distributions from profit made by these company’s pay individual income tax on these distributions.

Answer 17

True

Question 18

An advantage that a Limited Liability Company has over a partnership is?

a: Employees can be issued a 1099
b: Limited liability of the members
c: Employers care not liable for unemployment tax
d: Lower insurance cost

Answer 18

b: Limited liability of the members

Question 19

What are the six ways to organize your business?

Answer 19

• Sole Proprietorship
• General Partnership
• Corporations
• S Corporations
• Joint Ventures
• Limited Liability Companies

Question 20

What factors should you’re type of entity be chosen on?

Answer 20

• Need for capital
• Tax advantages
• Liability involved
• Division of revenue
• Number of people involved

Question 21

What is a Sole Proprietorship?

Answer 21

Typically a business owned and operated by one individual, or very often, a husband and wife.
A SP is not considered to be a legal entity under the law, but rather is an extension of the individual who owns it.
The income or revenue loss of a sole proprietorship is combined with the other earnings of an individual for income tax purposes.
It is the easiest form of business because it does not require any specific legal organization.

Question 22

What is a General Partnership?

Answer 22

When two or more individuals join together to run the business. A partnership should file a business name under which the partners can run the business.
Each of the individual partners has ownership of company assets and responsibility for liabilities, as well as authority in running the business.
You must file a co-partnership with the county clerk’s office int he counties in which you will be doing business.

Question 23

What is a Limited Partnership?

Answer 23

A business entity that has a partner who contributes cash and/or property to the business, and in turn shared in the profits and losses, but provides no service and has no voice or vote in matters of management.

Question 24

What is a Corporation?

Answer 24

An entity created by law that is composed of one or more individuals united into one body under a special or corporate name.
The company is regarded by law as being separate or corporate name. The company is regarded by law as being separate and distinct from the owners.

Question 25

A corporation is the most complicated type of business and is made up of what three groups of people?

Answer 25

• Shareholders
• Directors
• Officers
  All of which can be a single person or multiple people.

Question 26

True or False. Typically, the owners or shareholders of a corporation are protected from the liabilities of the business.

Answer 26

True

Question 27

What is a Sub-Chapter “S” Corporation?

Answer 27

A corporation that meets eligibility requirements, it has the option of being taxed as a partnership rather than a corporation. If it elects to take this option, it is referred to as an “S Corporation”.

Question 28

What is a Limited Liability Corporation (LLC)?

Answer 28

This form of business entity offers legal, tax and economic advantages over the traditional forms of business ownership. The feature of limited personal liability of a corporation, and taxation only at the owner level of a partnership are benefits of an LLC.

Question 29

What is a Joint Venture?

Answer 29

When two or more contracting firms unite their forces to construct a specific project. The members of a joint venture can be a sole proprietorship, partnership, or corporation, but the joint venture itself is a separate business entity.

Question 30

With the exception of a sole proprietor, no matter which type of business entity you choose, what is the business considered in relation to the owner?

Answer 30

A separate entity.

Question 31

What are three ways to conduct a search to see if your business name is available?

Answer 31

• U.S. Patent and Trademark office
• Secretary of State Office
• Internet search engine