Chapter 14 Flashcards
1) A(n) __________ is any change in the ownership of an organization that changes the legal existence of the organization.
A) arbitration B) rescission C) restitution D) dissolution E) extradition
D) dissolution
2) Which of the following statements is true of closely held business organizations?
A) Closely held organizations are free from all legal liabilities to their shareholders, which is the primary reason for this corporate form being used. B) Shareholders of closely held organizations can transfer their ownership without interfering with the organization’s management. C) Closely held organizations are only owned by a large number of persons. D) Closely held organizations are only owned by the government. E) A family-operated business is an example of a closely held business organization.
E) A family-operated business is an example of a closely held business organization.
3) One of the most significant creation-related issues to consider when selecting a business’s organizational form is __________.
A) the organization’s policies B) the target demographic for the services or products of the organization C) how much time it will take to create a particular organization D) how many people are recruited annually by the organization E) the cost of creation
C) how much time it will take to create a particular organization
4) The crucial issue with the continuity factor of a business’s organizational form is __________.
A) its management style B) the average age of the employees working for the business C) the method by which the business can be dissolved D) the method adopted by the business to reach its customers E) the control exercised by its managers
C) the method by which the business can be dissolved
5) Which of the following is true when determining the taxation of a business organization?
A) A single tax is not always better than a double tax. B) Taxation is never a critical factor when selecting the form of a business organization. C) There are no advantages when an organization is subject to the double tax. D) There are no advantages when an organization is subject to the single tax. E) Double taxation cannot be avoided by selecting a different form of organization.
A) A single tax is not always better than a double tax.
6) The use of sole proprietorships is very limited because __________.
A) there is no formal documentation process for its creation B) it gives limited control to the proprietor C) it is the most expensive business organization to create D) multiple owners cannot create a proprietorship E) it is the hardest business organization to create
D) multiple owners cannot create a proprietorship
7) A characteristic of a sole proprietorship is that __________.
A) it is the hardest business organization to create B) it can be created by multiple owners C) it is not possible to transfer ownership of the organization D) it can be publicly held E) it is the most expensive business organization to create
C) it is not possible to transfer ownership of the organization
8) Which of the following forms of organization must record a certificate with pertinent information in the county where the organization has its principal place of business and file additional copies inevery community in which the organization conducts business or has an office?
A) Limited partnership B) Sole proprietorship C) S corporation D) Limited liability company E) Corporation
A) Limited partnership
9) In a(n) __________, the shareholders are taxed only on income distributed.
A) limited partnership B) corporation C) limited liability company D) sole proprietorship E) S corporation
B) corporation
10) The creation of a(n) __________ is automatic based on business conduct and is modified by agreement.
A) limited partnership B) corporation C) general partnership D) sole proprietorship E) S corporation
C) general partnership
11) Which of the following makes a sole proprietorship a less desirable form of organization?
A) The creation of sole proprietorship is expensive and requires formal documentation. B) A proprietorship’s business activity may be more stable than a proprietor’s willingness to remain actively involved in the business. C) A proprietor may have to share his or her voice of control and responsibility for the business’ success with the other acting members of the organization. D) Sole proprietorships are the hardest forms of organization to create. E) Sole proprietorships are subject to double taxation.
B) A proprietorship’s business activity may be more stable than a proprietor’s willingness to remain actively involved in the business.
12) Which of the following is an advantage of a sole proprietorship?
A) A sole proprietor is personally obligated for the debt of the proprietorship. B) A sole proprietorship is not taxed as an organization. C) In a sole proprietorship, liability is shared with many partners. D) A sole proprietorship is the least expensive business organization to create. E) A sole proprietorship’s business activity may be more stable than the proprietor’s willingness to remain actively involved in the business.
D) A sole proprietorship is the least expensive business organization to create.
13) Jonathan intends to have maximum control over his decisions in his business. Which of the following forms of business organizations is most likely to give Jonathan total control over his business decisions?
A) Sole proprietorship B) Partnership C) Corporation D) S corporation E) Limited liability company
A) Sole proprietorship
14) One advantage of a partnership is that __________.
A) it is dissolved anytime a partner ceases to be a partner, regardless of whether the reason is withdrawal or death B) each partner’s liability is unlimited C) partners are taxed on their share of the partnership’s profits, whether the profits are distributed or not D) only a limited number of persons can be partners E) it may operate in more than one state without obtaining a license to do business
E) it may operate in more than one state without obtaining a license to do business
15) Which of the following forms of organization is most easily formed with minimal costs?
A) Limited liability partnership B) General partnership C) Corporation D) S corporation E) Limited liability company
B) General partnership
16) Which of the following is the basic difficulty of owning a minority interest in a closely held corporation?
A) There is no ready market for the minority stock should a shareholder desire to dispose of it. B) Stockholders with a minority interest have no rights in a closely held corporation. C) Buy and sell agreements to own a minority interest are not allowed in a closely held corporation. D) Minority shareholders have unlimited personal liability for the obligations of a closely held corporation. E) Minority shareholders risk losing more than their investment amount.
A) There is no ready market for the minority stock should a shareholder desire to dispose of it.
17) Technically, a(n) __________ is an agent appointed by a shareholder for the purpose of voting the shares.
A) officer B) director C) proxy D) arbitrator E) signatory
C) proxy
18) In a corporation, __________ elect members of the board of __________, who set the objectives and goals of the corporation.
A) officers; shareholders B) directors; officers C) arbitrators; proxies D) shareholders; directors E) proxies; shareholders
D) shareholders; directors
19) While selecting a name for a partnership, if the name is other than that of the partners, the partners must give notice as to their actual identity under the state’s __________.
A) fictitious-name certification law B) annexed-name statute C) suppositious-name law D) fictitious-name rule E) assumed-name statute
E) assumed-name statute
20) Which of the following statements is true of a general partnership?
A) Unlike proprietorships, partnerships are taxable entities. B) Each partner in a general partnership has an equal voice in the firm's affairs, unless the agreement provides to the contrary. C) A general partnership must have at least one controlling partner. D) All partners in a general partnership have only limited liability for their organization’s debts. E) A general partnership is not dissolved if there is a change in the partners.
B) Each partner in a general partnership has an equal voice in the firm’s affairs, unless the agreement provides to the contrary.
21) To prevent problems that may arise when a partner dies or withdraws from a partnership, the articles of partnership should include a(n) __________.
A) buy and sell agreement B) escrow instruction C) establishment clause D) commerce clause E) interest agreement
A) buy and sell agreement
22) Which of the following statements is true of managerial control in a general partnership?
A) It is mandatory that each partner have an equal voice in a firm's affairs. B) Partners may agree to divide control in such a way as to make controlling partners and minority partners. C) The differences in the degree of control do not affect a business’s success. D) The possibility of deadlock is higher when there is a greater number of partners and an odd number of them. E) An oral partnership agreement must include language governing issues of managerial control.
B) Partners may agree to divide control in such a way as to make controlling partners and minority partners.
23) Which of the following statements is true of liability of partners in a general partnership?
A) Partners have limited liability for an organization’s debts. B) Partners’ personal assets, which are not associated with the partnership, may not be claimed by the creditors. C) From a creditor’s perspective, the liability of each partner extends only to a pro rata share. D) A partner who has to pay beyond his pro rata share will have to make use of his future buyout interest. E) A partner is jointly and severally liable for the partnership's obligations.
E) A partner is jointly and severally liable for the partnership’s obligations.
