Chapter 7 Test

Question 1

What are the disadvantages of sole proprietorship?

Answer 1

Unlimited personal financial liability, limited life, and limited availability of money

Question 2

What are the advantages of a partnership?

Answer 2

Greater management skills, ease of formation, and freedom to manage

Question 3

What are the disadvantages of a partnership?

Answer 3

Unlimited personal financial liability, uncertain life, and potential conflicts between the partners

Question 4

What does it mean to be surety for someone?

Answer 4

Becoming security for or pledging to undertake his debt

Question 5

What are the two forms of partnership?

Answer 5

General partnership and limited partnership

Question 6

According to the law, what is a corporation, and what are its important properties?

Answer 6

A corporation is an artificial being- invisible, intangible, and existing only in the contemplation of the law. Important properties are immortality and individuality.

Question 7

How does one become a partial owner of a corporation?

Answer 7

Buying shares of the corporation’s stock

Question 8

What are the advantages of incorporation?

Answer 8

Limited personal financial liability and continuous life

Question 9

What are the disadvantages of incorporation?

Answer 9

Higher taxes, lack of secrecy, and rigidity

Question 10

What are the three basic forms of business organization, and which is the most common in the United States?

Answer 10

Three basic forms of business organizations are sole proprietorship, partnership, and corporation- sole proprietorship being the most common

Question 11

What disadvantage of a proprietorship does the partnership form of business ownership solve?

Answer 11

Because a partnership offers greater sources of financing, it overcomes the proprietorship’s disadvantage of limited financial resources

Question 12

What are the two biblical principles on partnerships discussed in the text?

Answer 12

Warnings against unequal yoking and becoming surety

Question 13

What is the primary advantage of being incorporated?

Answer 13

Limited financial liability

Question 14

An LLC combines the benefits of which two forms of business
ownership?

Answer 14

A partnership and a corporation

Question 15

What are the advantages of sole proprietorship?

Answer 15

Freedom from outside control, freedom to retain info, and freedom from paying excessive taxes