Chapter Six - Legislation Governing Business Organizations

Question 1

The 3 basic types of business organizations.

Answer 1

1. Partnership.
2. Sole Proprietorship.
3. Corporation.

Question 2

This is NOT a characteristic of a sole proprietorship.

Answer 2

The owner employs him or herself in the business.

Question 3

This is a TRUE statement of a partnership.

Answer 3

The liability of each party for the debts of the partnership is unlimited.

Question 4

Under what business structure(s) can business owner’s personal assets be seized to fulfill obligations of the company?

Answer 4

1. A partnership.

2. A sole proprietorship.

Question 5

These are TRUE statements about the securities of a corporation.

Answer 5

1. Preferred shareholders generally only have contingent voting rights.
2. Interest on bonds must be paid whether or not a corporation has earned a profit in that year.

Question 6

List 4 advantages of corporations over the other legal business structures.

Answer 6

1. A corporation is a separate legal entity from the owners.
2. The owners can limit their ability.
3. A corporation has perpetual succession.
4. A corporation owns it own property.