Question 1

Smith, Taylor, and Jones is a law firm specializing in medical malpractice. Each owner has unlimited liability for the debts of the business and all owners share in the management of the firm. This law firm is an example of a

Accepted Answer

A)   general partnership.
B)   limited partnership.
C)   joint venture.
D)   C corporation.
E)   strategic alliance.F) A) and E)
G) B) and D)

Question 2

What is a true statement about the board members of a corporation?

Accepted Answer

A)   They are directly responsible for the daily operations of the firm.
B)   They have dramatically increased company oversight since the passage of the Sarbanes-Oxley Act.
C)   They have a duty of care and loyalty to oversee the management of the firm.
D)   They are responsible for the short-term, but not the long-term, objectives of the corporation.
E)   They are not responsible for management of the firm's funds.F) A) and D)
G) B) and D)

Question 3

All of the following are true of 501(c) (3)  organizations EXCEPT

Accepted Answer

A)   they receive certain tax exemptions.
B)   they include public charities.
C)   their donors may reduce their tax deductibility for their donations.
D)   they include private operating foundations that sponsor and fund their own programs.
E)   they must answer to their shareholders.F) B) and E)
G) A) and C)

Question 4

Sasha works for a large corporation, and sometimes, she finds it difficult to see how she fits into the corporate picture. However, recently, her company decides to establish an employee stock ownership plan. Which is a benefit of this type of plan?

Accepted Answer

A)   It can boost employee productivity.
B)   It can make employees feel that their work benefits only the owners.
C)   It can provide employees with higher regular wages.
D)   It can build a partnership between managers and owners.
E)   It allows employees to take over the management of the company.F) A) and E)
G) A) and B)

Question 5

April is a doctor who is forming her own medical practice. She wants her practice to be flexible, simple to run, and free from required meetings, minutes, or resolutions. Her goal is to blend the best characteristics of corporations, partnerships, and sole proprietorships. What form of business ownership seems most in-line with April's goals?

Accepted Answer

A)   S corporation
B)   joint venture
C)   limited liability company
D)   C corporation
E)   cooperativeF) A) and D)
G) C) and D)

Question 6

In an S corporation, net profits and losses of the corporation pass to the owners. What effect does this have?

Accepted Answer

A)   It eliminates double taxation.
B)   It gives the owners unlimited liability.
C)   It allows the corporation to have unlimited shareholders.
D)   It makes the operation of the corporation easier.
E)   It gives the corporation a limited lifespan.F) None of the above
G) A) and B)

Question 7

When Dr. Hamilton, a local physical therapist, dies, her children sell her physical therapy practice to a young, new therapist who just moved to the area. What advantage will this new therapist gain by buying a business rather than starting a new one?

Accepted Answer

A)   being able to start fresh with all new equipment
B)   some of the customers will stay with the business
C)   getting to train all new employees for the business
D)   finding new employees for the business
E)   finding a partner to help run the businessF) C) and D)
G) D) and E)

Question 8

Ritesh wants to open his own bowling alley that will also serve alcoholic beverages and food. What will Ritesh have to do to start his business?

Accepted Answer

A)   He will need to hire a lawyer to help him obtain a liquor license.
B)   He will not require any licenses or permits to run this type of business.
C)   He will need to fill out paperwork to obtain the proper licenses and permits.
D)   He will need to hire someone to fill out the complicated paperwork to get the necessary licenses and permits.
E)   He will need to pay over $10,000 for the necessary licenses and permits.F) A) and E)
G) B) and E)

Question 9

Jeff and Maggie both work in the real estate market. One day, a great investment property comes on the market, and they decide to pool their money to buy and renovate it. They plan to spend six weeks on the renovation, and they hope to make a nice profit when they turn around and sell it. Jeff and Maggie's partnership is an example of a(n)

Accepted Answer

A)   cooperative.
B)   joint venture.
C)   sole proprietorship.
D)   S corporation.
E)   limited liability company.F) A) and D)
G) A) and E)

Question 10

Books to Grow, a corporation owned and managed by volunteers, supplies books and educational materials to impoverished children in Latin America. Its focus is not on earning a profit but on serving the community. Books to Grow is an example of a(n)

Accepted Answer

A)   sole proprietorship.
B)   domestic corporation.
C)   nonprofit corporation.
D)   quasi-public corporation.
E)   C corporation.F) B) and E)
G) None of the above

Question 11

Nathan is a sole proprietor. How is the income earned in his business taxed?

Accepted Answer

A)   Nathan is taxed twice-once for the business and once for his personal income.
B)   Nathan is exempt from paying any tax.
C)   Nathan pays one tax that includes both the business and his personal income.
D)   Nathan pays a business tax if the business earns a profit, if not, only his personal income is taxed.
E)   Nathan only pays tax on his business income; personal income is not taxed.F) B) and D)
G) A) and B)

Question 12

Sweet Scents, a candle company, purchases Nature Candle Products, its direct competitor, by buying most of its stock. In this scenario, Sweet Scents is involved in a(n)

Accepted Answer

A)   conglomerate merger.
B)   acquisition.
C)   vertical merger.
D)   leveraged buyout.
E)   franchise.F) None of the above
G) A) and C)

Question 13

Which form of business ownership has the most freedom from government regulation?

Accepted Answer

A)   partnership
B)   corporation
C)   limited liability company
D)   S corporation
E)   sole proprietorshipF) B) and E)
G) C) and D)

Question 14

When two companies of different industries join together, it is an example of a

Accepted Answer

A)   vertical merger.
B)   limited partnership.
C)   sole proprietorship.
D)   horizontal merger.
E)   conglomerate merger.F) A) and D)
G) None of the above

Question 15

The Dairy Farmers of America is an association of dairy farmers. Its agenda is not to make profits but to help its members market their products and to offer farmers a fair voice in national policymaking. Thus, The Dairy Farmers of America is an example of a(n)

Accepted Answer

A)   cooperative.
B)   S corporation.
C)   sole proprietorship.
D)   limited liability company.
E)   general partnership.F) B) and E)
G) C) and D)

Question 16

A disadvantage of the corporate form of business ownership is that the

Accepted Answer

A)   owners will have limited access to external funds.
B)   owners will have unlimited liability for the debts of the corporation.
C)   formation of a corporation can be costly and it faces double taxation.
D)   transfer of ownership in a corporation is very difficult.
E)   life expectancy of a corporation is very short and it lacks continuity.F) A) and D)
G) A) and B)

Question 17

Sarah is a partner in a local coffee shop. Without consulting her partners, she ordered some expensive, specialty roasted coffee beans that she thought would greatly improve their business. However, their customers felt the coffee had a bitter taste and are no longer buying it. What impact will Sarah's decision have on her partners?

Accepted Answer

A)   She bears the financial responsibility for her decision, so her partners will not be affected.
B)   Her partners may eliminate her from the partnership to avoid having to use their personal resources to pay for her decision.
C)   Her decision could impact the money her partners invested in the business, but not their personal resources.
D)   Her decision could impact her partners' profits, but not their personal resources.
E)   Her decision may put her partners' personal resources in jeopardy.F) B) and E)
G) None of the above

Question 18

Lawyers, Inc. is a large law practice with partners that specialize in real estate closings, estate planning, and divorce proceedings. Since each partner specializes in a different area of law, clients would be likely to

Accepted Answer

A)   take their business to a sole proprietor, rather than this partnership.
B)   view the service as lower quality than that provided by one person.
C)   question the qualifications of each partner.
D)   prefer to work with one person who has diverse skills.
E)   view the service as higher quality than that provided by one person.F) A) and E)
G) B) and C)

Question 19

All of the following are keys to a successful partnership EXCEPT partners must

Accepted Answer

A)   have different skill sets or resource contributions.
B)   maintain effective communication skills.
C)   focus on customer satisfaction and product quality.
D)   keep profit sharing equal regardless of contributions.
E)   maintain transparency with stakeholders.F) A) and B)
G) A) and C)

Question 20

An S corporation is taxed just like any other corporation.

Accepted Answer

A) True 
 B)False

Exam 4: Options for Organizing Business

All of the following are true of 501(c) (3) organizations EXCEPT

Correct Answer
verified

Sweet Scents, a candle company, purchases Nature Candle Products, its direct competitor, by buying most of its stock. In this scenario, Sweet Scents is involved in a(n)

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Smith, Taylor, and Jones is a law firm specializing in medical malpractice. Each owner has unlimited liability for the debts of the business and all owners share in the management of the firm. This law firm is an example of a

Correct Answer
verified

A disadvantage of the corporate form of business ownership is that the

Correct Answer
verified

Sasha works for a large corporation, and sometimes, she finds it difficult to see how she fits into the corporate picture. However, recently, her company decides to establish an employee stock ownership plan. Which is a benefit of this type of plan?

Correct Answer
verified

The Dairy Farmers of America is an association of dairy farmers. Its agenda is not to make profits but to help its members market their products and to offer farmers a fair voice in national policymaking. Thus, The Dairy Farmers of America is an example of a(n)

Correct Answer
verified

Which form of business ownership has the most freedom from government regulation?

Correct Answer
verified

When Dr. Hamilton, a local physical therapist, dies, her children sell her physical therapy practice to a young, new therapist who just moved to the area. What advantage will this new therapist gain by buying a business rather than starting a new one?

Correct Answer
verified

In an S corporation, net profits and losses of the corporation pass to the owners. What effect does this have?

Correct Answer
verified

Nathan is a sole proprietor. How is the income earned in his business taxed?

Correct Answer
verified

An S corporation is taxed just like any other corporation.

Correct Answer
verified

Correct Answer
verified

Lawyers, Inc. is a large law practice with partners that specialize in real estate closings, estate planning, and divorce proceedings. Since each partner specializes in a different area of law, clients would be likely to

Correct Answer
verified

What is a true statement about the board members of a corporation?

Correct Answer
verified

All of the following are keys to a successful partnership EXCEPT partners must

Correct Answer
verified

Books to Grow, a corporation owned and managed by volunteers, supplies books and educational materials to impoverished children in Latin America. Its focus is not on earning a profit but on serving the community. Books to Grow is an example of a(n)

Correct Answer
verified

Ritesh wants to open his own bowling alley that will also serve alcoholic beverages and food. What will Ritesh have to do to start his business?

Correct Answer
verified

When two companies of different industries join together, it is an example of a

Correct Answer
verified

Exam 4: Options for Organizing Business

All of the following are true of 501(c) (3) organizations EXCEPT

Correct AnswerverifiedShow Answer

Sweet Scents, a candle company, purchases Nature Candle Products, its direct competitor, by buying most of its stock. In this scenario, Sweet Scents is involved in a(n)

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Smith, Taylor, and Jones is a law firm specializing in medical malpractice. Each owner has unlimited liability for the debts of the business and all owners share in the management of the firm. This law firm is an example of a

Correct AnswerverifiedShow Answer

A disadvantage of the corporate form of business ownership is that the

Correct AnswerverifiedShow Answer

Sasha works for a large corporation, and sometimes, she finds it difficult to see how she fits into the corporate picture. However, recently, her company decides to establish an employee stock ownership plan. Which is a benefit of this type of plan?

Correct AnswerverifiedShow Answer

The Dairy Farmers of America is an association of dairy farmers. Its agenda is not to make profits but to help its members market their products and to offer farmers a fair voice in national policymaking. Thus, The Dairy Farmers of America is an example of a(n)

Correct AnswerverifiedShow Answer

Which form of business ownership has the most freedom from government regulation?

Correct AnswerverifiedShow Answer

When Dr. Hamilton, a local physical therapist, dies, her children sell her physical therapy practice to a young, new therapist who just moved to the area. What advantage will this new therapist gain by buying a business rather than starting a new one?

Correct AnswerverifiedShow Answer

In an S corporation, net profits and losses of the corporation pass to the owners. What effect does this have?

Correct AnswerverifiedShow Answer

Nathan is a sole proprietor. How is the income earned in his business taxed?

Correct AnswerverifiedShow Answer

An S corporation is taxed just like any other corporation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Lawyers, Inc. is a large law practice with partners that specialize in real estate closings, estate planning, and divorce proceedings. Since each partner specializes in a different area of law, clients would be likely to

Correct AnswerverifiedShow Answer

What is a true statement about the board members of a corporation?

Correct AnswerverifiedShow Answer

All of the following are keys to a successful partnership EXCEPT partners must

Correct AnswerverifiedShow Answer

Books to Grow, a corporation owned and managed by volunteers, supplies books and educational materials to impoverished children in Latin America. Its focus is not on earning a profit but on serving the community. Books to Grow is an example of a(n)

Correct AnswerverifiedShow Answer

Ritesh wants to open his own bowling alley that will also serve alcoholic beverages and food. What will Ritesh have to do to start his business?

Correct AnswerverifiedShow Answer

When two companies of different industries join together, it is an example of a

Correct AnswerverifiedShow Answer

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verified

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verified

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