Quiz 3

Which of the following is an advantage of a sole proprietorship?

• a. Ease of pooling financial resources.

• b. Ability to attract talented employees.

• c. Retention of control.

• d. Limited liability

 A key advantage of a sole proprietorship is that:

• a. it is easy and inexpensive to form this type of business.

• b. the owner has limited liability for the debts incurred.

• c. it is very easy to raise financial capital for this type of business.

• d. the business has perpetual life.

Tina is the owner of a dance studio.  As a sole proprietor, any profit she earns is:

• a. taxed twice, once as a business and then again as Tina's income.

• b. treated as a personal income of Tina.

• c. not subjected to any tax.

• d. taxed only when she withdraws the money from a bank.

 A key reason most sole proprietorships remain relatively small is that:

• a. they have limited ability to raise funds needed to finance growth.

• b. they involve extensive paperwork and incur heavy costs.

• c. heavy taxes are levied directly on their earnings as a business.

• d. their stockholders would rather receive dividends than have earnings reinvested to finance growth.

Sole proprietorships have _______________________ for the debts of their companies.

• a. no liability.

• b. limited liability.

• c. shared liability.

• d. unlimited liability.

 Which of the following statements is true of formation of a general partnership?

• a. It is safer to get everything in writing and to seek expert legal assistance when drawing up an agreement.

• b. It is legally not possible to start a partnership on the basis of a verbal agreement.

• c. There is a limit on the number of partners who can participate in a general partnership.

• d. A general partnership is formed when partners enter into an involuntary partnership agreement.

Compared to a sole proprietorship, a general partnership:

• a. has certainty regarding how long a business will last.

• b. is likely to have a stronger financial base.

• c. has limited ability to attract and maintain employees.

• d. is likely to have limited liability.

 A similarity between a general partnership and a sole proprietorship is:

• a. their ability to pool in financial resources.

• b. their ability to share responsibilities.

• c. their ability to avoid double taxation.

• d. the limited liability the owners enjoy.

_____________ are the most common types of corporations.

• a. S corporations.

• b. Closed corporations.

• c. C corporations

• d. Nonprofit corporations.

A ________ is a legal business entity that offers limited liability to all of its owners.

• a. C corporation.

• b. sole proprietorship.

• c. limited partnership.

• d. general partnership.