Business Ownership Quiz

Which of the following best describes a franchise?

• A business owned by two or more individuals who share profits and losses.

• A business model where individuals can buy rights to open and operate a location of a larger company.

• A business owned and operated by a single individual.

• A business structure that provides its owners with limited liability protection.

What is a key characteristic of a partnership?

• The business has perpetual existence.

• The business is owned by shareholders.

• The owners share profits and losses.

• The owner has unlimited liability.

Which of the following is true about a Limited Liability Company (LLC)?

• It is owned by a single individual.

• It combines elements of partnerships and corporations.

• It cannot enter into contracts.

• It offers no liability protection to its owners.

What is the main advantage of a sole proprietorship?

• It is easy and inexpensive to form.

• It offers the highest level of liability protection.

• It allows for easy transfer of ownership.

• It can sell stocks to raise funds.

Which of the following best defines a corporation?

• A business owned by a single individual.

• A business where the owners share profits and losses.

• A business entity that is legally separate from its owners.

• A business that operates in multiple locations under a single brand name.

In a franchise, who is responsible for managing the day-to-day operations?

• The franchisor

• The government

• The franchisee

• A board of directors

Which of the following is a disadvantage of a partnership?

• Limited growth potential

• High start-up costs

• Joint and several liability

• Difficulty in transferring ownership

What does it mean for an LLC to have "pass-through" taxation?

• The LLC itself pays taxes on its income.

• Taxes on the LLC's income are passed through to the owners' personal tax returns.

• The LLC can choose whether to be taxed as a corporation or as a partnership.

• The LLC pays a flat tax rate, regardless of its income level.

Which of the following is NOT a characteristic of a sole proprietorship?

• The business is easy to dissolve.

• The owner has unlimited liability.

• The business has a separate legal identity from the owner.

• The owner retains all profits.

What is a common reason for forming a corporation?

• To avoid paying business taxes

• To protect owners from personal liability

• To ensure the business ceases when the owner dies

• To make it difficult to transfer ownership