Question 1

What is a limited liability company? Explain the advantages and disadvantages of this type of business ownership?

Accepted Answer

A limited liability company (LLC)is a re...

Question 2

Franchise fees can be costly,but they are usually payable over a number of years,after profits are generated from the business.

Accepted Answer

A) True 
 B)False

Question 3

Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Accepted Answer

A sole proprietorship is an unincorporat...

Question 4

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Accepted Answer

A)   sole proprietorship.
B)   partnership.
C)   joint venture.
D)   limited liability company.E) A) and B)
F) A) and C)

Question 5

Which of the following transactions would be considered by the IRS to be a taxable sale of assets? Changing the form of business from:

Accepted Answer

A)   a corporation to an LLC.
B)   a partnership to an LLC.
C)   an LLC to a corporation.
D)   All of the above.E) C) and D)
F) A) and B)

Question 6

All the business forms listed below have limited liability except the:

Accepted Answer

A)   limited liability company.
B)   general partnership.
C)   Subchapter "S" corporation.
D)   corporation.E) A) and D)
F) C) and D)

Question 7

The term "S Corporation" comes from:

Accepted Answer

A)   the Internal Revenue Code.
B)   the FTC rules.
C)   the U.S. Constitution.
D)   state corporation law.E) None of the above
F) All of the above

Question 8

An S Corporation cannot have more than ____ shareholders.

Accepted Answer

A)   100
B)   75
C)   50
D)   25E) B) and C)
F) A) and C)

Question 9

Cooperatives may be either incorporated or unincorporated businesses.

Accepted Answer

A) True 
 B)False

Question 10

James was a partner in a large firm.He died unexpectedly.His son,Frank,wanted to take over for his father in the partnership and was well qualified to do the work his father had done.Which statement best describes Frank's rights in the partnership if he inherits the interest?

Accepted Answer

A)   Frank has a right to take over for his father in the partnership.
B)   Frank is entitled to the value in the partnership, but not to become a full partner.
C)   Frank has no rights to his father's partnership interest.
D)   None of the above.E) B) and C)
F) A) and B)

Question 11

A limited liability company,unlike a Subchapter S corporation,can have members that are corporations,partnerships,or nonresident aliens.

Accepted Answer

A) True 
 B)False

Question 12

E.I.James is a writer with a best selling novel.He wishes to create a corporation called "James,Inc." He will be the only shareholder.Can James incorporate his business of writing?

Accepted Answer

A)   Yes, this would be the incorporation of a sole proprietorship.
B)   No, the law requires at least two people to be shareholders of a corporation.
C)   No, the law does not permit a person to, in effect, incorporate himself.
D)   Only if he forms an S Corporation.E) A) and D)
F) None of the above

Question 13

The advantage of a corporation over a partnership is:

Accepted Answer

A)   shares are easily transferable to another person.
B)   perpetual existence.
C)   it is easier to raise funds.
D)   All the above.E) None of the above
F) A) and B)

Question 14

To be a close corporation,the business must be small,with no more than 20 owners and no more than $500,000 in gross annual income.

Accepted Answer

A) True 
 B)False

Question 15

Rachel and Cyndi started a retail business called Zebra Toy Company.The business is operated as a partnership.Under partnership law:

Accepted Answer

A)   Rachel is personally liable for any business contracts entered into by Cyndi.
B)   Rachel is personally liable for any business debts, regardless of whether she or Cyndi created the obligation.
C)   Rachel is personally liable for any negligent act committed by Cyndi in the scope of the business activity.
D)   All the above.E) B) and C)
F) C) and D)

Question 16

To form an LLC,a charter and an operating agreement must be filed with the Secretary of State in the jurisdiction where the business will operate.

Accepted Answer

A) True 
 B)False

Question 17

Seventy farmers in Morgan County joined together to gain the advantages of purchasing seed and fertilizer in bulk and of obtaining better prices when distributing and selling their crops.These farmers have formed a:

Accepted Answer

A)   business trust.
B)   cooperative.
C)   franchise.
D)   joint venture.E) A) and B)
F) A) and C)

Question 18

Filings are required to form and operate a limited liability partnership.

Accepted Answer

A) True 
 B)False

Question 19

The most common form of business ownership is the corporation.

Accepted Answer

A) True 
 B)False

Question 20

Daniel,his parents,and three brothers own all the stock of their family farm corporation.This corporation,which is taxed as a corporation,is probably:

Accepted Answer

A)   an S corporation.
B)   a C corporation.
C)   a closely held corporation.
D)   an LLC.E) A) and B)
F) A) and C)

Exam 31: Starting A Business

What is a limited liability company? Explain the advantages and disadvantages of this type of business ownership?

Correct AnswerverifiedA limited liability company (LLC)is a re...View AnswerShow Answer

E.I.James is a writer with a best selling novel.He wishes to create a corporation called "James,Inc." He will be the only shareholder.Can James incorporate his business of writing?

Correct AnswerverifiedShow Answer

To be a close corporation,the business must be small,with no more than 20 owners and no more than $500,000 in gross annual income.

Correct AnswerverifiedShow Answer

A limited liability company,unlike a Subchapter S corporation,can have members that are corporations,partnerships,or nonresident aliens.

Correct AnswerverifiedShow Answer

Cooperatives may be either incorporated or unincorporated businesses.

Correct AnswerverifiedShow Answer

James was a partner in a large firm.He died unexpectedly.His son,Frank,wanted to take over for his father in the partnership and was well qualified to do the work his father had done.Which statement best describes Frank's rights in the partnership if he inherits the interest?

Correct AnswerverifiedShow Answer

All the business forms listed below have limited liability except the:

Correct AnswerverifiedShow Answer

Seventy farmers in Morgan County joined together to gain the advantages of purchasing seed and fertilizer in bulk and of obtaining better prices when distributing and selling their crops.These farmers have formed a:

Correct AnswerverifiedShow Answer

Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Correct AnswerverifiedA sole proprietorship is an unincorporat...View AnswerShow Answer

An S Corporation cannot have more than ____ shareholders.

Correct AnswerverifiedShow Answer

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Correct AnswerverifiedShow Answer

To form an LLC,a charter and an operating agreement must be filed with the Secretary of State in the jurisdiction where the business will operate.

Correct AnswerverifiedShow Answer

Franchise fees can be costly,but they are usually payable over a number of years,after profits are generated from the business.

Correct AnswerverifiedShow Answer

Which of the following transactions would be considered by the IRS to be a taxable sale of assets? Changing the form of business from:

Correct AnswerverifiedShow Answer

Filings are required to form and operate a limited liability partnership.

Correct AnswerverifiedShow Answer

Rachel and Cyndi started a retail business called Zebra Toy Company.The business is operated as a partnership.Under partnership law:

Correct AnswerverifiedShow Answer

The most common form of business ownership is the corporation.

Correct AnswerverifiedShow Answer

The advantage of a corporation over a partnership is:

Correct AnswerverifiedShow Answer

The term "S Corporation" comes from:

Correct AnswerverifiedShow Answer

Daniel,his parents,and three brothers own all the stock of their family farm corporation.This corporation,which is taxed as a corporation,is probably:

Correct AnswerverifiedShow Answer

Correct Answer
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A limited liability company (LLC)is a re...
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A sole proprietorship is an unincorporat...
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