Q. In a partnership, what is the main disadvantage compared to a corporation?
A.
Limited lifespan
B.
Higher taxes
C.
More regulatory requirements
D.
Limited liability
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Solution
Partnerships typically have a limited lifespan, as they can dissolve upon the departure of a partner.
Correct Answer:
A
— Limited lifespan
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Q. In which business structure do owners have limited control over management?
A.
Sole proprietorship
B.
General partnership
C.
Corporation
D.
LLC
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Solution
In a corporation, owners (shareholders) have limited control over day-to-day management.
Correct Answer:
C
— Corporation
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Q. What is a common feature of both partnerships and LLCs?
A.
Limited liability for all owners
B.
Pass-through taxation
C.
Unlimited lifespan
D.
Formal management structure
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Solution
Both partnerships and LLCs typically benefit from pass-through taxation.
Correct Answer:
B
— Pass-through taxation
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Q. What is a common reason entrepreneurs choose to form a corporation?
A.
Simplicity of formation
B.
Limited liability protection
C.
Lower taxes
D.
Direct control over operations
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Solution
Entrepreneurs often choose corporations for the limited liability protection they offer.
Correct Answer:
B
— Limited liability protection
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Q. What is a key characteristic of a limited liability company (LLC)?
A.
Unlimited personal liability
B.
Pass-through taxation
C.
No formal structure required
D.
Ownership is restricted to one person
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Solution
An LLC allows for pass-through taxation, meaning profits are taxed at the owner's personal tax rate.
Correct Answer:
B
— Pass-through taxation
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Q. What is a primary reason entrepreneurs choose to form an LLC?
A.
Simplicity of formation
B.
Unlimited liability
C.
Complex tax structure
D.
Formal management requirements
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Solution
Entrepreneurs often choose an LLC for its simplicity of formation and flexibility.
Correct Answer:
A
— Simplicity of formation
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Q. What is a significant tax advantage of a sole proprietorship?
A.
Double taxation
B.
Pass-through taxation
C.
No tax obligations
D.
Higher tax rates
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Solution
Sole proprietorships benefit from pass-through taxation, where business income is taxed only at the owner's personal tax rate.
Correct Answer:
B
— Pass-through taxation
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Q. Which business structure is most suitable for raising capital through public investment?
A.
Sole proprietorship
B.
Partnership
C.
Corporation
D.
Cooperative
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Solution
Corporations can raise capital by selling shares to the public.
Correct Answer:
C
— Corporation
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Q. Which form of business ownership is characterized by a group of individuals who voluntarily cooperate for mutual social, economic, and cultural benefit?
A.
Sole proprietorship
B.
Partnership
C.
Corporation
D.
Cooperative
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Solution
A cooperative is formed by individuals who work together for mutual benefit.
Correct Answer:
D
— Cooperative
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Q. Which form of business ownership is characterized by having shareholders?
A.
Sole proprietorship
B.
Partnership
C.
Corporation
D.
LLC
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Solution
A corporation is characterized by having shareholders who own shares of the company.
Correct Answer:
C
— Corporation
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Q. Which form of business ownership provides the best protection against personal liability?
A.
Sole proprietorship
B.
Partnership
C.
Corporation
D.
Limited liability company (LLC)
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Solution
Corporations provide the best protection against personal liability for their owners.
Correct Answer:
C
— Corporation
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Q. Which form of business ownership provides the strongest protection against personal liability?
A.
Sole proprietorship
B.
General partnership
C.
Limited liability company (LLC)
D.
Corporation
Show solution
Solution
A corporation provides the strongest protection against personal liability for its owners.
Correct Answer:
D
— Corporation
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