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Exam 3: Selecting a Form of Business Ownership

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Question 21

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In deciding which legal form of business ownership to choose, these professionals must ask themselves all of the following questions _____.

A) How much control do you want
B) Do you want to share profits with others
C) What are your financing needs
D) All of these are critical questions to ask.

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Question 22

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The most important benefit of incorporation is the limited liability to which the owners are exposed.

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Question 23

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If the three brothers form a limited partnership, all three could be limited partners and therefore limit their liability.

If you want to own the business yourself, you might consider setting up as a(n) __________.

The most common type of business ownership in the United States is the sole proprietorship, which has one owner.

Bob Grange has just opened a new pet shop on Main Street.If he selected the easiest and cheapest legal form to start a business, what legal form would Bob Have selected?

In a limited partnership the limited partners' losses are limited to their investment in the business and not their personal assets.

A rationale behind mergers and acquisitions is to grab a bigger share of the market and improve profitability.

The sole proprietor supplies all the different talents needed to make the business a success.

The problem with general partnerships is:

_________are earnings distributed to shareholders by a corporation.

They would most likely form a public corporation.

A _____ is a business owned and operated jointly by two or more people.

An S-corporation would give them a more favorable tax treatment than a regular corporation.

A corporation pays taxes on its earnings.When the earnings are distributed as dividends, the shareholders pay taxes on these dividends.This is called _____.

A business that is owned and controlled by those who use its services is called a cooperative.

What benefit will Jerry enjoy over the years as the sole owner of his canoe renting company?

There are pros and cons for sole proprietorships and partnerships, but not for corporations.

A corporation is a legal entity that is entirely separate from the parties that own it.

Companies are motivated to merge or acquire other companies for a number of reasons, including gaining complementary products.