Question

1) Which of the following is true of sole proprietorship?

a)They form the majority of all businesses located in the United States.

b)They are the most expensive type of business to create and maintain

c)They account for the majority of the profits made in the United States

d)They are entities which protect their owners from all types of liability.

2) Which of the following is true of general partnerships?

a)General partnerships are taxable entities operated by a sole proprietor.

b)General partnerships comprise limited partners with limited liabilities

c)Partners do not play a major decision-making role in the life of the business.

d)Partners’ business losses can be deducted from personal income taxes.

3)Which of the following is true of C-corporations?

a)They are the most basic type of business organization in the United States.

b)Shareholders are liable only for their original investment in the business.

c)They form the majority of all business organizations in the United States.

d)Shareholders can be sued for amounts larger than their original investment.

4) Which of the following is true of limited liability companies?

a)The format is used primarily by banking industries.

b)The company can have no more than ten shareholders.

c)The format cannot be availed of by insurance industries

d) The format offers participants no tax or financial benefits

Answer 1

1.

Answer: a

This is the small business of single ownership. It creates majority of business in the country, because it is less expensive to form.

2.

Answer: d

This is the legal agreement between two or more partners for any legal business; partners must have unlimited liabilities. The business loss could be deducted from the personal income tax.

3.

Answer: b

This is the business where the owners or shareholders have limited liability – liability exits only up to the investments made in shares; personal property of shareholders must not be liable.

4.

Answer: d

There is no personal liability of the participants; therefore, there is no tax liability in the business; the profit or loss through the business is added with participants’ personal income for paying personal income tax.