PART A. OBJECTIVE QUESTIONS.
TRUE OR FALSE. PLACE A "T" (FOR TRUE) ON THE LINE IMMEDIATELY FOLLOWING THE QUESTION NUMBER IF THE STATEMENT IS TRUE; PLACE AN "F" (FOR FALSE) ON THE LINE IMMEDIATELY FOLLOWING THE QUESTION NUMBER IF THE STATEMENT IS FALSE. ALSO, IF THE QUESTION IS FALSE, PLEASE EXPLAIN WHY.
1. _____ A sole proprietor must file a certificate indicating that he or she is commencing operations and pay a single organizational fee.
IF FALSE, EXPLAIN:
2. _____ A sole proprietorship must pay, at the corporate income tax rate, income taxes based on the net earnings of the sole proprietorship.
IF FALSE, EXPLAIN:
3. _____ A partnership is not dissolved by the death of a partner.
IF FALSE, EXPLAIN:
4. _____ A corporation must have at least two shareholders.
IF FALSE, EXPLAIN:
5. _____ The death of a majority shareholder terminates a corporate enterprise.
IF FALSE, EXPLAIN:
6. _____ Most courts hold that joint ventures are not subject to the same principles of law as partnerships.
IF FALSE, EXPLAIN:
MULTIPLE CHOICE. PLACE THE LETTER THAT CORRESPONDS TO THE CORRECT ANSWER ON THE LINE IMMEDIATELY FOLLOWING THE QUESTION NUMBER.
7. _____ The principal forms of business organization are:
a. sole proprietorships, joint ventures, and corporations.
b. unincorporated associations, partnerships, and corporations.
c. sole proprietorships, partnerships, and corporation's
d. unincorporated associations, limited partnerships, and corporations.
8. _____ A sole proprietorship is taxed:
a. only on a personal and a corporate level.
b. only on the corporate level.
c. on a personal.
d. none of the above.
9. _____ A major disadvantage of the sole proprietorship is:
a. no organizational fees.
b. the sole proprietor obtains all of the profits.
c. the sole proprietor is personally liable for the debts of the sole proprietorship.
d. the sole proprietor is free to make all business decisions concerning operation of the sole proprietorship.
10. _____ A limited liability partnership:
a. is taxed like a corporation.
b. provides limited liability for all partners.
c. shields innocent partners from personal liability beyond their investment.
d. All of the above.
PART B. SHORT RESPONSE.
11. What are the principal forms of business organizations? (60 to 100 words, you can write more if you want)
12. What are the specialized forms of business organizations? (60 to 100 words, you can write more if you want)
PART C. CASE STUDIES.
13. Sally Gomez is interested in starting a new business. Gomez has developed her business plan and is ready to implement her ideas. However, Gomez lacks the necessary finances to begin her new business. Along with a lack of finances, Gomez worries about the potential liability involved with starting a new business.
Gomez would hate to lose all that she has personally accumulated to date in the event of a successful lawsuit against her. She is considering a sole proprietorship, a partnership, or a corporation as the organizing structure of her new venture. Which type of business would best serve Gomez's needs at this given time? (200 words minimum).
14. Arnold was the sole shareholder, president, and CEO of Algernon Enterprises, Inc. Acting on behalf of Algernon, Arnold negotiated the purchase on credit of inventory from Amax. The contract was signed in the name of Algernon Enterprises. Algernon never paid the sums due on the contract, and Arnold and the corporation were sued. What is the liability of Arnold? (200 words minimum).