ETH/321T Week 2 Practice Questions with Verified Solutions

ETH/321T Week 2 Practice Questions with Verified Solutions What is the definition of a foreign corporation? A business formed in a different state What is the definition of a Subchapter S corporation? A business that passes profits directly to shareholders Wade and Hunter want to start a business. They have a large amount of capital. They have a good working relationship and believe they will do well sharing management responsibility and in sharing profits. They are happy to be organizing a business together in order to avoid full liability for the business. Which detail(s) of this situation would be most unhelpful toward Wade and Hunter's decision to organize a general partnership? Avoiding full liability Wade and Hunter’s anticipation of limited liability would be a mistake if they are organizing a general partnership. Sharing management responsibility and profits are valid benefits of a general partnership, and while a large amount of capital is unnecessary in organizing one, it would certainly still be beneficial. Found in the following section(s) of the text: 2.3: General Partnerships What is a public corporation? A business formed by the government What is a closely-held corporation? A business with a small number of shareholders Albus wants to build a business. He wants to start the business fast and reach a large customer base, but he only has a small amount of opening capital. He has no partner with whom to form the business. Which of the following is not a valid reason for Albus to choose a sole proprietorship organization for his business? Wants to reach a large customer base Reaching a large customer base is the only detail of Albus’ situation that is not a reason to pursue sole proprietorship based on the text. Found in the following section(s) of the text: 2.2: Small Business Structures Which of the following is false concerning LLCs? LLCs are formed in much the same way as a general partnership. The text states that LLCs are a creation of state statute. Found in the following section(s) of the text: 2.8: Limited Liability Corporations Tawny wants to be involved in a business. She has lots of capital to invest and she wants to be involved in management, but does not want to be exposed to personal liability for losses the business might incur and she does not want to have to pay excessive taxes on her gains. Which form of business would be best for Tawny? LLC Only an LLC would satisfy all of the details of Tawny’s situation. Found in the following section(s) of the text: 2.8: Limited