, 6 Major Factors for Choosing a Business Form - CORRECT ANSWERS-1. Personal
liability of the business owner
2. Taxation of both the entity and its owners
3. Complexity and organizational costs in setting up
4. Control of the business
5. Continuity of the business
6. Ability of the business to raise capital
Advantages of Sole Proprietorships - CORRECT ANSWERS-1. Secrecy
2. Unique tax advantages
3. Owner doesn't have to share profits
4. Relative freedom of action and control
5. Easiest and simplest form to organize, operate, and dissolve
Disadvantages of Sole Proprietorships - CORRECT ANSWERS-1. Limited capital
2. Difficulty obtaining credit
3. Inadequate management and employee skills
4. Unlimited liability for the firm's debts
5. Limited life because business and owner are legally the same
Disadvantages of Partnerships - CORRECT ANSWERS-1. Limited life
2. Unlimited liability for firm's debts
3. Each partner is responsible for the acts of every other partner
4. An impasse may develop if the partners become incompatible
5. Death of any one of the partners terminates the partnership
6. A partner cannot obtain bonding protection against the acts of the other partners
Advantages of Partnerships - CORRECT ANSWERS-1. Easy to form
2. Division of labor and management responsibility
3. Can use idea and plans of more than one person
4. Specialized skills available from individual partners
5. Can raise more capital since good credit may be available
6. Obtains financial resources from more than one person
Restrictions of S-Corporations - CORRECT ANSWERS--Shareholders of the corp must
be individuals, estates, or certain trusts that are US persons
-Corp must have no more than 100 shareholders
-Corp must have only one class of stock, although all shareholders do not need to have
the same voting rights
Limited Liability Company (LLC) - CORRECT ANSWERS--"Newer" business form
-Members are called "owners"
-May be taxed as a partnership or corporation
liability of the business owner
2. Taxation of both the entity and its owners
3. Complexity and organizational costs in setting up
4. Control of the business
5. Continuity of the business
6. Ability of the business to raise capital
Advantages of Sole Proprietorships - CORRECT ANSWERS-1. Secrecy
2. Unique tax advantages
3. Owner doesn't have to share profits
4. Relative freedom of action and control
5. Easiest and simplest form to organize, operate, and dissolve
Disadvantages of Sole Proprietorships - CORRECT ANSWERS-1. Limited capital
2. Difficulty obtaining credit
3. Inadequate management and employee skills
4. Unlimited liability for the firm's debts
5. Limited life because business and owner are legally the same
Disadvantages of Partnerships - CORRECT ANSWERS-1. Limited life
2. Unlimited liability for firm's debts
3. Each partner is responsible for the acts of every other partner
4. An impasse may develop if the partners become incompatible
5. Death of any one of the partners terminates the partnership
6. A partner cannot obtain bonding protection against the acts of the other partners
Advantages of Partnerships - CORRECT ANSWERS-1. Easy to form
2. Division of labor and management responsibility
3. Can use idea and plans of more than one person
4. Specialized skills available from individual partners
5. Can raise more capital since good credit may be available
6. Obtains financial resources from more than one person
Restrictions of S-Corporations - CORRECT ANSWERS--Shareholders of the corp must
be individuals, estates, or certain trusts that are US persons
-Corp must have no more than 100 shareholders
-Corp must have only one class of stock, although all shareholders do not need to have
the same voting rights
Limited Liability Company (LLC) - CORRECT ANSWERS--"Newer" business form
-Members are called "owners"
-May be taxed as a partnership or corporation
