March 25
LOMA 308 Module 2 Exam Complete Questions and Correct
Detailed Answers (Verified Answers)
Suppose that you want to start your own insurance company. The first thing you
need to decide is what kind of structure your company will have. Which
organizational structures do you think you can choose from?
a. sole proprietorship
b. partnership
c. corporation
Ans: c. - Laws in most jurisdictions require insurance companies to be organized as
corporations. In this lesson, you'll learn why that structure is required. You'll also
learn how organizational form and management affect the way an insurance
company does business.
Sole Proprietorship
Ans: is created, owned, and operated by one person.
he owner earns all company profits and is responsible for all company debts.
Company operations cease if the owner dies.
The company is considered a privately held company because ownership is restricted
to a specified individual.
privately held company
pg. 1
, March 25
Ans: A company in which ownership is restricted to specified individuals. Contrast
with publicly held company.
partnership
Ans: is created, owned, and operated by two or more partners.
Partners earn all company profits and are responsible for all company debts.
A two-owner partnership dissolves if a partner dies or withdraws; a partnership with
many owners will continue as long as there are two or more owners.
The company is considered a privately held company because ownership is limited to
specified individuals.
Corporation
Ans: is a legal entity created by government authority.
It's separate from its owners, so owners can't be held responsible for company debts.
Operations continue even if one or more owners die or withdraw.
It can sue or be sued, enter into contracts, and own property.
It can be a privately held company or a publicly held company that sells ownership
shares to the public.
publicly held company
pg. 2
, March 25
Ans: A company that sells ownership shares to the public. Contrast with privately
held company.
requirements for incorporation
Ans: In the U.S., insurance companies are incorporated at the state level.
A description of the company, including its name, location, plan for organizing
operations, and the type of business it intends to conduct
The names of the company's original directors
The amount of initial investment being made by company owners
Licensing
Ans: license granting the insurer the legal authority to conduct insurance business in
a specific jurisdiction. An insurer that intends to do business in more than one
jurisdiction must obtain a license from each jurisdiction. In the U.S., that means a
license from each state in which the insurer will operate.
The purpose of licensing is to ensure that an insurance company is
Financially sound and able to meet its obligation to policyowners
Directed by knowledgeable and capable managers
Which of the following are characteristics of a sole proprietorship? (Choose all that
apply.)
A. Owned and operated by one person
pg. 3
, March 25
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
I. Owner(s) not responsible for company debts
Ans: A, B, C, & G
Which of the following are characteristics of a partnership? (Choose all that apply.)
A. Owned and operated by one person
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
pg. 4
LOMA 308 Module 2 Exam Complete Questions and Correct
Detailed Answers (Verified Answers)
Suppose that you want to start your own insurance company. The first thing you
need to decide is what kind of structure your company will have. Which
organizational structures do you think you can choose from?
a. sole proprietorship
b. partnership
c. corporation
Ans: c. - Laws in most jurisdictions require insurance companies to be organized as
corporations. In this lesson, you'll learn why that structure is required. You'll also
learn how organizational form and management affect the way an insurance
company does business.
Sole Proprietorship
Ans: is created, owned, and operated by one person.
he owner earns all company profits and is responsible for all company debts.
Company operations cease if the owner dies.
The company is considered a privately held company because ownership is restricted
to a specified individual.
privately held company
pg. 1
, March 25
Ans: A company in which ownership is restricted to specified individuals. Contrast
with publicly held company.
partnership
Ans: is created, owned, and operated by two or more partners.
Partners earn all company profits and are responsible for all company debts.
A two-owner partnership dissolves if a partner dies or withdraws; a partnership with
many owners will continue as long as there are two or more owners.
The company is considered a privately held company because ownership is limited to
specified individuals.
Corporation
Ans: is a legal entity created by government authority.
It's separate from its owners, so owners can't be held responsible for company debts.
Operations continue even if one or more owners die or withdraw.
It can sue or be sued, enter into contracts, and own property.
It can be a privately held company or a publicly held company that sells ownership
shares to the public.
publicly held company
pg. 2
, March 25
Ans: A company that sells ownership shares to the public. Contrast with privately
held company.
requirements for incorporation
Ans: In the U.S., insurance companies are incorporated at the state level.
A description of the company, including its name, location, plan for organizing
operations, and the type of business it intends to conduct
The names of the company's original directors
The amount of initial investment being made by company owners
Licensing
Ans: license granting the insurer the legal authority to conduct insurance business in
a specific jurisdiction. An insurer that intends to do business in more than one
jurisdiction must obtain a license from each jurisdiction. In the U.S., that means a
license from each state in which the insurer will operate.
The purpose of licensing is to ensure that an insurance company is
Financially sound and able to meet its obligation to policyowners
Directed by knowledgeable and capable managers
Which of the following are characteristics of a sole proprietorship? (Choose all that
apply.)
A. Owned and operated by one person
pg. 3
, March 25
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
I. Owner(s) not responsible for company debts
Ans: A, B, C, & G
Which of the following are characteristics of a partnership? (Choose all that apply.)
A. Owned and operated by one person
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
pg. 4
