Business Administration Exam
queries and answers graded A+
Sole proprietorship - ANS✅✅A business that is owned, and usually managed, by one person.
Partnership - ANS✅✅A legal form of business with two or more owners.
Corporation - ANS✅✅A legal entity with authority to act and have liability separate from its
owners.
Sole Proprietorships and Partnerships are both: - ANS✅✅easy to form
The types of partnerships limit liability - ANS✅✅Limited Liability Partnership, Limited Partnership,
Master Limited Partnership.
The types of partnerships that do not limit liability - ANS✅✅General Partnership
The shared characteristics of S-corporations and C-corporations: - ANS✅✅Paperwork & Details
The differences between s-corporations and c-corporations: - ANS✅✅S corporations have
shareholders, directors, and employees, and the benefit of limited liability, but their profits are taxed
only as the personal income of the shareholders—thus avoiding the double taxation of C
corporations.
The characteristics of limited liability companies (LLCs): - ANS✅✅Protects like a corporation
(typically, liability is limited to investment), Taxed like a partnership (or like a corporation, if desired),
No eligibility requirements for investments or ownership, Fewer administrative tasks and less
record-keeping than a corporation.
How LLC's are similar to both corporations and partnerships: - ANS✅✅offer protection of personal
assets; can be taxed like a partnership (or like a corporation, if desired). LLC protects like a
corporation
Differences between S-corps and (LLCs): - ANS✅✅LLCs do not have special eligibility requirements.
,S-corps - ANS✅✅a unique government creation that looks like a corporation but is taxed like sole
proprietorships and partnerships.
LLCs - ANS✅✅corporate which investors have limited liability; similar to S corporations without
eligibility requirements.
Personal liability as a function of business type: - ANS✅✅can be limited or unlimited depending on
what business type. Can either be responsible for liability or not. Can be limited by an investment
like an LLC and protected if like a corporation.
Sole Proprietorship Advantages: - ANS✅✅Easy to start, Easy to end, You can be your own boss,
Pride of ownership, Profits taxed as personal income (avoids double-taxation)
Sole Proprietorship Disadvantages: - ANS✅✅Unlimited personal liability, Limited financial
resources, Limited managerial resources, Huge time commitment, Few fringe benefits (Paid health
or disability ins., sick leave, etc.), Business life is tied to life of owner (Must make arrangements to
"pass" the business on to children).
Partnership Advantages: - ANS✅✅More financial resources, More managerial resources, Profits
are taxed as personal income (Avoids double taxation), Limited partners have limited personal
liability, Longer survival because more than one person owns and contributes.
Partnership Disadvantages: - ANS✅✅Unlimited personal liability for general partners, Potential
conflicts regarding sharing profits, Disagreements among partners, Difficulty terminating
partnerships.
Corporation Advantages: - ANS✅✅Limited liability, Enhanced ability to raise money by selling
shares of stock, Relative ease of changing ownership, Potentially, perpetual life beyond that of the
owners, Easier to separate management from ownership.
Corporation Disadvantages: - ANS✅✅Costly to set up, Double taxation (C-corp only), Can be lots of
yearly paperwork, Difficulties in terminating corporation, Possible conflicts between management
and board of directors.
What is required to start a sole proprietorship? - ANS✅✅Obtain a Federal Employer Identification
Number (EIN), Register your fictitious business name with your county or state (FBN), Obtain a local
, tax registration certificate, Obtain a permit to sell retail goods and collect state sales tax, and Obtain
specialized vocation-related licenses or environmental permits if necessary.
Domestic corporation - ANS✅✅an incorporated company in the state in which it is incorporated.
Foreign corporation - ANS✅✅an incorporated company that is in all other states.
Alien corporation - ANS✅✅an incorporated business from a different country.
Stock - ANS✅✅the shares of ownership of a corporation.
Stockholder / shareholder - ANS✅✅a person who owns a corporation's stock.
Private company /closed corporation - ANS✅✅stock is owned by relatively few people and not
sold to public.
Public company / open corporation - ANS✅✅stock is bought and sold on security exchanges and
can be bought by anyone.
Nonprofit corporation - ANS✅✅an organization formed to serve the public good rather than
purely for the creation of profit itself, as businesses aim to do.
Multinational corporation - ANS✅✅has facilities and other assets in at least one country other
than its home country.
Preferred stock - ANS✅✅no voting rights, but primarily claims on dividends.
Common stock - ANS✅✅voting rights, but subordinate claims on dividends.
Double-taxation - ANS✅✅when corporate income is taxed twice.
Form of business that represents the largest percentage of business in the United States: -
ANS✅✅Sole proprietorships (72%)
queries and answers graded A+
Sole proprietorship - ANS✅✅A business that is owned, and usually managed, by one person.
Partnership - ANS✅✅A legal form of business with two or more owners.
Corporation - ANS✅✅A legal entity with authority to act and have liability separate from its
owners.
Sole Proprietorships and Partnerships are both: - ANS✅✅easy to form
The types of partnerships limit liability - ANS✅✅Limited Liability Partnership, Limited Partnership,
Master Limited Partnership.
The types of partnerships that do not limit liability - ANS✅✅General Partnership
The shared characteristics of S-corporations and C-corporations: - ANS✅✅Paperwork & Details
The differences between s-corporations and c-corporations: - ANS✅✅S corporations have
shareholders, directors, and employees, and the benefit of limited liability, but their profits are taxed
only as the personal income of the shareholders—thus avoiding the double taxation of C
corporations.
The characteristics of limited liability companies (LLCs): - ANS✅✅Protects like a corporation
(typically, liability is limited to investment), Taxed like a partnership (or like a corporation, if desired),
No eligibility requirements for investments or ownership, Fewer administrative tasks and less
record-keeping than a corporation.
How LLC's are similar to both corporations and partnerships: - ANS✅✅offer protection of personal
assets; can be taxed like a partnership (or like a corporation, if desired). LLC protects like a
corporation
Differences between S-corps and (LLCs): - ANS✅✅LLCs do not have special eligibility requirements.
,S-corps - ANS✅✅a unique government creation that looks like a corporation but is taxed like sole
proprietorships and partnerships.
LLCs - ANS✅✅corporate which investors have limited liability; similar to S corporations without
eligibility requirements.
Personal liability as a function of business type: - ANS✅✅can be limited or unlimited depending on
what business type. Can either be responsible for liability or not. Can be limited by an investment
like an LLC and protected if like a corporation.
Sole Proprietorship Advantages: - ANS✅✅Easy to start, Easy to end, You can be your own boss,
Pride of ownership, Profits taxed as personal income (avoids double-taxation)
Sole Proprietorship Disadvantages: - ANS✅✅Unlimited personal liability, Limited financial
resources, Limited managerial resources, Huge time commitment, Few fringe benefits (Paid health
or disability ins., sick leave, etc.), Business life is tied to life of owner (Must make arrangements to
"pass" the business on to children).
Partnership Advantages: - ANS✅✅More financial resources, More managerial resources, Profits
are taxed as personal income (Avoids double taxation), Limited partners have limited personal
liability, Longer survival because more than one person owns and contributes.
Partnership Disadvantages: - ANS✅✅Unlimited personal liability for general partners, Potential
conflicts regarding sharing profits, Disagreements among partners, Difficulty terminating
partnerships.
Corporation Advantages: - ANS✅✅Limited liability, Enhanced ability to raise money by selling
shares of stock, Relative ease of changing ownership, Potentially, perpetual life beyond that of the
owners, Easier to separate management from ownership.
Corporation Disadvantages: - ANS✅✅Costly to set up, Double taxation (C-corp only), Can be lots of
yearly paperwork, Difficulties in terminating corporation, Possible conflicts between management
and board of directors.
What is required to start a sole proprietorship? - ANS✅✅Obtain a Federal Employer Identification
Number (EIN), Register your fictitious business name with your county or state (FBN), Obtain a local
, tax registration certificate, Obtain a permit to sell retail goods and collect state sales tax, and Obtain
specialized vocation-related licenses or environmental permits if necessary.
Domestic corporation - ANS✅✅an incorporated company in the state in which it is incorporated.
Foreign corporation - ANS✅✅an incorporated company that is in all other states.
Alien corporation - ANS✅✅an incorporated business from a different country.
Stock - ANS✅✅the shares of ownership of a corporation.
Stockholder / shareholder - ANS✅✅a person who owns a corporation's stock.
Private company /closed corporation - ANS✅✅stock is owned by relatively few people and not
sold to public.
Public company / open corporation - ANS✅✅stock is bought and sold on security exchanges and
can be bought by anyone.
Nonprofit corporation - ANS✅✅an organization formed to serve the public good rather than
purely for the creation of profit itself, as businesses aim to do.
Multinational corporation - ANS✅✅has facilities and other assets in at least one country other
than its home country.
Preferred stock - ANS✅✅no voting rights, but primarily claims on dividends.
Common stock - ANS✅✅voting rights, but subordinate claims on dividends.
Double-taxation - ANS✅✅when corporate income is taxed twice.
Form of business that represents the largest percentage of business in the United States: -
ANS✅✅Sole proprietorships (72%)
