MNG 201 actual exam QUESTIONS AND ANSWERS WITH CORRECT VERIFIED
ANSWERS|Latest 2025|A+ GUARANTEED
Chapter 11 -CORRECT ANSWER-Business organization
The 8 Factors assist us in determining the best business organization for the situation (can
evolve over time) -CORRECT ANSWER-1. Creation
2. Continuity/Stability
3. Control
4. Owner Liability
5. Taxation
6. Raise capital
7. Retain quality employees
8. Transfer interest
The more government approval, -CORRECT ANSWER-the more costly it is
Creation -CORRECT ANSWER--What is involved to create each type of business listed below
- How much approval do you have to have from the government -> the more approval, the
more expensive
Continuity/Stability -CORRECT ANSWER-- How is the life of the owner tied to the entity
- How easy is the entity dissolved
,-How is the life of the entity connected to the life of the owners
Continuity / Stability p2 -CORRECT ANSWER-- How easy is it for an owner to remove himself
and how does it affect the stability of the business
How to determine an owners share
Control -CORRECT ANSWER-o How much management/decision making/control does the
owner have over the business?
o How is the life of the entity connected to the life of the owners
o How easy is it for an owner to remove himself and how does it affect the stability of
o How to determine an owners share is.
Owner liability -CORRECT ANSWER-o How much of the owner's personal assets and personal
liability are exposed to business?
o How much is the owner's personal property exposed to business operations
o sometimes they can only take the business's assets
Taxation -CORRECT ANSWER-o Sometimes there is single taxation and sometimes there is
double taxation
double taxation is highly controversial. , now more complicated under new tax law
Raise capital -CORRECT ANSWER-o How easy is it to raise capital to expand and improve
business?
o Expand, cash flow problems
Retain quality employees -CORRECT ANSWER-o How difficult is it to keep my quality
employees around?
Transfer interest -CORRECT ANSWER-o How easy is it to transfer your interest? Some you
can't and some there is no market
,o How easy is it to sell the business/interest?
Compare liability between corporation and sole proprietorship -CORRECT ANSWER-..
Sole Proprietorship (most common) -CORRECT ANSWER-- No difference between person and
the business
- No distinction between the owner and the business, only one owner
Creation of sole proprietorship -CORRECT ANSWER--Simple
- There is no government approval whatsoever
-You may have to get permission for a restaurant
- May need approval if you operate under a different name
Continuity of a sole proprietorship -CORRECT ANSWER--Life of the owner
- Life of the business entity and life of owner are tied together
- New sole proprietorship if the original sole proprietor dies; the restaurant can stay around
but it is considered a new business
- If the owner dies the restaurant is a new business (Absolutely connected) becomes an
entirely different SP
Control of a sole proprietorship -CORRECT ANSWER-Great
- You have complete control because you are the only owner
-Delegate as much as you want
Liability of a sole proprietorship -CORRECT ANSWER-personal (terrible)
- Business creditors can get to any of your assets
- Unlimited liability -> You are responsible for everything - Car, house, will, life savings
Taxation of a sole proprietorship -CORRECT ANSWER-Single taxation
, ● occurs on the owner's individual income taxes
● have separate individual and business accounts for tax.
● The business does not pay tax at all, the individual pays the taxes on his individual income
tax return
Taxation of a sole proprietorship p2 -CORRECT ANSWER-● Retained earnings (Fully taxable in
a SP): you still have to pay tax on the earnings going into next year
● ***Loss → if you have a business somewhere else you can take it from there
● Now there is an ability as a sole proprietary to get a 20% off your tax liability
Transfer of a sole proprietorship -CORRECT ANSWER-● Can't transfer sole proprietorship.
● You are still able to sell the sole proprietorship
● Make a covenant not to compete clause - requires that the person selling the sole
proprietorship can not start a new business because then they will steal the customers
● Reasonable to: scope of activity, geographic location, period of time (max 2 years)
Retaining employees of a sole proprietorship -CORRECT ANSWER-Difficult
-small business so no way for them to move up
Raising capital of a sole proprietorship -CORRECT ANSWER-- Bank will want collateral -> the
only thing you really have is your personal assets
ex. Car, house, greater personal liability
If you buy a sole proprietorship -CORRECT ANSWER-You have to have a non-compete clause
in it
General partnership -CORRECT ANSWER-(on test) ● 2 or more people (business entities)
who own a common business interest and have to agree to share the profits and losses
ANSWERS|Latest 2025|A+ GUARANTEED
Chapter 11 -CORRECT ANSWER-Business organization
The 8 Factors assist us in determining the best business organization for the situation (can
evolve over time) -CORRECT ANSWER-1. Creation
2. Continuity/Stability
3. Control
4. Owner Liability
5. Taxation
6. Raise capital
7. Retain quality employees
8. Transfer interest
The more government approval, -CORRECT ANSWER-the more costly it is
Creation -CORRECT ANSWER--What is involved to create each type of business listed below
- How much approval do you have to have from the government -> the more approval, the
more expensive
Continuity/Stability -CORRECT ANSWER-- How is the life of the owner tied to the entity
- How easy is the entity dissolved
,-How is the life of the entity connected to the life of the owners
Continuity / Stability p2 -CORRECT ANSWER-- How easy is it for an owner to remove himself
and how does it affect the stability of the business
How to determine an owners share
Control -CORRECT ANSWER-o How much management/decision making/control does the
owner have over the business?
o How is the life of the entity connected to the life of the owners
o How easy is it for an owner to remove himself and how does it affect the stability of
o How to determine an owners share is.
Owner liability -CORRECT ANSWER-o How much of the owner's personal assets and personal
liability are exposed to business?
o How much is the owner's personal property exposed to business operations
o sometimes they can only take the business's assets
Taxation -CORRECT ANSWER-o Sometimes there is single taxation and sometimes there is
double taxation
double taxation is highly controversial. , now more complicated under new tax law
Raise capital -CORRECT ANSWER-o How easy is it to raise capital to expand and improve
business?
o Expand, cash flow problems
Retain quality employees -CORRECT ANSWER-o How difficult is it to keep my quality
employees around?
Transfer interest -CORRECT ANSWER-o How easy is it to transfer your interest? Some you
can't and some there is no market
,o How easy is it to sell the business/interest?
Compare liability between corporation and sole proprietorship -CORRECT ANSWER-..
Sole Proprietorship (most common) -CORRECT ANSWER-- No difference between person and
the business
- No distinction between the owner and the business, only one owner
Creation of sole proprietorship -CORRECT ANSWER--Simple
- There is no government approval whatsoever
-You may have to get permission for a restaurant
- May need approval if you operate under a different name
Continuity of a sole proprietorship -CORRECT ANSWER--Life of the owner
- Life of the business entity and life of owner are tied together
- New sole proprietorship if the original sole proprietor dies; the restaurant can stay around
but it is considered a new business
- If the owner dies the restaurant is a new business (Absolutely connected) becomes an
entirely different SP
Control of a sole proprietorship -CORRECT ANSWER-Great
- You have complete control because you are the only owner
-Delegate as much as you want
Liability of a sole proprietorship -CORRECT ANSWER-personal (terrible)
- Business creditors can get to any of your assets
- Unlimited liability -> You are responsible for everything - Car, house, will, life savings
Taxation of a sole proprietorship -CORRECT ANSWER-Single taxation
, ● occurs on the owner's individual income taxes
● have separate individual and business accounts for tax.
● The business does not pay tax at all, the individual pays the taxes on his individual income
tax return
Taxation of a sole proprietorship p2 -CORRECT ANSWER-● Retained earnings (Fully taxable in
a SP): you still have to pay tax on the earnings going into next year
● ***Loss → if you have a business somewhere else you can take it from there
● Now there is an ability as a sole proprietary to get a 20% off your tax liability
Transfer of a sole proprietorship -CORRECT ANSWER-● Can't transfer sole proprietorship.
● You are still able to sell the sole proprietorship
● Make a covenant not to compete clause - requires that the person selling the sole
proprietorship can not start a new business because then they will steal the customers
● Reasonable to: scope of activity, geographic location, period of time (max 2 years)
Retaining employees of a sole proprietorship -CORRECT ANSWER-Difficult
-small business so no way for them to move up
Raising capital of a sole proprietorship -CORRECT ANSWER-- Bank will want collateral -> the
only thing you really have is your personal assets
ex. Car, house, greater personal liability
If you buy a sole proprietorship -CORRECT ANSWER-You have to have a non-compete clause
in it
General partnership -CORRECT ANSWER-(on test) ● 2 or more people (business entities)
who own a common business interest and have to agree to share the profits and losses
