BLAW 2200-EXAM 4 TEST
QUESTIONS AND ANSWERS GRADED
TO PASS.
When choosing a business entity, entrepreneurs should consider: - Answer Ease of creation
Owner's liability
Tax considerations
Need for Capital
has sole proprietorship - Answer anyone who does business without creating a separate
business organization has a sole proprietorship
major disadvantage of owning - Answer personally liable for all losses or liabilities incurred by
the business
formation - Answer done by an individual
may have a fictitious name
no formal requirements for formation
may have to publish d/b/s name
Sources of funding - Answer loans, government help
tax consequences - Answer owner claims all income and losses, no separate filing
requirement
management and control - Answer all assets with one person
transferability of interest - Answer business can be sold- property, inventory and goodwill,
owner will usually sign a non-compete agreement
advantages of sole proprietorship - Answer owner is in complete control and receives all
profits, flexibility, ease of creation, maintenance
Disadvantages of Sole Proprietorship - Answer unlimited liability, lack of continuity after
death , difficulty to raise financing
, partnership - Answer an association of two or more persons to carry on as co-owners, a
business for profit
Can include corporations and natural persons
Uniform partnership act - Answer act ordering common ownership interests, profit and loss
sharing, and shared management responsibilities in a partnership
involuntary partnership formation - Answer sharing of profits, constitutes prime facie
evidence that a partnership exists.
Partnership funding - Answer capital contributions of partners, loans by partners, outside
loans
Agency Concepts and Partnership Law - Answer Partnerships are governed both by common
law and by statutory laws.
-Each partner is deemed to be an agent and fiduciary of the other.
-There may be imputation of liability.
LLC - Answer a hybrid entity that combines the limited liability of a corporation and the tax
advantages of a partnership
LLC's are creature of state law - Answer owners are called "members" not share holders
ownership is called an "interest" not shares
formation of an LLC - Answer requires filing articles of organization with central state
authority
Name of business
Principal Address
Name and Address of registered agent
Names of the Owners
limited liability - Answer members stand to lose capital contributions, but their personal
assets are not subject to attachment
tax consequence - Answer income passes through to members
QUESTIONS AND ANSWERS GRADED
TO PASS.
When choosing a business entity, entrepreneurs should consider: - Answer Ease of creation
Owner's liability
Tax considerations
Need for Capital
has sole proprietorship - Answer anyone who does business without creating a separate
business organization has a sole proprietorship
major disadvantage of owning - Answer personally liable for all losses or liabilities incurred by
the business
formation - Answer done by an individual
may have a fictitious name
no formal requirements for formation
may have to publish d/b/s name
Sources of funding - Answer loans, government help
tax consequences - Answer owner claims all income and losses, no separate filing
requirement
management and control - Answer all assets with one person
transferability of interest - Answer business can be sold- property, inventory and goodwill,
owner will usually sign a non-compete agreement
advantages of sole proprietorship - Answer owner is in complete control and receives all
profits, flexibility, ease of creation, maintenance
Disadvantages of Sole Proprietorship - Answer unlimited liability, lack of continuity after
death , difficulty to raise financing
, partnership - Answer an association of two or more persons to carry on as co-owners, a
business for profit
Can include corporations and natural persons
Uniform partnership act - Answer act ordering common ownership interests, profit and loss
sharing, and shared management responsibilities in a partnership
involuntary partnership formation - Answer sharing of profits, constitutes prime facie
evidence that a partnership exists.
Partnership funding - Answer capital contributions of partners, loans by partners, outside
loans
Agency Concepts and Partnership Law - Answer Partnerships are governed both by common
law and by statutory laws.
-Each partner is deemed to be an agent and fiduciary of the other.
-There may be imputation of liability.
LLC - Answer a hybrid entity that combines the limited liability of a corporation and the tax
advantages of a partnership
LLC's are creature of state law - Answer owners are called "members" not share holders
ownership is called an "interest" not shares
formation of an LLC - Answer requires filing articles of organization with central state
authority
Name of business
Principal Address
Name and Address of registered agent
Names of the Owners
limited liability - Answer members stand to lose capital contributions, but their personal
assets are not subject to attachment
tax consequence - Answer income passes through to members
