BUSN100 Unit Test 5 Forms of
Business Ownership Questions And
Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A | Instant
Download Pdf
1. Which form of business ownership is owned and operated by one
individual?
A. Corporation
B. Partnership
C. Sole proprietorship
D. Cooperative
Answer: C. Sole proprietorship
Rationale: A sole proprietorship is a business owned by one individual
who generally makes the business decisions and receives the profits. It
is one of the simplest forms of business ownership to establish and
operate.
2. Which is a major advantage of a sole proprietorship?
A. Unlimited access to corporate stock markets
B. Simple formation and direct control by the owner
C. Limited liability for all business debts
D. Perpetual existence independent of the owner
Answer: B. Simple formation and direct control by the owner
,Rationale: Sole proprietorships are generally easy to establish and
allow the owner to retain direct control over business decisions.
However, the owner normally has unlimited personal liability for
business obligations.
3. What is the primary disadvantage of unlimited liability?
A. The owner may have personal assets exposed to business debts
B. The business cannot earn a profit
C. The owner cannot make business decisions
D. The business must issue common stock
Answer: A. The owner may have personal assets exposed to business
debts
Rationale: Unlimited liability means that the owner can be personally
responsible for business debts and obligations. If business assets are
insufficient, personal assets may be at risk, subject to applicable law
and protections.
4. A business owned by two or more individuals who agree to operate
it together is commonly organized as a:
A. Corporation
B. Cooperative
C. Sole proprietorship
D. Partnership
Answer: D. Partnership
Rationale: A partnership generally involves two or more owners who
agree to conduct a business together. The partners typically share
responsibilities, profits, and risks according to their partnership
agreement and applicable law.
, 5. Which document commonly establishes the rights and
responsibilities of partners?
A. Partnership agreement
B. Articles of incorporation
C. Stock certificate
D. Corporate charter only
Answer: A. Partnership agreement
Rationale: A partnership agreement sets out important terms such as
ownership percentages, profit distribution, management
responsibilities, dispute procedures, and conditions for adding or
removing partners.
6. Which characteristic is generally associated with a general
partnership?
A. Ownership is limited to shareholders
B. All owners must be government agencies
C. Partners may have personal liability for partnership obligations
D. The business cannot earn profits
Answer: C. Partners may have personal liability for partnership
obligations
Rationale: In a traditional general partnership, partners can generally
face personal liability for partnership obligations. The exact rules
depend on the jurisdiction and the structure selected by the owners.
7. What is a key distinction between a general partnership and a
limited partnership?
A. A limited partnership has no owners
B. A limited partnership can include owners whose liability is limited
under applicable rules
, C. A general partnership must be publicly traded
D. A limited partnership cannot earn income
Answer: B. A limited partnership can include owners whose liability
is limited under applicable rules
Rationale: A limited partnership typically includes general partners
who manage the business and limited partners whose liability is
generally limited to their investment, provided applicable requirements
are followed.
8. In a limited partnership, which party typically assumes
responsibility for managing the partnership?
A. Limited partners only
B. Customers
C. Government regulators
D. General partners
Answer: D. General partners
Rationale: General partners commonly manage the partnership and
assume broader personal liability for partnership obligations. Limited
partners generally have more restricted management rights under the
partnership structure.
9. What is a major advantage of a corporation compared with a sole
proprietorship?
A. Corporations eliminate all business taxes
B. Corporations provide limited liability to shareholders in ordinary
circumstances
C. Corporations require only one owner in every case
D. Corporations cannot raise outside capital
Business Ownership Questions And
Correct Answers (Verified Answers)
Plus Rationales 2026 Q&A | Instant
Download Pdf
1. Which form of business ownership is owned and operated by one
individual?
A. Corporation
B. Partnership
C. Sole proprietorship
D. Cooperative
Answer: C. Sole proprietorship
Rationale: A sole proprietorship is a business owned by one individual
who generally makes the business decisions and receives the profits. It
is one of the simplest forms of business ownership to establish and
operate.
2. Which is a major advantage of a sole proprietorship?
A. Unlimited access to corporate stock markets
B. Simple formation and direct control by the owner
C. Limited liability for all business debts
D. Perpetual existence independent of the owner
Answer: B. Simple formation and direct control by the owner
,Rationale: Sole proprietorships are generally easy to establish and
allow the owner to retain direct control over business decisions.
However, the owner normally has unlimited personal liability for
business obligations.
3. What is the primary disadvantage of unlimited liability?
A. The owner may have personal assets exposed to business debts
B. The business cannot earn a profit
C. The owner cannot make business decisions
D. The business must issue common stock
Answer: A. The owner may have personal assets exposed to business
debts
Rationale: Unlimited liability means that the owner can be personally
responsible for business debts and obligations. If business assets are
insufficient, personal assets may be at risk, subject to applicable law
and protections.
4. A business owned by two or more individuals who agree to operate
it together is commonly organized as a:
A. Corporation
B. Cooperative
C. Sole proprietorship
D. Partnership
Answer: D. Partnership
Rationale: A partnership generally involves two or more owners who
agree to conduct a business together. The partners typically share
responsibilities, profits, and risks according to their partnership
agreement and applicable law.
, 5. Which document commonly establishes the rights and
responsibilities of partners?
A. Partnership agreement
B. Articles of incorporation
C. Stock certificate
D. Corporate charter only
Answer: A. Partnership agreement
Rationale: A partnership agreement sets out important terms such as
ownership percentages, profit distribution, management
responsibilities, dispute procedures, and conditions for adding or
removing partners.
6. Which characteristic is generally associated with a general
partnership?
A. Ownership is limited to shareholders
B. All owners must be government agencies
C. Partners may have personal liability for partnership obligations
D. The business cannot earn profits
Answer: C. Partners may have personal liability for partnership
obligations
Rationale: In a traditional general partnership, partners can generally
face personal liability for partnership obligations. The exact rules
depend on the jurisdiction and the structure selected by the owners.
7. What is a key distinction between a general partnership and a
limited partnership?
A. A limited partnership has no owners
B. A limited partnership can include owners whose liability is limited
under applicable rules
, C. A general partnership must be publicly traded
D. A limited partnership cannot earn income
Answer: B. A limited partnership can include owners whose liability
is limited under applicable rules
Rationale: A limited partnership typically includes general partners
who manage the business and limited partners whose liability is
generally limited to their investment, provided applicable requirements
are followed.
8. In a limited partnership, which party typically assumes
responsibility for managing the partnership?
A. Limited partners only
B. Customers
C. Government regulators
D. General partners
Answer: D. General partners
Rationale: General partners commonly manage the partnership and
assume broader personal liability for partnership obligations. Limited
partners generally have more restricted management rights under the
partnership structure.
9. What is a major advantage of a corporation compared with a sole
proprietorship?
A. Corporations eliminate all business taxes
B. Corporations provide limited liability to shareholders in ordinary
circumstances
C. Corporations require only one owner in every case
D. Corporations cannot raise outside capital
