LSB 3213 Exam 3 Study Guide Graded A+
Which of the following statements is incorrect? ✔️A corporation may not incur obligations separate
from those of its principals.
Raul wants a simple method to start-up a small marketing company. The marketing firm has relatively
low revenue and expenses. Which type of business entity would you suggest? ✔️Sole proprietorship
Which statement below is correct about a sole proprietorship? ✔️It has low start-up costs and minimal
filing.
Which of the following is true regarding the taxation of a limited liability partnership (LLP)? ✔️All
income or losses of the LLP are reported on the partners' individual tax returns.
What are principals? ✔️individuals in a business entitled to profits based on percentage of ownership.
What are the common forms of business entities? ✔️Sole Proprietorships, Corporation,
LLC,
LLP,
General and Limited Partnerships
Sole Proprietorships: ✔️-Require only a minimal fee,
-Typically require no annual filings,
-Involve a straightforward filing requirement with the appropriate state or county government authority
Sole Proprietorships: taxation & termination ✔️-Not subject to corporate income taxation & no tax
return is filed on behalf of the business. Principal reports business income & expenses on own individual
tax return at individual rate.
-Termination is either by an express act of principal or operation of law in case of death or personal
bankruptcy of the proprietor.
, All of the following are methods that a sole proprietorship can raise money except: ✔️Sell ownership in
the business.
Which of the following is true about a sole proprietorship? ✔️The owner reports income and expenses
on the owner's own tax return.
The person who is entitled to the profits of a business based on the percentage of ownerships is
✔️Principal
Reid Sterling owns a sole proprietorship called Dunkle Distributing. Dunkle Distributing is a ✔️Trade
name
Gwendolyn Melvin wishes to start a children's sports store called, "Just Let 'Em Play!" as a sole
proprietor. What form must she file so that she can use another name than her own? ✔️DBA
Certificate
Josh is a sole proprietor of an ice cream shop. Regina, a customer, slips and fall on some melted mint
chocolate chip ice cream on the floor and breaks her leg. Regina files suit and wins a judgment of
$50,000. Josh does not have any insurance and the total value of the assets of the ice cream shop is
$10,000. Which statement below is correct? ✔️Josh will have to use his own personal assets to pay the
remainder of the judgment.
Cyndy is a sole proprietor of a day care. She wishes to build a new playground and also purchase new
toys. She plans on doing this in stages and therefore wants a loan where she can draw against a
predetermined amount as she needs it rather than getting a lump sum loan. Which type of loan would
you recommend for Cyndy? ✔️Line of credit
Stefan has opened a sole proprietorship bicycle shop. The business shows a net income of $100,000.
Stefan took a salary of $40,000. The remaining money is left in the bank. ✔️At tax time, Stefan pays
taxes on $140,000.
A limited partnership requires ✔️at least one general and one limited partner.
Which of the following statements is incorrect? ✔️A corporation may not incur obligations separate
from those of its principals.
Raul wants a simple method to start-up a small marketing company. The marketing firm has relatively
low revenue and expenses. Which type of business entity would you suggest? ✔️Sole proprietorship
Which statement below is correct about a sole proprietorship? ✔️It has low start-up costs and minimal
filing.
Which of the following is true regarding the taxation of a limited liability partnership (LLP)? ✔️All
income or losses of the LLP are reported on the partners' individual tax returns.
What are principals? ✔️individuals in a business entitled to profits based on percentage of ownership.
What are the common forms of business entities? ✔️Sole Proprietorships, Corporation,
LLC,
LLP,
General and Limited Partnerships
Sole Proprietorships: ✔️-Require only a minimal fee,
-Typically require no annual filings,
-Involve a straightforward filing requirement with the appropriate state or county government authority
Sole Proprietorships: taxation & termination ✔️-Not subject to corporate income taxation & no tax
return is filed on behalf of the business. Principal reports business income & expenses on own individual
tax return at individual rate.
-Termination is either by an express act of principal or operation of law in case of death or personal
bankruptcy of the proprietor.
, All of the following are methods that a sole proprietorship can raise money except: ✔️Sell ownership in
the business.
Which of the following is true about a sole proprietorship? ✔️The owner reports income and expenses
on the owner's own tax return.
The person who is entitled to the profits of a business based on the percentage of ownerships is
✔️Principal
Reid Sterling owns a sole proprietorship called Dunkle Distributing. Dunkle Distributing is a ✔️Trade
name
Gwendolyn Melvin wishes to start a children's sports store called, "Just Let 'Em Play!" as a sole
proprietor. What form must she file so that she can use another name than her own? ✔️DBA
Certificate
Josh is a sole proprietor of an ice cream shop. Regina, a customer, slips and fall on some melted mint
chocolate chip ice cream on the floor and breaks her leg. Regina files suit and wins a judgment of
$50,000. Josh does not have any insurance and the total value of the assets of the ice cream shop is
$10,000. Which statement below is correct? ✔️Josh will have to use his own personal assets to pay the
remainder of the judgment.
Cyndy is a sole proprietor of a day care. She wishes to build a new playground and also purchase new
toys. She plans on doing this in stages and therefore wants a loan where she can draw against a
predetermined amount as she needs it rather than getting a lump sum loan. Which type of loan would
you recommend for Cyndy? ✔️Line of credit
Stefan has opened a sole proprietorship bicycle shop. The business shows a net income of $100,000.
Stefan took a salary of $40,000. The remaining money is left in the bank. ✔️At tax time, Stefan pays
taxes on $140,000.
A limited partnership requires ✔️at least one general and one limited partner.
