D432 Section 1 Questions with Verified Correct
Answers
List the Advantages of Sole Proprietorship (6)
1. Easy and inexpensive to form.
2. Profits all go to the owner.
3. Direct control of the business.
4. Freedom from government regulations.
5. No special taxation.
6. Ease of dissolution.
Describe the Disadvantages of Sole Proprietorship (7)
1. Unlimited liability.
2. Difficulty raising capital.
3. Limited managerial expertise.
4. Personal time commitment.
5. Trouble finding quality employees.
6. Unstable business life.
7. Losses are the owners responsibility.
What are some important elements of the partnership agreement?
A written partnership agreement, spelling out the terms and conditions of the partnership, is
recommended to prevent later conflicts between the partners. Such agreements typically
include the name of the partnership, its purpose, and the contributions of each partner.
Explain the 4 types of partnership.
,1. General Partnership - all partners share the management and profits.
2. Limited Partnership - two types: general (unlimited liability) and limited (limited liability).
3. Limited Liability - similar to a general partnership, but partners are not held responsible for
the business debt and liabilities.
4. Limited Liability Limited - similar to limited partnership with additional limited liability,
which protects the general partner from the debt and liabilities of the partnership.
List advantages of partnerships (6)
1. Ease of formation.
2. Availability of capital.
3. Diversity of skills and expertise.
4. Flexibility.
5. No special taxes.
6. Relative freedom from government control.
List the disadvantages of partnership (4)
1. Unlimited liability.
2. Potential for conflicts between partners.
3. Complexity of profit sharing.
4. Difficulty exiting or dissolving partnerships.
What are characteristics associated with a corporation?
A corporation can own property, enter into contracts, sue and be sued, and engage in business
operations under the terms of its charter.
What are 3 components of a corporations organizational structure?
, 1. Stockholders (owners)
2. Board of directors (elected by stockholders)
3. Officers (hired by board of directors)
Describe advantages associated with corporations as a business form (5)
1. Limited liability.
2. Ease of transferring ownership.
3. Unlimited life.
4. Tax deductions.
5. Ability to attract financing.
Describe the disadvantages of corporations (3)
1. Double taxation of profits.
2. Cost and complexity of formation.
3. More government restrictions.
Compare/contrast types of corporations.
C corporation - a conventional or basic form of corporate organization.
S corporation - a hybrid entity allowing smaller corporations to avoid double taxation of
corporate profits as long as they meet certain size and ownership requirements.
Limited liability company - also a hybrid organization. Like S corporations, they appeal to
small businesses because they are easy to set up and not subject to many restrictions.
What is the main objective of a cooperative?
A legal entity with several corporate features. Cooperatives are solely organized to meet the
needs of the member-owners, not to accumulate capital for investors. Cooperatives are
Answers
List the Advantages of Sole Proprietorship (6)
1. Easy and inexpensive to form.
2. Profits all go to the owner.
3. Direct control of the business.
4. Freedom from government regulations.
5. No special taxation.
6. Ease of dissolution.
Describe the Disadvantages of Sole Proprietorship (7)
1. Unlimited liability.
2. Difficulty raising capital.
3. Limited managerial expertise.
4. Personal time commitment.
5. Trouble finding quality employees.
6. Unstable business life.
7. Losses are the owners responsibility.
What are some important elements of the partnership agreement?
A written partnership agreement, spelling out the terms and conditions of the partnership, is
recommended to prevent later conflicts between the partners. Such agreements typically
include the name of the partnership, its purpose, and the contributions of each partner.
Explain the 4 types of partnership.
,1. General Partnership - all partners share the management and profits.
2. Limited Partnership - two types: general (unlimited liability) and limited (limited liability).
3. Limited Liability - similar to a general partnership, but partners are not held responsible for
the business debt and liabilities.
4. Limited Liability Limited - similar to limited partnership with additional limited liability,
which protects the general partner from the debt and liabilities of the partnership.
List advantages of partnerships (6)
1. Ease of formation.
2. Availability of capital.
3. Diversity of skills and expertise.
4. Flexibility.
5. No special taxes.
6. Relative freedom from government control.
List the disadvantages of partnership (4)
1. Unlimited liability.
2. Potential for conflicts between partners.
3. Complexity of profit sharing.
4. Difficulty exiting or dissolving partnerships.
What are characteristics associated with a corporation?
A corporation can own property, enter into contracts, sue and be sued, and engage in business
operations under the terms of its charter.
What are 3 components of a corporations organizational structure?
, 1. Stockholders (owners)
2. Board of directors (elected by stockholders)
3. Officers (hired by board of directors)
Describe advantages associated with corporations as a business form (5)
1. Limited liability.
2. Ease of transferring ownership.
3. Unlimited life.
4. Tax deductions.
5. Ability to attract financing.
Describe the disadvantages of corporations (3)
1. Double taxation of profits.
2. Cost and complexity of formation.
3. More government restrictions.
Compare/contrast types of corporations.
C corporation - a conventional or basic form of corporate organization.
S corporation - a hybrid entity allowing smaller corporations to avoid double taxation of
corporate profits as long as they meet certain size and ownership requirements.
Limited liability company - also a hybrid organization. Like S corporations, they appeal to
small businesses because they are easy to set up and not subject to many restrictions.
What is the main objective of a cooperative?
A legal entity with several corporate features. Cooperatives are solely organized to meet the
needs of the member-owners, not to accumulate capital for investors. Cooperatives are
