MBA Entrepreneurship Test 2 Exam 155 Questions with
Verified Answers
Which of the following is NOT one of the three basic types of legal business
organization? - CORRECT ANSWER Franchise
Which type of legal business organization is the simplest form to establish? -
CORRECT ANSWER Sole proprietorship
What are the two broad categories of partnerships? (Check all that apply.) -
CORRECT ANSWER Limited
General
A more complex business form that has two or more people sharing unlimited
liability in a new business venture is called a general _____. - CORRECT ANSWER
partnership
True or false: A partnership will be governed by either the Uniform Partnership
Act or the Revised Uniform Partnership Act if the partnership agreement is not
developed and signed. - CORRECT ANSWER True
Which of the following are the three basic types of legal business organization?
(Check all that apply.) - CORRECT ANSWER Sole proprietorship
Partnership
Corporation
Which type of legal business organization is characterized by the fact that the
person who owns the business and the business itself are treated as the same
entity? - CORRECT ANSWER Sole proprietorship
General and limited are two broad categories of _____. - CORRECT ANSWER
partnership
,Besides sole proprietorships, which of the following business forms requires the
business debt to flow directly to the owner(s)? - CORRECT ANSWER General
partnership
Which form of business involves two or more individuals sharing unlimited
liability in a business venture? - CORRECT ANSWER General partnership
True or false: If a corporation suffers substantial losses, the founder(s) will lose
only his or her investment in the business. - CORRECT ANSWER True
Which of the following are true about the Uniform Partnership Act and the
Revised Uniform Partnership Act? (Check all that apply.) - CORRECT ANSWER
Their provisions do not cover issues like noncompete agreements.
They are an effective means to handle the basics of partnership.
Subchapter S and Subchapter C Corporations take their names from subchapters
in the ______ Code - CORRECT ANSWER Internal Revenue
In which of the following business forms do the business debts flow directly to the
owner(s)? (Check all that apply.) - CORRECT ANSWER Sole proprietorship
General partnership
The critical issues of personal liability and the desire to limit exposure to the
original equity investment led to the development of corporations. A corporation
addresses both drawbacks by _____. - CORRECT ANSWER considering the
business and the individual separate entities
An advantage of the Subchapter_____ Corporation is that it allows the owners to
report their income or losses on their personal income tax returns, thus avoiding
double taxation. - CORRECT ANSWER S
Which of the following are types of corporations developed by the U.S. legal
system? (Check all that apply.) - CORRECT ANSWER Subchapter S
LLC
Subchapter C
, Which of the following are disadvantages associated with Subchapter S
Corporations? (Check all that apply.) - CORRECT ANSWER Limitation on the
number of shareholders
Expensive, complex formation compared with sole proprietorships
May require a lawyer to process paperwork
Which of the following are benefits of a Subchapter S Corporation? (Check all that
apply.) - CORRECT ANSWER Relatively easy to form compared with Subchapter C
Limited liability for the owners
Consolidation of business and personal income for tax benefits
Legitimacy in the market as a more established form of business
True or false: A C corporation treats fringe benefits that are paid out as income
for its employees. - CORRECT ANSWER False
One disadvantage of the Subchapter S Corporation is the limitation to the number
of shareholders, which is currently set at a maximum of ____ shareholders. -
CORRECT ANSWER 75
An important feature of a Subchapter C Corporation is that there are no limits to
_____. - CORRECT ANSWER the number of shareholders that an organization can
obtain
What is the initial value at which the firm's shares are offered? - CORRECT
ANSWER Par value
Which form of incorporation is required to pay an income tax? - CORRECT
ANSWER A C corporation
A corporation pays a tax on its profits; then those after tax profits are paid as
dividends to the owners, who then have to pay personal income taxes on the
dividend income. This situation is referred to as _______. - CORRECT ANSWER
double taxation
A Subchapter C Corporation has a _____ that is equal to the par value times the
number of shares distributed. - CORRECT ANSWER floor value
Verified Answers
Which of the following is NOT one of the three basic types of legal business
organization? - CORRECT ANSWER Franchise
Which type of legal business organization is the simplest form to establish? -
CORRECT ANSWER Sole proprietorship
What are the two broad categories of partnerships? (Check all that apply.) -
CORRECT ANSWER Limited
General
A more complex business form that has two or more people sharing unlimited
liability in a new business venture is called a general _____. - CORRECT ANSWER
partnership
True or false: A partnership will be governed by either the Uniform Partnership
Act or the Revised Uniform Partnership Act if the partnership agreement is not
developed and signed. - CORRECT ANSWER True
Which of the following are the three basic types of legal business organization?
(Check all that apply.) - CORRECT ANSWER Sole proprietorship
Partnership
Corporation
Which type of legal business organization is characterized by the fact that the
person who owns the business and the business itself are treated as the same
entity? - CORRECT ANSWER Sole proprietorship
General and limited are two broad categories of _____. - CORRECT ANSWER
partnership
,Besides sole proprietorships, which of the following business forms requires the
business debt to flow directly to the owner(s)? - CORRECT ANSWER General
partnership
Which form of business involves two or more individuals sharing unlimited
liability in a business venture? - CORRECT ANSWER General partnership
True or false: If a corporation suffers substantial losses, the founder(s) will lose
only his or her investment in the business. - CORRECT ANSWER True
Which of the following are true about the Uniform Partnership Act and the
Revised Uniform Partnership Act? (Check all that apply.) - CORRECT ANSWER
Their provisions do not cover issues like noncompete agreements.
They are an effective means to handle the basics of partnership.
Subchapter S and Subchapter C Corporations take their names from subchapters
in the ______ Code - CORRECT ANSWER Internal Revenue
In which of the following business forms do the business debts flow directly to the
owner(s)? (Check all that apply.) - CORRECT ANSWER Sole proprietorship
General partnership
The critical issues of personal liability and the desire to limit exposure to the
original equity investment led to the development of corporations. A corporation
addresses both drawbacks by _____. - CORRECT ANSWER considering the
business and the individual separate entities
An advantage of the Subchapter_____ Corporation is that it allows the owners to
report their income or losses on their personal income tax returns, thus avoiding
double taxation. - CORRECT ANSWER S
Which of the following are types of corporations developed by the U.S. legal
system? (Check all that apply.) - CORRECT ANSWER Subchapter S
LLC
Subchapter C
, Which of the following are disadvantages associated with Subchapter S
Corporations? (Check all that apply.) - CORRECT ANSWER Limitation on the
number of shareholders
Expensive, complex formation compared with sole proprietorships
May require a lawyer to process paperwork
Which of the following are benefits of a Subchapter S Corporation? (Check all that
apply.) - CORRECT ANSWER Relatively easy to form compared with Subchapter C
Limited liability for the owners
Consolidation of business and personal income for tax benefits
Legitimacy in the market as a more established form of business
True or false: A C corporation treats fringe benefits that are paid out as income
for its employees. - CORRECT ANSWER False
One disadvantage of the Subchapter S Corporation is the limitation to the number
of shareholders, which is currently set at a maximum of ____ shareholders. -
CORRECT ANSWER 75
An important feature of a Subchapter C Corporation is that there are no limits to
_____. - CORRECT ANSWER the number of shareholders that an organization can
obtain
What is the initial value at which the firm's shares are offered? - CORRECT
ANSWER Par value
Which form of incorporation is required to pay an income tax? - CORRECT
ANSWER A C corporation
A corporation pays a tax on its profits; then those after tax profits are paid as
dividends to the owners, who then have to pay personal income taxes on the
dividend income. This situation is referred to as _______. - CORRECT ANSWER
double taxation
A Subchapter C Corporation has a _____ that is equal to the par value times the
number of shares distributed. - CORRECT ANSWER floor value
