Business: Types of Companies and Sole Proprietorship

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BB003
Chapter 05
Choosing a Form of Business Ownership
 

True / False Questions
 
1. The corporation is the most common form of business ownership.  True    False
 2. The three major forms of business ownership in the U.S. are sole proprietorships, partnerships, and corporations.  True    False
 
3. Few people today start their own business. 
True    False
4. Once a business is established, it's almost impossible to change from one form of business ownership to another.  True    False
 5. When two or more people legally agree to become co-owners of a business, the form of business is called a partnership.  True    False

6. A legal entity with authority to act and have liability separate from its owners is called a partnership.  True    False

7. Corporations represent 20 percent of all the businesses in the U.S. and earn 81 percent of the total U.S. business receipts.  True    False

8. A comparison of the three major forms of business ownership shows that sole proprietorships are usually the most difficult type of business to establish.  True    False

9. The first step in starting a sole proprietorship is to fill out a proprietorship charter application form and file it with the state government.  True    False
10. It is usually easy to start and end a sole proprietorship.  True    False
 11. The profits of a sole proprietorship are taxed as the personal income of the owner.  True    False

 12. The sole proprietorship form of ownership tends to be attractive to people who want to invest in a company without taking an active role in management.  True    False

 13. A major advantage of sole proprietorships is that an owner has limited liability for the debts of his or her business.  True    False
 
14. One of the strengths of the sole proprietorship is its ability to sustain rapid growth by raising large amounts of financial resources.  True    False
 15. The debts of a business operated as a sole proprietorship are considered to be the personal debts of the owner of the business.  True    False

16. A drawback of sole proprietorships is that they usually have limited access to additional financial resources.  True    False
17. An advantage of forming a sole proprietorship is that it allows the owner to have more time for leisure activities.  True    False
 18. If a sole proprietorship fails, the owner may lose whatever was invested in the business, however, the owner's personal assets are not at risk.  True    False
 
19. If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.  True    False

 20. A difficulty that sole proprietors try to overcome is the fact that they have trouble competing with large firms for expert talent. Large firms can usually pay better and offer fringe benefits that are unaffordable to the sole proprietor.  True    False

21. Unlike partnerships, if sole proprietorships find themselves in bankruptcy, they need not worry about a court of law requiring them to sell-off personal assets to pay for the debts of the firm.  True    False

22. Eric wants to start a business. He is attracted to the idea of being his own boss, and wants to get started with a minimum of expense and hassle. He is confident in his abilities, and the market he can draw from, so he is not particularly worried about financial risks. All of these factors suggest that Eric may favor starting his business as a sole proprietorship.  True    False

23. Sandy Beech, a talented fashion designer who wants to start her own women's swimwear and beach towel line is trying to decide which form of business ownership is right for her. As a young mother who aspires to send her children to college some day, she does not want to jeopardize her savings account in any way. In order to overcome these risks,...
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