Corporation & Partnership – Introduction to Business

Corporation & Partnership – Introduction to Business

This quiz is about Corporation & Partnership – Introduction to Business.

_____ are profits of a corporation that are distributed in the form of cash payments to stockholders. 

Common Stock

Retained earnings

Dividends – correct


A corporation doing business in the state in which it is chartered is known as a(n)  

horizontal corporation

alien corporation

domestic corporation – correct

quasi corporation

Sole proprietorships are typically small businesses that 

focus on providing a service rather than earning a profit.

employ fewer than 50 people. – correct

are formed by two or more partners.

are managed by incorporators.

Which of the following forms of business ownership provides limited liability but is taxed like a partnership? 

a sole proprietorship

a general partnership

a C corporation

a limited liability company – correct

A ______ has at least one general partner, who assumes unlimited liability, and at least one limited partner, whose liability is limited to his or her investment in the business. 

sole proprietorship

C corporation

general partnership

limited partnership – correct

_____ is a volunteer agency funded by the Small Business Administration to provide advice for owners of small firms. 

Local Chambers of Commerce

Small Business Development Centers

Service Corps of Retired Executives – correct

Business Executive Council

Which of the following is the best definition of a merger? 

when a company splits into two separate companies

when one company purchases another company by buying most of its stock

when a group of investors borrows money from banks and other institutions to acquire a company

when two companies combine to form a new company – correct

All of the following are advantages of franchising EXCEPT 

more freedom in purchasing goods. – correct

national and local advertising programs.

brand-name appeal.

centralized buying power.

Persons or organizations that agree to provide some funds for a new business in exchange for ownership interest or stock are called  


category captains.

venture capitalists. – correct


In the process of starting a business, the step that immediately follows the development of a business plan involves 

organizing resources like labor and supplies.

developing some general business ideas.

deciding an appropriate legal form of business ownership. – correct

promoting the business to the customers.

Which of the following is one of the commonly reported disadvantages of franchising? 

lack of management training and assistance

restrictions on purchasing – correct

lack of financial assistance

low rate of success

Limited partners do not participate in the management of the business. 

True – correct


Which of the following forms of business ownership is the easiest to establish? 


joint ventures

sole proprietorship – correct


In sole proprietorships, owners 

cannot easily dissolve the business.

have to share their profits.

have access to limited sources of funds. – correct

do not have to pay any income tax.

Which of the following statements is true of taxation in partnerships? 

They are taxed based on the number of shareholders.

They pay taxes at the income tax rate for individuals. – correct

They are exempted from tax.

They pay taxes before distributing profits.

_____ are legal documents that the state issues to companies based on information the company provides in the articles of incorporation. 

Corporation contracts

Articles of partnership

State bonds

Corporate charters – correct

A _____ has been defined as “an association of two or more persons who carry on as co-owners of a business for profit.”

sole proprietorship


partnership – correct

quasi-public corporation

A precise statement of the rationale for a business and a step-by-step explanation of how it will achieve its goals is known as a(n)  

business agreement

business plan. – correct

article of partnership

article of incorporation

Which of the following statements best describes bartering? 

It is the practice of small businesses trading their own products for the goods and services offered by other businesses. – correct

It is the process in which a small-business owner provides personal property as collateral for a loan.

It is the process in which suppliers allow a business to acquire needed goods and pay for them at a later date.

It is an agreement by which a financial institution promises to lend a business a predetermined sum on demand.

To make profits from a small business, the owner must first provide or obtain _____ to start the business and keep it running smoothly. 



capital – correct


The act of financing one’s business by using real personal assets is known as 

debt financing.

equity financing. – correct



A _____ is best described as any independently owned and operated business that is not dominant in its competitive area and does not employ more than 500 people. 

publicly traded company

small business – correct

limited liability company


_____ are typically owned by many individuals and organizations who own shares of the business, called stock. 

General partnerships

Corporations – correct


Limited partnerships

Obtaining money from venture capitalists to start a new business venture is an example of  



debt financing.

equity financing. – correct

A(n) _____ is a form of business ownership that is taxed as though it were a partnership, is popular among entrepreneurs, and represents almost half of all corporate filings. 

worker cooperative

C corporation

general partnership

S corporation – correct

Which of the following statements is true of preferred stockholders? 

They are the voting owners of a corporation.

They are eligible to vote by proxy.

They have a claim to profits before other stockholders do. – correct

They are generally the decision-makers in the day-to-day running of an organization.

Which of the following is an advantage of a sole proprietorship? 

It has limited liability for the debts incurred by the business.

It is easy and inexpensive to form. – correct

It is hard to dissolve.

It is unaffected by the death or withdrawal of its owner.

A ______ involves a complete sharing in the management of a business. 

general partnership – correct

limited partnership

joint partnership

joint venture

A(n) _____ is a legal entity, created by the state, whose assets and liabilities are separate from its owners. 

corporation – correct

strategic group

sole proprietorship


Which of the following is a disadvantage of corporations? 

The life expectancy of a corporation is very short and it lacks continuity.

C. The formation of a corporation can be costly and it faces double taxation. – correct

The owners will have unlimited liability for the debts of a corporation.

The transfer of ownership in a corporation is very difficult.

Which of the following is a disadvantage of sole proprietorships? 

lack of business control

lack of continuity – correct

stringent government regulations

sharing of profits with major stock holders

Which of the following is a corporation that provides a service, but is neither owned by the government nor focuses on earning profits? 

a C corporation

a nonprofit corporation – correct

an S corporation

a government subsidiary

Entrepreneurship is the process of creating and managing a business to achieve desired objectives.

True – correct


The legal documents that identify the basic agreements between partners are called 

articles of incorporation.

articles of partnership. – correctc

partnership charters.

partnership bonds.

Which of the following is an advantage of a partnership? 

unlimited liability

few regulatory controls – correct

lack of business responsibility

unrestricted access to funds

Which of the following is a disadvantage of a partnership? 

limited liability faced by the partners

stringent government regulations

difficulty of forming the business

difficulty of selling the partnership interest – correct

_____ is best described as the lack of funds to operate a business normally. 

Debt financing

Undercapitalization – correct

Trade credit

Trade deficit

A license to sell another’s products or to use another’s name in business, or both, is called a  

franchise. – correct




Which form of business ownership is least used in the United States?

sole proprietorships

partnerships – correct

joint ventures


Which of the following is a source of equity financing? 

securing government loans

borrowing money from friends

securing short-term loans from a family member

selling personal assets to raise funds – correct

An S corporation is taxed just like any other corporation. 


False – correct

An acquisition occurs when one company purchases another company by buying most of its stock.

True – correct


A sole proprietor has limited liability in meeting the debts of his or her business.


False – correct

Small businesses may obtain funding from their suppliers in the form of a _____, which means that suppliers allow the business to take possession of the needed goods and services and pay for them at a later date or in installments. 

stock dividend

non-recourse loan

mutual fund

trade credit – correct

An organization composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization is known as a(n)  

S corporation.

cooperative. – correct

multinational firm.

general partnership

Which type of stockholders usually has the right to vote and elect the board of directors? 

a capital stockholder

a preferred stockholder

a proxy stockholder

a common stockholder – correct

A _____ is a partnership established for a specific project or for a limited time. 


C corporation

joint venture – correct


The income earned in sole proprietorships is 

taxed as personal income. – correct

taxed as business income.

exempted for tax.

taxed twice.

The assets and liabilities of a corporation are separate from its owners.

True – correct


Banks and other financial institutions can grant a small business a _____, which is an agreement by which a financial institution promises to lend a business a predetermined sum on demand. 

trade credit

trust fund

mutual fund

line of credit – correct