CFA Test Chpt. 6

There are three (3) main types of business organizations: sole proprietorships, partnerships, and corporations.

• True

• False

About half of all businesses in the United States are sole proprietorships.

• True

• False

Income from a corporation is taxed twice.

• True

• False

A major disadvantage of owning a sole proprietorship is that the owner has limited liability.

• True

• False

An advantage of owning a partnership is that banks are more often more willing to lend money to partnerships than to sole proprietorships.

• True

• False

The most common type of business in the United States are

• corporations.

• sole proprietorships.

• partnerships.

• “mom and pop” stores.

A dividend is

• the cost of a share of stock.

• a tax paid by stockholders.

• the money made as a result of owning a share of stock.

• the money lost on a share of stock.

Unlimited liability means

• the owner is responsible for only accidents that occur on business property.

• the owner is responsible for the company’s debts.

• the owner must have insurance.

• the owner shares the liability with the company’s stockholders.

An advantage of a partnership is

• that the partners make decisions together.

• that banks are often more willing to lend money to a partnership than to a sole proprietorship.

• that the partners often bring different skills and talents to the business.

• all of the above.

In order to start a corporation, the first thing one must do is

• obtain a corporate charter from the state government.

• hire an accountant and an attorney.

• hire employees.

• start bank accounts.