Chapter 4/5 Quiz

Which of the following is necessary for starting a sole proprietorship?

• a contract

• no specific legal documents

• an application to the secretary of state

• articles of proprietorship

Which of the following is not a disadvantage of sole proprietorship?

• unlimited liability

• lack of money

• double taxation

• lack of continuity

Unlimited liability means______

• there is no limit on the amount an owner can borrow

• creditors will absorb any loss from nonpayment of debt

• the business can borrow money for any type of purchase

• the owner is responsible for all business debts

When the owner of a sole proprietorship dies, what becomes of the business?

• the employees take over the business

• it ceases to exist unless the heirs take it over or sell it

• it is automatically auctioned to the highest bidder

• it ceases to exist, and no one legally takes it over

The person who assumes full co-ownership of a partnership, including unlimited liability, is a

• general partner

• stockholder

• shareholder

• limited partner

The _______ is a legal document that lists and explains the terms of the partnership.

• co-owner's agreement

• charter

• will

• articles of partnership

As a limited partner in a construction business, Joe

• has input only on major company decisions

• contributes only his time and not his money

• does not receie any portion of the profits

• only risks his initial investment

With regard to taxation of partnerships, which of the following statements is true?

• profits are taxed twice

• each partner is taxed in the same way as a sole proprietor

• taxes are paid on a partnerships' profits, after which each partner pays taxes on his or her share of the profits

• a partnership is exempt from taxes

Kayla purchases shares of ownership in General Electric. These shares are referred to as:

• ownership documents

• stock

• articles of ownership

• incorporation

A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n)____.

• sole proprietorship

• s-corporation

• closed corporation

• open corporation