Types of Business

Which of the following is a downside of choosing a business structure where the owner has full control?

• The owner must hire a CPA for the business

• The owner has full responsibility and liability for the business

• The owner must work all hours the business is open

• The owner cannot use their real name when obtaining a business license

What would be an advantage of choosing a sole proprietorship over other legal structures of business?

• The sole proprietorship can live long after its founder moves on

• The sole proprietorship is protected from all liability

• . The sole proprietorship pays no taxes

• The sole proprietorship would be cheaper to set up

Caitlin is invited to join a business as a partner due to her expertise in the field. She is asked to sign a partnership agreement that gives her 40% of the profits, full control of the marketing activities, but final say on all other decisions goes to the original owner.

• A limited partnership

• A general partnership

• A dual proprietorship

• An S corporation

The following are all advantages of business partnerships EXCEPT:

• Partnerships shield the individual partners from debt and liability

• Partnerships are relatively easy and inexpensive to set up

• Partnerships pool the resources of the partners to obtain capital

• Partnerships can take advantage of the various skills, strengths, and experiences of each of the partners

What is the main disadvantage of a sole proprietorship?

• Limited control

• Difficulty in raising capital

• Shared profits

• Unlimited personal liability for the sole proprietor

In a limited partnership, what do partners with limited liability have?

• Limited input in management decisions

• Unlimited personal liability

• Equal distribution of profits

• Full control of the business

Which factor is NOT considered when choosing an organizational type?

• A. Taxation

• B. Entrepreneurial ability

• C. Geographic location

• D. Risk tolerance

What is a characteristic of corporations in terms of liability?

• A. Limited liability for shareholders

• B. Unlimited personal liability for owners

• C. Limited liability only for executives

• D. No liability protection for anyone involved

What type of partnership allows partners to have limited liability as well as limited input in management decisions?

• A. General partnership

• B. Limited partnership

• C. Limited liability partnership

• D. Limited liability company

What is a disadvantage of forming a partnership with a friend?

• A. Shared financial commitment

• B. Complementary skills

• C. Joint and individual liability

• D. Partnership incentives for employees