Business Formation

Which of the following best describes a Sole Proprietorship?

• A business owned by two or more individuals

• A business owned by shareholders

• A business owned and operated by one individual

• A business with limited liability protection

What is a key characteristic of a Partnership?

• It is taxed as a separate entity

• It has perpetual existence

• It involves shared ownership and responsibilities

• It offers limited liability to all owners

Which of the following is NOT a characteristic of a Corporation?

• Limited liability for its owners

• Taxed as a separate legal entity

• Owners have direct management control

• Can raise funds through the sale of stock

What does Limited Liability mean in the context of a Limited Liability Company (LLC)?

• The company has a limited time to operate

• Owners are personally responsible for company debts

• Owners' personal assets are protected from business debts

• The company can only incur a limited amount of debt

Which of the following best defines Entrepreneurship?

• The process of managing a company as a CEO

• The act of investing in stocks and bonds

• The activity of setting up a business, taking on financial risks in the hope of profit

• The practice of hiring employees to start a new business

How is a Sole Proprietorship taxed?

• As a separate legal entity

• Through the personal income tax of the owner

• It is not subject to taxes

• At a fixed corporate tax rate

Which of the following entities provides its owners with the most comprehensive level of limited liability protection?

• Sole Proprietorship

• Partnership

• Corporation

• Limited Liability Company

In a General Partnership, how are profits typically shared?

• Based on the amount of capital each partner invested

• Equally among all partners

• Based on the roles and responsibilities of each partner

• Profits are not shared; they are reinvested into the business

What is a key advantage of forming a Corporation?

• Simple to set up and operate

• Profits are taxed once at the corporate level

• Ability to raise funds by issuing stock

• No need for formal meetings or records

Which of the following is true about a Limited Liability Company (LLC)?

• It cannot enter into contracts

• It is always taxed as a corporation

• It combines the benefits of a corporation and a partnership

• It offers no liability protection to its owners