Ch. 2 - Forms of Business Ownership

A sole proprietorship is a business owned by two or more people.

• True

• False

Answer explanation

One person only

Sole proprietors have limited liability for their business debts.

• True

• False

One advantage of a sole proprietorship is that all profits go to the sole proprietor.

• True

• False

In a general partnership, all partners share unlimited liability for the firm's obligations.

• True

• False

Limited partners in a partnership take an active role in managing the business.

• True

• False

Answer explanation

Do not take an active in

managing the company.

One disadvantage of a partnership is that profits must be shared among partners.

• True

• False

A corporation is a legal entity that is distinct from its owners.

• True

• False

Corporations have a disadvantage in that shareholders face unlimited liability.

• True

• False

Answer explanation

Limited liability

A corporation’s earnings are subject to double taxation.

• True

• False

A cooperative is formed to maximize profits for its members.

• True

• False

Answer explanation

Give benefits