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WorksheetsBusiness Types
Total questions: 15
Worksheet time: 8mins
Which of the following describes the income tax treatment for a sole proprietorship?
No losses generated by the business are recognized.
The business is taxed on profits and the owner is then taxed on any profits distributed to her.
No tax is paid on income generated from the business.
Income and losses are reported on the owner's personal income tax return.
What happens if a sole proprietorship takes on a second owner?
The business ceases to be a sole proprietorship.
Nothing.
The business must take on a new structure or it will be dissolved.
The new owner must purchase their percentage of ownership.
What is the difference between an S-corporation and a C-corporation?
The level of liability protection afforded shareholders is higher for an S-corporation.
A C-corporation has a tax treatment that allows income and losses to flow through to each shareholder.
An S-corporation is organized under state law and a C-corporation is registered under federal law.
A C-corporation is subject to double income taxation, while an S-corporation is not.
What is the primary reason a business would decide to become a corporation over any other form of organization?
Owners who wish to retain complete control over all operations would chose to be a corporation.
Forming a corporation would limit tax liability for owners and leave more capital for operations.
It is ideal for those who want a business that is considered a separate entity from its owners.
A corporation is a simple form of business for the owners to operate.
Which of the following is NOT an aspect of a general partnership?
One or more partners serve only as investors.
Unlimited liability for all partners.
At least two partners
Business isn't separately taxed.
Unincorporated
Betty and Bert start a bicycle repair business. Betty runs the shop and Bert fixes the bikes. Bert repairs Bea's bike, but he forgets to tighten the bolts on her seat. Bea falls off the bike and is injured. She sues the bike shop and is awarded a money judgment. Which of the following is true?
None of the above
Only the bike shop will be liable for Bea's money judgment
Both Bert and Betty will be personally liable for Bea's money judgment
Bea can only collect as much money as Betty and Bert personally put into the bike shop
Only Bert will be personally liable for Bea's money judgment
Which of the following is NOT an aspect of a limited partnership?
Unincorporated
Business isn't separately taxed
Unlimited liability for all partners
At least two partners
One or more partners serve only as investors
In a partnership, the business isn't separately taxed but the partners are. This is commonly called:
Flow through taxation
Limited partnership
Funnel taxation
By-pass business
Not-for-profit business
Betty and Bert start a bicycle repair business. Betty gives Bert $50,000 to start the business but Betty won't be involved in business operations. Bert will run the business by himself. Which of the following is NOT true?
Betty is a limited partner
Betty and Bert formed a partnership
Both Betty and Bert have unlimited personal liability for the bicycle business' debts
The bicycle business isn't separately taxed
Only Bert has unlimited personal liability for the business' debts
How much protection from liability does a sole proprietorship offer?
none, there is no distinction between the owner and the company
the greatest protection since the company is separate from the owner
some liability, like that of a partnership
limited liability, like that of a corporation
A sole proprietorship must register with which of the following?
The agency regulating business organizations in their county
there are no registration requirements
the US Small Business Administration
the Secretary of state
Which of the following businesses represents a sole proprietorship?
a criminal law firm with multiple senior partners
a consulting firm called AAA Engineering, Incorporated
sisters who make custom wedding gowns from a shop in their home
a man who owns and operates a lawn mower repair business by himself
Which one of the following is considered a disadvantage of a corporation?
A corporation is more complex and expensive to run.
Planning for the company's future is more difficult when it becomes a corporation.
It becomes difficult to transfer ownership interests in a corporation.
Shareholders hold more liability for things that happen with the business.
What do you call the documentation that governs the corporation's activities?
shareholder agreement
Articles of Incorporation
operating agreement
bylaws
Tyler is the sole owner and stockholder of the corporation, Tyler's Tires. Two years ago, Tyler's Tires hired Anna as the CEO. If Tyler dies, what happens to Tyler's Tires?
Management of the company goes to the next of kin.
Nothing, it continues to run under the direction of the CEO.
The company will need to seek new management in order to continue operation.
The company is immediately liquidated.
