1) Which of the following is NOT an advantage of the sole proprietorship?
A) Limited liability
B) No time limit imposed on its existence
C) No legal requirements for starting the business
D) None of the above
2) What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form?
A) Sole proprietorships are subject to double taxation of profits.
B) The cost of formation.
C) Inadequate profit sharing.
D) Owners have unlimited liability.
3) Which of the following is NOT true for limited partnerships?
A) Limited partners can only manage the business.
B) One general partner must exist who has unlimited liability.
C) Only the name of general partners can appear in the name of the firm.
D) Limited partners may sell their interest in the company.
4) The true owners of the corporation are the
A) holders of debt issues of the firm.
B) preferred stockholders.
C) board of directors of the firm.
D) common stockholders.
5) In terms of organizational costs, which of the following sequences is generally correct, moving from lowest to highest cost?
A) General partnership, sole proprietorship, limited partnership, corporation
B) Sole proprietorship, general partnership, limited partnership, corporation
C) Corporation, limited partnership, general partnership, sole proprietorship
D) Sole proprietorship, general partnership, corporation, limited partnership
6) Assume that you are starting a business. Further assume that the business is expected to grow very quickly and a great deal of capital will be needed soon. What type of business organization would you choose?
A) Corporation
B) General Partnership
C) Sole proprietorship
D) Limited partnership
7) Which one of the following categories of owners enjoys limited liability?
A) General partners in a limited partnership or limited liability company
B) Shareholders (common stock) of a corporation
C) Sole proprietors
D) Both A and B
