7.1.11: Review Questions

1. A not-for-profit business ________.
   1. Is allowed to retain earnings for use within the organization
   2. Must distribute profits to shareholders
   3. Must turn over to the government any excess earnings
   4. Can pay dividends to shareholders
2. The term “for-profit corporation” means which of the following?
   1. The business must make a profit or forfeit its status.
   2. The business may make or lose money without changing its status.
   3. The business is not allowed to sell stock to the public.
   4. The business must have more than 100 shareholders.
3. Which of the following business structures often involve two or more businesses starting a new business together?
   1. Sole proprietorship
   2. General partnership
   3. Joint venture
   4. Corporation
4. How is an S corporation taxed?
   1. At the entity level as a corporation
   2. At the owner level as if it were a partnership
   3. At both the entity and owner levels
   4. At a special lower rate of income tax
5. A public corporation is ________.
   1. Owned or sponsored by the government
   2. Owned by member of the investing public
   3. Owned by a combination of public and private investors
   4. None of these choices are correct
6. A C corporation is taxed ________.
   1. At the entity level
   2. At the individual level
   3. At both the entity and individual levels potentially
   4. Only at the state level, not federal
7. Limited liability partnerships (LLPs) ________.
   1. Are normally used for firms that consist of licensed professionals such as lawyers or accountants
   2. Can be used for partnerships that sell services but not goods
   3. Are used for firms that do business across state lines
   4. Require that the stock be owned by fewer than 100 shareholders
8. A joint venture ________.
   1. Must be a corporation
   2. Can choose to be any type of entity
   3. Must be either a partnership or a C corporation
   4. None of these choices are correct
9. General partners have what type of liability?
   1. Limited
   2. Joint and several
   3. Joint only
   4. Personal only
10. Of all the business entity choices, LLCs are the most like ________.
    1. S corporations
    2. C corporations
    3. Sole proprietorships
    4. Joint ventures
11. LLC owners are called ________.
    1. Members
    2. Shareholders
    3. Limited equity investors
    4. Directors
12. LLCs offer flexible tax treatment, meaning ________.
    1. They can be taxed like corporation
    2. They can be taxed like partnerships
    3. They can be taxed like proprietorships
    4. All choices are correct.
13. Sole proprietorships offer limited liability ________.
    1. If you register it with the state
    2. If you elect to be taxed as a corporation
    3. If you have an SBA loan guarantee
    4. Sole proprietorships never have limited liability.
14. A sole proprietorship ________.
    1. Pays taxes at the highest corporate rate
    2. Pays taxes at the lowest corporate rate
    3. Pays taxes at the individual rate
    4. None of these choices are correct.
15. Sole proprietorships ________.
    1. Must register with the state
    2. Are similar to general partnerships in terms of liability
    3. Are similar to LLCs in terms of liability
    4. Are not allowed by law to operate outside of the US
16. States can levy a sales tax on items sold online to a customer in a different state if ________.
    1. The business has a nexus with that state
    2. There is an contract between the business and the state comptroller
    3. The items sold are over $300
    4. The business is one that only sells foreign-made items
17. As a general rule, LLCs, GPs, and SPs are taxed as ________.
    1. Corporations
    2. Not taxed
    3. Individuals
    4. Taxed twice, once as entity and once as individuals
18. Entrepreneurs can choose what state to incorporate in, and many choose ________.
    1. New York
    2. Delaware
    3. California
    4. Texas
19. Enterprise risk management includes ________.
    1. Identifying risk
    2. Risk assessment
    3. Risk abatement
    4. All of the choices are correct.
20. A business owner can insure against all but which one of the following?
    1. Earthquakes
    2. A bad economy
    3. Flooding
    4. Hurricanes
21. Examples of risk facing a business include ________.
    1. Human risks
    2. Economic risks
    3. Natural risks
    4. All of the choices are correct.