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Exam 28: Starting a Business

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Question 21

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The term "S Corporation" comes from:

A) the Internal Revenue Code.
B) the FTC rules.
C) the U.S.Constitution.
D) state corporation law.

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Question 22

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Harold and Zack have pooled their money together to buy real estate but have filed no formal papers to form a business.Harold,a lawyer,handles all the legal matters and Zack,a real estate broker,finds buyers for the property they have subdivided.Harold and Zack are engaged in a:

A) partnership.
B) close corporation.
C) joint venture.
D) business trust.

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Question 23

Multiple Choice

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All the business forms listed below have limited liability except the:

Franchise fees can be costly,but they are usually payable over a number of years,after profits are generated from the business.

To form an LLC,a charter and an operating agreement must be filed with the Secretary of State in the jurisdiction where the business will operate.

Generally,a joint venture is a partnership created for one limited purpose.

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Jill was a limited partner in a retail business that was sued by a customer who fell in the store.The customer claimed the business was negligent in caring for its floors.Which statement best describes Jill's potential liability?

Trudy wishes to buy a national franchise.What information is the seller legally required to provide before she buys the franchise?

James was a partner in a large firm.He died unexpectedly.His son,Frank,wanted to take over for his father in the partnership and was well qualified to do the work his father had done.Which statement best describes Frank's rights in the partnership if he inherits the interest?

Corporations have a distinct advantage over other forms of business organization in the area of taxation.

Alan,a dentist,and his wife Martha,an attorney,can protect their personal assets with limited liability from their business dealings by creating and operating a professional corporation together.

What federal agency requires that the seller of a franchise give the potential buyer an offering circular and audited financial statements?

Briefly discuss the limitations on a corporation electing Subchapter "S" status.

A partnership is a taxable entity,separate from the partners.

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

Rachel and Cyndi started a retail business called Zebra Toy Company.The business is operated as a partnership.Under partnership law:

The most common form of business ownership is the corporation.

Compare and contrast the following forms of business organization:sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

E.I.James is a writer with a best selling novel.He wishes to create a corporation called "James,Inc." He will be the only shareholder.Can James incorporate his business of writing?