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Question: 2

A sole proprietorship would be an ideal form of business to select if:

  1. The individual desired no liability beyond his capital investment.
  2. The individual wanted to be able sell the business at will.
  3. The individual wanted the business to be a separate entity from the sole proprietor.
  4. The individual wanted the business to continue indefinitely.


Answer: B

Explanation:

Choice “b” is correct. A sole proprietor is free to transfer or sell the business at will.

Choice “a” is incorrect because a sole proprietor is personally liable for all obligations of the business.

Choice “c” is incorrect. A sole proprietorship is not considered an entity separate from the sole proprietor.

Choice “d” is incorrect because a sole proprietorship ends with the death of the sole proprietor.

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Question: 5

Noll Corp. and Orr Corp. are contemplating entering into an unincorporated joint venture. Such a joint venture:

  1. Will be treated as a partnership in most important legal respects.
  2. Must be dissolved upon the completion of a single undertaking.
  3. Will be treated as an association for federal income tax purposes and taxed at the prevailing corporate rates.
  4. Must file a certificate of limited partnership with the appropriate state agency.


Answer: A

Explanation:

Choice “a” is correct. The legal requirements, the consequences, the advantages, and disadvantages of forming a joint venture generally are identical to those of a general partnership. Joint ventures are treated as a partnership in most important legal aspects.

Choice “b” is incorrect. A joint venture need not be dissolved upon the completion of a single undertaking. Joint ventures may be formed for a single transaction or for a related series of transactions.

Choice “c” is incorrect because a joint venture would be taxed like a partnership, not a corporation.

Choice “d” is incorrect because a joint venture, like a partnership, may be formed without filing with the state.

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Question: 4

Which of the following forms of business can be formed with only one individual owning the business?

  1. Option A
  2. Option B
  3. Option C
  4. Option D


Answer: B

Explanation:

Choice “b” is correct. A sole proprietorship and (in most states) a limited liability company can be formed with only one owner. A partnership requires two or more partners.

Choices “a”, “c”, and “d” are incorrect per the Explanation: above.

Question: 4

Which of the following forms of business can be formed with only one individual owning the business?

  1. Option A
  2. Option B
  3. Option C
  4. Option D


Answer: B

Explanation:

Choice “b” is correct. A sole proprietorship and (in most states) a limited liability company can be formed with only one owner. A partnership requires two or more partners.

Choices “a”, “c”, and “d” are incorrect per the Explanation: above.