1Connie wanted to form a partnership with Chuck to sell insurance. He agreed and they became co-owners in C&C Insurance, an equal partnership. The partnership did well in its first year and, after expenses, had a profit of $150,000. How will the taxation of this profit be handled?

C&C Insuranceitself will pay the taxes on the business's profit.

Since the partnership was Connie's idea, she will pay income tax on the profit on her personal tax return.

C&C Insurancewill pay half of the tax liability and Connie and Chuckwill pay the other half.

Connie and Chuck must both pay tax on the business's profit.

2George and Mark are looking to start a business named P&P Enterprises. They are looking at an S corporation. How would this type of entity provide an advantage to George and Mark?

An S Corporation enables partnerships and corporations to invest as shareholders.

An S Corporation can attract an unlimited number of shareholders.

An S Corporation offers multiple classes of stock.

An S Corporation is a flow-through entity for income tax purposes.

3George and Mark are also considering other business forms for P&P Enterprises. They want the limited liability of a corporation and the tax status of a flow-through entity, but they don't want to deal with restrictions on shareholders and classes of stock. What business form should they choose:

a general partnership.

a limited liability company.

a sole proprietorship.

a close corporation.

4George & Mark are still considering other business forms for P&P Enterprises. If they choose a closely held corporation with just the two of them and ten other investors as shareholders, which of the following would not be true abouttheir company?

P&P Enterprises'shares will be publicly traded.

P&P Enterprises will be able tooperate without a board of directors.

P&P Enterprises' minority shareholders will be provided more protection than in regular corporations.

P&P Enterprisescan restrict its shareholders from transferring shares.

5Frank, Christie, & Matt are members of Custom Glass, an LLC.Custom Glass is getting sued by Andy, who has made a motion to have Custom Glass' veil pierced. The court may grant such a motion and pierce Custom Glass' veil if

Custom Glasshas too many members.

Frank, Christie, & Matt keep their assets and the assets of Custom Glass separate.

Frank, Christie, & Matt fail to provide adequate capital.

Frank, Christie, & Matt treat Custom Glass like a separate organization.

6Christie had a falling out with Frank and Matt and decided to open up her own shop - Christie's GlassWorks, selling windows on a retail basis. She decided to set up a sole proprietorship. At her grand opening, Eric was in the store and a window display fell over and hit him on the head. Eric sued Christie's GlassWorks. Which of the following is true about Christie's potential liability?

Christie can be held personally liable to Eric because she is the owner.

Christie can only be liable to the amount she initially invested in the business.

Christie has no potential liability to the customer.

Christie cannot be held personally responsible; Eric's insurance must pay for the claim.

7What is the purpose of the Franchise Disclosure Document?

to ensure quality

to ensure profitability

to ensure franchisee is qualified

to ensure disclosure of all relevant facts

8Vic and Ruthann are starting Victory Signs which will manufacture signs. If their primary objective is to ensure that they will be able to easily transfer ownership of Victory, which form should the choose?

sole proprietorship.

close corporation.

general partnership.

corporation.

9Gloria and Stanley are starting up Johnson Air. If they choose a corporation, what will be one of the advantages they will have?

It will be easy to form Johnson Air.

They will have limited liability.

They will only have to incur a small expense to form Johnson Air.

Johnson Air will be a flow-through tax entity.

10Yvonne is incorporating her business, YES! Surf Shop. YES!'s headquarters will be in Cincinnati. Business will be conducted in California, Washington, Florida, and South Carolina. Yvonne:

must incorporate the business in Ohio, where her headquarters are located.

can incorporate the business in any state.

must incorporate the business in California, Washington, Florida, & South Carolina where she is doing business.

must incorporate in Delaware because that is where other corporations are located.

11SterlingPublishing, Inc, a corporation, is a publisher of textbooks. Sterling's officers are:

appointed by Sterling's president.

elected by Sterling's shareholders.

appointed by the Secretary of State of Ohio where Sterling is incorporated.

chosen by Sterling's board of directors.

12Jude is on the board of directors of Mammoth Food Processing Corporation. Mammoth is looking for a distribution center to purchase. Jude owns a development company that recently built a distribution center that is still vacant. Which of the following is not a required method by which Jude can sell the distribution center to Mammoth?

A court reviews the transaction to determine fairness.

Jude resigns his position on Mammoth's board of directors before any negotiations for the buildingbegin.

A special committee of disinterested members of Mammoth's board of directors approves the transaction.

Disinterested shareholders approve the transaction.

13Lost Coast Drilling (LCD), which is incorporated in Delaware, owns and operates three oil drilling platforms in the Gulf of Mexico. Which of the following actions will not require a vote by its shareholders.

a change to LCD's charter.

the sale of one of LCD's platforms to Texas Pipeline.

the sale of one of its helicopters.

the sale of LCD to Texas Pipeline.

14Jake was elected to board of the Queen City Lights but didn't receive a majority of the vote. Jake is known as a:

dependent director.

nominal director.

proxy director.

zombie director.

15Rock Capital's shareholdersare requiring its CEO and COO to reimburse the company for a bonus they received six months after it was discovered that the financials supporting the bonus were flawed. This action is known as:

voting out the directors.

say-on-pay.

clawback pay action.

activist investing.

16Brian is the Chief Financial Officer of the Hamilton Corporation. He made a difficult business decision which ended up losing millions for the corporation. When challenged about his decision, the court ruled he had not acted in good faith. According to the business judgment rule:

Brian will only be held personally liable if he breached a duty of loyalty or a duty of care.

Brian will be held personally liable for the loss.

Brian will have to resign from the company.

Brian will not be held personally liable for the loss.

17Mary Jo, a shareholder in Dimmick, Inc., appoints Sergio to vote for her at a shareholder meeting. Sergio is a(n):

director

manager

proxy

officer

18Shane is a Chief Operating Officer for JNJ Enterprises. He also sits on the Board of Directors. He is known as what kind of director?

zombie

internal

inside

independent