Multiple choice

1.George 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?

a. An S Corporation offers up to five classes of stock.

b. An S Corporation enables international investors as shareholders.

c.An S Corporation provides limited liability.

d. An S Corporation can have up to 250 shareholders.shareholders.

2.Connie 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 $60,000. H6ow will the taxation of this profit be handled?

a.C&C Insurance will pay taxes on the $60,000 profit.

b.Connie will pay income tax on the $60,000 profit on her personal tax return.

c.Connie and Chuck will each personally pay taxes on $30,000 of the profit.

d.C&C Insurance will pay taxes on $30,000 of the profit; and Connie and Chuck will pay taxes on $15,000 each.

3.George 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.a general partnership.

B.a limited liability company.

C.a close corporation.

D.a sole proprietorship.

4.George & 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?

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

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

C.P&P Enterprises'shares will be publicly traded.

D. P&P Enterprisescan restrict its shareholders from transferring shares.

5.Frank, 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

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

B.Custom Glasshas too many members.

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

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

6.Christie 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?

a.Christie has no potential liability to the customer.

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

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

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

7.What is the purpose of the Franchise Disclosure Document?

a.to ensure disclosure of all relevant facts

b.to ensure profitability

c.to ensure quality

d,to ensure franchisee is qualified

8.Vic 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?

a.close corporation.

b.general partnership.

c.corporation.

d. sole proprietorship.

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

1.They will have limited liability.

2.Johnson Air will be a flow-through tax entity.

3.It will be easy to form Johnson Air.

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

10.Yvonne 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:

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

b.can incorporate the business in any state.

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

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