ETH/321T WEEK 2 PRACTICE
TEST WITH ALL SOLUTIONS
1. What is the definition of a foreign corporation?: A business formed in a
different state
2. What is the definition of a Subchapter S corporation?: A business that passes
profits directly to shareholders
3. Wade and Hunter want to start a business. They have a large amount of
capital. They have a good working relationship and believe they will do well
sharing management responsibility and in sharing profits. They are happy
to be organizing a business together in order to avoid full liability for the
business. Which detail(s) of this situation would be most unhelpful toward
Wade and Hunter's decision to organize a general partnership?: Avoiding full
liability Wade and Hunter's anticipation of limited liability would be a mistake if they
are organizing a general partnership. Sharing management responsibility and profits
are valid benefits of a general partnership, and while a large amount of capital is
unnecessary in organizing one, it would certainly still be beneficial.
Found in the following section(s) of the text:
2.3: General Partnerships
4. What is a public corporation?: A business formed by the government
5. What is a closely-held corporation?: A business with a small number of share-
holders
6. Albus wants to build a business. He wants to start the business fast and
reach a large customer base, but he only has a small amount of opening
capital. He has no partner with whom to form the business. Which of the
following is not a valid reason for Albus to choose a sole proprietorship
organization for his business?: Wants to reach a large customer base Reaching
a large customer base is the only detail of Albus' situation that is not a reason to
pursue sole proprietorship based on the text.
Found in the following section(s) of the text:
2.2: Small Business Structures
7. Which of the following is false concerning LLCs?: LLCs are formed in much
the same way as a general partnership. The text states that LLCs are a creation of
state statute.
Found in the following section(s) of the text:
2.8: Limited Liability Corporations
8. Tawny wants to be involved in a business. She has lots of capital to invest
and she wants to be involved in management, but does not want to be exposed
to personal liability for losses the business might incur and she does not want
to have to pay excessive taxes on her gains. Which form of business would
be best for Tawny?: LLC Only an LLC would satisfy all of the details of Tawny's
situation.
1/4
TEST WITH ALL SOLUTIONS
1. What is the definition of a foreign corporation?: A business formed in a
different state
2. What is the definition of a Subchapter S corporation?: A business that passes
profits directly to shareholders
3. Wade and Hunter want to start a business. They have a large amount of
capital. They have a good working relationship and believe they will do well
sharing management responsibility and in sharing profits. They are happy
to be organizing a business together in order to avoid full liability for the
business. Which detail(s) of this situation would be most unhelpful toward
Wade and Hunter's decision to organize a general partnership?: Avoiding full
liability Wade and Hunter's anticipation of limited liability would be a mistake if they
are organizing a general partnership. Sharing management responsibility and profits
are valid benefits of a general partnership, and while a large amount of capital is
unnecessary in organizing one, it would certainly still be beneficial.
Found in the following section(s) of the text:
2.3: General Partnerships
4. What is a public corporation?: A business formed by the government
5. What is a closely-held corporation?: A business with a small number of share-
holders
6. Albus wants to build a business. He wants to start the business fast and
reach a large customer base, but he only has a small amount of opening
capital. He has no partner with whom to form the business. Which of the
following is not a valid reason for Albus to choose a sole proprietorship
organization for his business?: Wants to reach a large customer base Reaching
a large customer base is the only detail of Albus' situation that is not a reason to
pursue sole proprietorship based on the text.
Found in the following section(s) of the text:
2.2: Small Business Structures
7. Which of the following is false concerning LLCs?: LLCs are formed in much
the same way as a general partnership. The text states that LLCs are a creation of
state statute.
Found in the following section(s) of the text:
2.8: Limited Liability Corporations
8. Tawny wants to be involved in a business. She has lots of capital to invest
and she wants to be involved in management, but does not want to be exposed
to personal liability for losses the business might incur and she does not want
to have to pay excessive taxes on her gains. Which form of business would
be best for Tawny?: LLC Only an LLC would satisfy all of the details of Tawny's
situation.
1/4
