HCM 416 ONLINE TEST 1 STUDY GUIDE EXAM QUESTIONS AND
ANSWERS WITH COMPLETE SOLUTIONS VERIFIED
Proprietorship
A single form of business owned by a single individual.
Advantages:
Ease of formation
Subject to few regulations
No corporate income taxes
Disadvantages:
Limited life
Difficult to transfer ownership
Unlimited liability
Difficult to raise capital
Partnership
Non-incorporated business entity created by two or more individuals.
Advantages:
Ease of formation
Subject to few regulations
,No corporate income taxes
Disadvantages:
Limited life
Difficult to transfer ownership
Unlimited liability
Difficult to raise capital
Corporation
Legal business entity that is separate from it's owners and managers.
Advantages:
Unlimited life
Easy transfer of ownership
Limited liability
Ease of raising capital
Disadvantages:
Cost of formation and reporting
Double (or triple) taxation for investor-
owned corporations
Limited liability company (LLC)
Members are taxed like partners
Liability like stockholders
, Limited liability partnership (LLP)
Partners share general business liability
But partners are liable only for their own malpractice actions
Investor-Owned Corporations
Investors become owners by purchasing shares
of common stock.
Stockholders have:
-Right of control
-Claim on residual earnings and residual liquidation
proceeds
-Typically expect a return on their investment in the form of dividends and/or capital
gains.
Primary goal is shareholder wealth (stock price) maximization.
For-profit managers are primarily concerned with
satisfying stockholders.
Investor-Owned Corporations must pay:
-Property tax
-Income tax
-Sales tax
Not-for-Profit
No sales, property or income tax and no shareholders.
Not-for-profit managers must satisfy all
stakeholders.
ANSWERS WITH COMPLETE SOLUTIONS VERIFIED
Proprietorship
A single form of business owned by a single individual.
Advantages:
Ease of formation
Subject to few regulations
No corporate income taxes
Disadvantages:
Limited life
Difficult to transfer ownership
Unlimited liability
Difficult to raise capital
Partnership
Non-incorporated business entity created by two or more individuals.
Advantages:
Ease of formation
Subject to few regulations
,No corporate income taxes
Disadvantages:
Limited life
Difficult to transfer ownership
Unlimited liability
Difficult to raise capital
Corporation
Legal business entity that is separate from it's owners and managers.
Advantages:
Unlimited life
Easy transfer of ownership
Limited liability
Ease of raising capital
Disadvantages:
Cost of formation and reporting
Double (or triple) taxation for investor-
owned corporations
Limited liability company (LLC)
Members are taxed like partners
Liability like stockholders
, Limited liability partnership (LLP)
Partners share general business liability
But partners are liable only for their own malpractice actions
Investor-Owned Corporations
Investors become owners by purchasing shares
of common stock.
Stockholders have:
-Right of control
-Claim on residual earnings and residual liquidation
proceeds
-Typically expect a return on their investment in the form of dividends and/or capital
gains.
Primary goal is shareholder wealth (stock price) maximization.
For-profit managers are primarily concerned with
satisfying stockholders.
Investor-Owned Corporations must pay:
-Property tax
-Income tax
-Sales tax
Not-for-Profit
No sales, property or income tax and no shareholders.
Not-for-profit managers must satisfy all
stakeholders.
