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MGMT 160 Final Exam Comprehensive Study
Sheet 2025
6 Major Factors for Choosing a Business Form -
.....ANSWER ...✔✔ 1. Personal liability of the business
owner
2. Taxation of both the entity and its owners
3. Complexity and organizational costs in setting up
4. Control of the business
5. Continuity of the business
6. Ability of the business to raise capital
Advantages of Sole Proprietorships - .....ANSWER
...✔✔ 1. Secrecy
2. Unique tax advantages
3. Owner doesn't have to share profits
4. Relative freedom of action and control
5. Easiest and simplest form to organize, operate, and
dissolve
Disadvantages of Sole Proprietorships - .....ANSWER
...✔✔ 1. Limited capital
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2. Difficulty obtaining credit
3. Inadequate management and employee skills
4. Unlimited liability for the firm's debts
5. Limited life because business and owner are legally
the same
Disadvantages of Partnerships - .....ANSWER ...✔✔ 1.
Limited life
2. Unlimited liability for firm's debts
3. Each partner is responsible for the acts of every other
partner
4. An impasse may develop if the partners become
incompatible
5. Death of any one of the partners terminates the
partnership
6. A partner cannot obtain bonding protection against
the acts of the other partners
Advantages of Partnerships - .....ANSWER ...✔✔ 1.
Easy to form
2. Division of labor and management responsibility
3. Can use idea and plans of more than one person
4. Specialized skills available from individual partners
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5. Can raise more capital since good credit may be
available
6. Obtains financial resources from more than one
person
Restrictions of S-Corporations - .....ANSWER ...✔✔ -
Shareholders of the corp must be individuals, estates, or
certain trusts that are US persons
-Corp must have no more than 100 shareholders
-Corp must have only one class of stock, although all
shareholders do not need to have the same voting rights
Limited Liability Company (LLC) - .....ANSWER ...✔✔ -
"Newer" business form
-Members are called "owners"
-May be taxed as a partnership or corporation
LLC Operating Agreement - .....ANSWER ...✔✔ -
Detailed management structure and decision-making
process
-How profits will be divided
-Rights to transfer of membership interests
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Single level of taxation - .....ANSWER ...✔✔ Earnings
of the business are taxed once, with the owners paying
the taxes
Double taxation - .....ANSWER ...✔✔ -C-Corporations
pay tax, then the shareholders
-Earnings of the business are taxed twice with the
business as well as its owners being subject to tax
Pass through taxation - .....ANSWER ...✔✔ Earnings
of the business are distributed to the business owners
and those owners pay individual tax on the earnings
"Check the Box" taxation - .....ANSWER ...✔✔ A
choice LLCs can make on their tax returns: be taxed as a
corporation or a partnership
Patent - .....ANSWER ...✔✔ Government-protected
monopoly where the inventor must teach the innovation
in exchange
-Protection varies by country
-20 year protection
MGMT 160 Final Exam Comprehensive Study
Sheet 2025
6 Major Factors for Choosing a Business Form -
.....ANSWER ...✔✔ 1. Personal liability of the business
owner
2. Taxation of both the entity and its owners
3. Complexity and organizational costs in setting up
4. Control of the business
5. Continuity of the business
6. Ability of the business to raise capital
Advantages of Sole Proprietorships - .....ANSWER
...✔✔ 1. Secrecy
2. Unique tax advantages
3. Owner doesn't have to share profits
4. Relative freedom of action and control
5. Easiest and simplest form to organize, operate, and
dissolve
Disadvantages of Sole Proprietorships - .....ANSWER
...✔✔ 1. Limited capital
,2|Page
2. Difficulty obtaining credit
3. Inadequate management and employee skills
4. Unlimited liability for the firm's debts
5. Limited life because business and owner are legally
the same
Disadvantages of Partnerships - .....ANSWER ...✔✔ 1.
Limited life
2. Unlimited liability for firm's debts
3. Each partner is responsible for the acts of every other
partner
4. An impasse may develop if the partners become
incompatible
5. Death of any one of the partners terminates the
partnership
6. A partner cannot obtain bonding protection against
the acts of the other partners
Advantages of Partnerships - .....ANSWER ...✔✔ 1.
Easy to form
2. Division of labor and management responsibility
3. Can use idea and plans of more than one person
4. Specialized skills available from individual partners
,3|Page
5. Can raise more capital since good credit may be
available
6. Obtains financial resources from more than one
person
Restrictions of S-Corporations - .....ANSWER ...✔✔ -
Shareholders of the corp must be individuals, estates, or
certain trusts that are US persons
-Corp must have no more than 100 shareholders
-Corp must have only one class of stock, although all
shareholders do not need to have the same voting rights
Limited Liability Company (LLC) - .....ANSWER ...✔✔ -
"Newer" business form
-Members are called "owners"
-May be taxed as a partnership or corporation
LLC Operating Agreement - .....ANSWER ...✔✔ -
Detailed management structure and decision-making
process
-How profits will be divided
-Rights to transfer of membership interests
, 4|Page
Single level of taxation - .....ANSWER ...✔✔ Earnings
of the business are taxed once, with the owners paying
the taxes
Double taxation - .....ANSWER ...✔✔ -C-Corporations
pay tax, then the shareholders
-Earnings of the business are taxed twice with the
business as well as its owners being subject to tax
Pass through taxation - .....ANSWER ...✔✔ Earnings
of the business are distributed to the business owners
and those owners pay individual tax on the earnings
"Check the Box" taxation - .....ANSWER ...✔✔ A
choice LLCs can make on their tax returns: be taxed as a
corporation or a partnership
Patent - .....ANSWER ...✔✔ Government-protected
monopoly where the inventor must teach the innovation
in exchange
-Protection varies by country
-20 year protection
