Options For Organizing Business Quiz

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Business Organization Quizzes & Trivia

Dive into the intricate world of business organization with our quiz, "Options for Organizing Business." Explore the various structures and strategies that businesses adopt to thrive and navigate the corporate landscape.

From sole proprietorships and partnerships to corporations and LLCs, this quiz challenges your understanding of the fundamental choices entrepreneurs face when structuring their ventures. Discover the implications of each option on liability, taxation, and decision-making authority.

Whether you're an aspiring entrepreneur or a business enthusiast, test your knowledge of organizational frameworks and gain insights into the dynamic ways businesses are structured. Sharpen your understanding of the options available for Read moreorganizing a business and embrace the strategic nuances that can shape success. Are you ready to decode the intricate world of business organization?


Questions and Answers
  • 1. 

    If you want to go into business for yourself, the easiest way is a sole proprietorship. 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Pg.145 AACSB: Reflective Thinking Bloom's Taxonomy: Knowledge Difficulty: Easy Learning Objective: 1

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  • 2. 

    Sole proprietorship typically employ fewer than 50 people. 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Pg. 145 AACSB: Reflective Thinking Bloom's Taxonomy: Knowledge Difficulty: Easy Learning Objective: 1

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  • 3. 

    Lack of control is a disadvantage of sole proprietorships.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Pg 146
    AACSB: Reflective Thinking
    Bloom's Taxonomy: Knowledge
    Difficulty: Easy
    Learning Objective: 1

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  • 4. 

    Sole proprietorships have the least degree of secrecy.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Pg 146
    AACSB: Reflective Thinking

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  • 5. 

    A sole proprietorship has limited sources of funds, which may affect the growth of the business.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    A sole proprietorship is a business owned and operated by a single individual. As the sole owner, the proprietor is solely responsible for financing the business. Unlike other forms of business ownership, such as partnerships or corporations, a sole proprietorship does not have the ability to raise funds through the sale of stocks or the addition of partners. This limited access to funds can hinder the growth of the business, as it may restrict the ability to invest in new opportunities, expand operations, or hire additional employees. Therefore, the statement that a sole proprietorship has limited sources of funds, which may affect the growth of the business, is true.

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  • 6. 

    In the U.S, men are twice as likely as women to start their own business

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Men being twice as likely as women to start their own business in the U.S. can be explained by various factors. One possible explanation is the existence of gender disparities in access to resources and opportunities. Historically, women have faced greater barriers in securing funding, mentorship, and networking opportunities compared to men. Additionally, societal expectations and cultural norms may discourage women from pursuing entrepreneurship. However, it is important to note that this answer is based on statistical data and does not imply that all men are more likely than all women to start their own business.

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  • 7. 

    In a partnership, if the goals of one partner change, the result may be friction and even legal disputes. 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    In a partnership, each partner has their own goals and objectives. If one partner's goals change, it can lead to conflicts and disagreements within the partnership. These disagreements can escalate to the point of legal disputes if the partners are unable to find a resolution. Therefore, it is true that if the goals of one partner change, it can result in friction and legal disputes in a partnership.

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  • 8. 

    All states require partnerships to have articles of partnership.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Not all states require partnerships to have articles of partnership. While many states do require partnerships to have a written agreement, it may not necessarily be called "articles of partnership." Some states may refer to it as a partnership agreement, partnership contract, or another similar term. Therefore, the statement that all states require partnerships to have articles of partnership is false.

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  • 9. 

    Partnerships have fewer regulatory controls than corporations.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Partnerships have fewer regulatory controls than corporations because partnerships are generally less complex and have fewer legal requirements. Unlike corporations, partnerships do not have to comply with certain regulations such as filing annual reports with regulatory authorities, holding shareholder meetings, or appointing a board of directors. Partnerships also have more flexibility in decision-making and are subject to less government oversight. However, it is important to note that the specific regulatory controls may vary depending on the jurisdiction and type of partnership.

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  • 10. 

    In a general partnership, each partner is liable only for the debts he or she incurs. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    In a general partnership, each partner is personally liable for all the debts and liabilities incurred by the partnership. This means that if the partnership cannot pay its debts, the partners are individually responsible for paying them, even if they did not personally incur the debt. Therefore, the correct answer is False.

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  • 11. 

    In a partnership, all partners are equally liable. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    In a partnership, all partners are not equally liable. The liability of each partner is based on their individual contribution and agreed upon in the partnership agreement. Partners may have different levels of liability, depending on their investment and involvement in the partnership. Therefore, it is not true that all partners are equally liable in a partnership.

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  • 12. 

    Corporations cannot be sued. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Corporations can be sued because they are considered legal entities separate from their owners. They have the ability to enter into contracts, own property, and be held liable for their actions. Therefore, if a corporation engages in illegal or harmful activities, it can be taken to court and held accountable for its actions.

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  • 13. 

    In most states, corporations must have "corporation," "incorporated," or "limited" in their names to show that their owners have limited liability. 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    In most states, corporations are required to include the terms "corporation," "incorporated," or "limited" in their names. This is because these terms indicate that the owners of the corporation have limited liability, meaning that their personal assets are protected from being used to cover the corporation's debts or legal obligations. By including these terms in their names, corporations are able to inform the public and potential investors about the legal structure and protections in place. Therefore, the statement "True" is the correct answer.

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  • 14. 

    Taking a company public means announcing its creation to the public. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Taking a company public does not mean announcing its creation to the public. Instead, it refers to the process of offering shares of the company to the public through an initial public offering (IPO) or other means. This allows the company to raise capital by selling ownership stakes to investors. The company may have already been in existence for some time before deciding to go public.

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  • 15. 

    The biggest advantage of the corporate form of ownership may be the limited liability of its owners. 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The statement is true because one of the main advantages of the corporate form of ownership is that it provides limited liability to its owners. This means that the owners' personal assets are protected and they are only liable for the amount they have invested in the company. In case of any financial or legal issues faced by the company, the owners are not personally responsible for the debts or liabilities of the business. This limited liability feature provides a sense of security to the owners and encourages investment in corporations.

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  • 16. 

    Preferred stockholders have a preemptive right.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Preferred stockholders do not have a preemptive right. Preemptive right refers to the right of existing shareholders to maintain their proportional ownership in a company by purchasing additional shares before they are offered to other investors. While common stockholders generally have preemptive rights, preferred stockholders typically do not have this right. They have a fixed dividend payment and other preferential rights, but not the right to purchase additional shares before others. Therefore, the correct answer is false.

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  • 17. 

    Most tender offers are considered hostile. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Tender offers are not automatically considered hostile. A tender offer is a public offer to buy shares of a company's stock at a specified price, typically above the current market price. While some tender offers can be hostile, meaning they are made without the approval or cooperation of the target company's management, many tender offers are made with the support and cooperation of the target company. Therefore, it is incorrect to say that most tender offers are considered hostile.

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  • 18. 

    When firms that make and sell similar products to the same customers merge, it is known as a horizontal merger. 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    A horizontal merger refers to the combination of two or more firms operating in the same industry and producing similar products. In this case, when firms that make and sell similar products to the same customers merge, it aligns with the definition of a horizontal merger. Therefore, the statement "When firms that make and sell similar products to the same customers merge, it is known as a horizontal merger" is true.

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  • 19. 

    A merger occurs when one company buys another by buying its stock. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    A merger occurs when two companies combine to form a new entity, rather than one company buying another. In a merger, the shareholders of both companies typically receive shares in the new entity. This allows for a pooling of resources, expertise, and market share, resulting in potential synergies and improved competitiveness.

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  • 20. 

    Shark repellent is a method of thwarting a corporate takeover in which management requires a large majority of stockholders to approve the takeover. 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Shark repellent refers to a strategy used by management to prevent a corporate takeover. It involves implementing measures that require a significant majority of stockholders to approve any takeover attempts. This is done to make it more difficult for the acquiring company to gain control of the target company. Therefore, the statement that shark repellent is a method of thwarting a corporate takeover by requiring a large majority of stockholders to approve the takeover is true.

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  • 21. 

    A leveraged buyout is an organization composed of small businesses that have banded together to reap the benefits of belonging to a larger organization. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    A leveraged buyout is not an organization composed of small businesses. Instead, it refers to the acquisition of a company using a significant amount of borrowed money to meet the cost of acquisition. It typically involves a financial sponsor (private equity firm) and aims to take a publicly traded company private. Therefore, the correct answer is False.

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  • 22. 

    The government usually will scrutinize high-profile mergers and acquisitions to ensure that they are not creating monopolies 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The explanation for the given correct answer is that the government has a responsibility to prevent the formation of monopolies, which can harm competition and consumers. High-profile mergers and acquisitions often involve large companies with significant market power, and if left unchecked, they could potentially dominate the market and eliminate competition. Therefore, it is important for the government to scrutinize these mergers and acquisitions to ensure that they do not result in the creation of monopolies.

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  • 23. 

    A sole proprietorship is a popular form of business because 

    • A.

      it is heavily regulated by the government.

    • B.

      it is taxed more than other forms.

    • C.

      it is hard to dissolve.

    • D.

      The proprietor does not have direct control.

    • E.

      It is easy to form.

    Correct Answer
    E. It is easy to form.
    Explanation
    A sole proprietorship is a popular form of business because it is easy to form. This means that individuals can easily start their own business without going through complex legal processes or requiring a large amount of capital. Compared to other forms of business, such as partnerships or corporations, a sole proprietorship offers simplicity and flexibility in terms of formation. This ease of formation makes it an attractive option for entrepreneurs who want to start their own business quickly and with minimal resources.

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  • 24. 

    One of the most popular and easiest to establish forms of business in the United States is the 

    • A.

      Partnership.

    • B.

      Sole proprietorship.

    • C.

      Corporation.

    • D.

      Joint venture.

    • E.

      Cooperative.

    Correct Answer
    B. Sole proprietorship.
    Explanation
    The correct answer is sole proprietorship. This is because a sole proprietorship is a business owned and operated by one person. It is the simplest form of business to establish, as it does not require any formal legal processes or paperwork. In a sole proprietorship, the owner has complete control over the business and is personally responsible for all its debts and liabilities. This form of business is popular among small businesses and individuals who want to start their own ventures without the need for partners or shareholders.

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  • 25. 

    About 80 percent of all businesses in the United States are sole proprietorships, and they earn somewhere around 15 percent of total business income. We may conclude that  A. the average corporation is small, but earns little income.

    • A.

      The average corporation is small, but earns little income.

    • B.

      The average corporation hires many people, but makes little income.

    • C.

      The average sole proprietorship is large, but earns little income.

    • D.

      There are many sole proprietorships, but their average income is small.

    • E.

      There are few sole proprietorships, and their average income is small.

    Correct Answer
    D. There are many sole proprietorships, but their average income is small.
    Explanation
    The correct answer suggests that there are many sole proprietorships in the United States, but their average income is small. This conclusion is drawn from the information provided, which states that about 80 percent of all businesses in the United States are sole proprietorships and they earn around 15 percent of total business income. This implies that while there may be a large number of sole proprietorships, their individual incomes are relatively low.

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  • 26. 

    Which of the following is not a source of funds for a sole proprietorship?

    • A.

      Bank loans

    • B.

      Family members

    • C.

      Personal funds

    • D.

      Selling stock or issuing bonds

    • E.

      Small Business Administration

    Correct Answer
    D. Selling stock or issuing bonds
    Explanation
    Selling stock or issuing bonds is not a source of funds for a sole proprietorship because sole proprietorships are owned and operated by a single individual who is personally responsible for all the business's debts and obligations. Unlike corporations, sole proprietorships do not have the ability to issue stock or bonds to raise funds. Instead, sole proprietors typically rely on personal funds, loans from banks, assistance from family members, or government programs like the Small Business Administration to finance their business ventures.

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  • 27. 

    All of the following are advantages of a sole proprietorship except

    • A.

      Ease of formation.

    • B.

      Secrecy.

    • C.

      Unlimited liability.

    • D.

      Control of the business.

    • E.

      Limited government regulation.

    Correct Answer
    C. Unlimited liability.
    Explanation
    A sole proprietorship is a business owned and operated by a single individual. One advantage of a sole proprietorship is ease of formation, as it does not require any formal legal processes. Secrecy is also an advantage, as the owner has complete control over the business and can keep information private. Control of the business is another advantage, as the owner has the final say in all decisions. Limited government regulation is also an advantage, as sole proprietorships are subject to fewer regulations compared to other business structures. However, the exception to these advantages is unlimited liability, which means the owner is personally responsible for all debts and liabilities of the business.

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  • 28. 

    The following is an advantage of a sole proprietorship:

    • A.

      Limited sources of funds

    • B.

      Profits are not shared

    • C.

      Limited liability

    • D.

      Ease of hiring qualified employees

    • E.

      Owner's role as a generalist

    Correct Answer
    B. Profits are not shared
    Explanation
    The advantage of a sole proprietorship is that profits are not shared. In this type of business structure, the owner has complete control over the profits generated by the business and does not have to share them with any partners or shareholders. This allows the owner to have full autonomy over the allocation and use of the profits, which can be beneficial in terms of reinvesting in the business or personal financial gains.

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  • 29. 

    Jane has discovered that she is bored working for others. She wants to open a business in which she will have maximum control and the least interference from government regulation. Which business form should she use? 

    • A.

      Joint venture

    • B.

      Cooperative

    • C.

      Corporation

    • D.

      Partnership

    • E.

      Sole proprietorship

    Correct Answer
    E. Sole proprietorship
    Explanation
    Jane should use a sole proprietorship as her business form. A sole proprietorship offers maximum control as Jane will be the sole owner and decision-maker of the business. It also has the least interference from government regulation compared to other business forms such as corporations or partnerships. In a sole proprietorship, Jane will have complete autonomy over her business and will not have to comply with as many regulatory requirements as other forms.

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  • 30. 

    The income earned by sole proprietorships is 

    • A.

      Taxed twice.

    • B.

      Not taxable.

    • C.

      Taxed as personal income.

    • D.

      Too high.

    • E.

      Audited less often than others.

    Correct Answer
    C. Taxed as personal income.
    Explanation
    Sole proprietorships are not separate legal entities from their owners, so the income earned by them is considered personal income of the owner. Therefore, it is taxed as personal income, meaning that it is subject to individual income tax rates and not taxed twice.

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  • 31. 

    Barber shops, dog kennels, and independent grocery stores are typically 

    • A.

      Franchises.

    • B.

      Nonprofit agencies.

    • C.

      Sole proprietorships.

    • D.

      Partnerships.

    • E.

      Limited liability partnerships.

    Correct Answer
    C. Sole proprietorships.
    Explanation
    The correct answer is sole proprietorships. Barber shops, dog kennels, and independent grocery stores are typically owned and operated by a single individual, known as a sole proprietor. This means that the owner has complete control over the business and is personally responsible for all its debts and liabilities. Sole proprietorships are the simplest form of business ownership and are often chosen by individuals looking to start a small business on their own.

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  • 32. 

    Which of the following requires owners to perform many functions and possess diverse skills to make decisions? 

    • A.

      Corporation

    • B.

      Partnership

    • C.

      Sole proprietorship

    • D.

      Cooperative

    • E.

      Holding company

    Correct Answer
    C. Sole proprietorship
    Explanation
    A sole proprietorship requires owners to perform many functions and possess diverse skills to make decisions. In a sole proprietorship, the owner is responsible for all aspects of the business, including management, operations, finance, and decision-making. They must possess a wide range of skills and knowledge to effectively run the business. Unlike other business structures, such as a corporation or partnership, a sole proprietorship does not have separate legal entity status, making the owner personally liable for the business's debts and obligations.

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  • 33. 

    Which characteristic of a sole proprietorship can be considered both an advantage and a disadvantage? 

    • A.

      Taxation

    • B.

      Fund sources

    • C.

      Liability

    • D.

      Continuity

    • E.

      Secrecy

    Correct Answer
    A. Taxation
    Explanation
    Taxation can be considered both an advantage and a disadvantage for a sole proprietorship. On one hand, sole proprietors have the advantage of being able to report business income and expenses on their personal tax return, simplifying the tax filing process. This can also potentially lead to lower overall tax rates. However, the disadvantage is that sole proprietors are personally responsible for paying all taxes owed by the business, which can be a significant financial burden. Additionally, sole proprietors do not have access to certain tax benefits and deductions that are available to larger business entities.

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  • Dec 04, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Aug 31, 2010
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