CH – 4

Which is the easiest form of business to start up?

 Sole proprietorship

The partnership business entity is not taxed, because each partner pays tax on the business's profits

as their ______.

 personal income

If the Smith family of four brothers owns all the shares in the family business, then this corporation is

considered:

 a private corporation

Which of the following, when issued to a business, identifies that the business has been approved by

the federal or provincial government?

 Certificate of Incorporation

A ______ corporation is one in which the shares may be bought, sold, or traded by anyone.

 Blank 1: public

________ (Preferred/Common) shareholders receive dividends_______ (Preferred/Common)

shareholders.

 Blank 1: Preferred

 Blank 2: Common

A business that is owned and managed by one person is a __________, ___________ .

  Blank 1: sole

 Blank 2: proprietorship or proprietor

Which of the following is considered an advantage of corporations?

 Ease of transfer of ownership

Sole proprietorships are generally managed by their ______.

 owners

A disadvantage of sole proprietorships is that any debts or losses incurred by the business are your

debts because you and the business are legally one and you have:

 unlimited liability

A legal form of business with two or more owners is a(n)

 partnership

A partnership where all owners share in operating the business and in assuming unlimited liability for

the business's debts is a:

 general partnership

Which of the following are true of preferred shares? (Check all that apply.)

 The owners have the first claim on profits before other shareholders.

 The owners of preferred shares have little say in the running of the company.

A sole proprietorship is owned by one _________.

 Blank 1: person, individual, or owner
The responsibility of business owners for all of the debts of the business, beyond the amount of

money invested in the firm, is known as _________ liability.

 Blank 1: unlimited

A general partnership is a partnership that involves a complete sharing in both the management and

the unlimited __________ of the business.

 Blank 1: liability or liabilities

____________do not pay taxes when submitting the organization's tax return to the Canada Revenue

Agency; the tax return simply provides information about the profitability of the organization and the

distribution of profits.

 Blank 1: Partners or Partnerships

The various responsibilities of each partner as well as any issues involving money should be included

in the _______, __________.

 Blank 1: partnership

 Blank 2: agreement

It is a requirement in Canada that a partnership registers its:

 name

Which of the following are more likely to suffer from disagreements among partners?

 Smaller firms

When is a partnership terminated?

 When one partner dies

  When one partner withdraws

A business which is a legal entity and has assets and liabilities which are separate from the owners is

called a:

 corporation

A major advantage of a corporation is _______ liability because it reduces stockholders' risk.

 Blank 1: limited

 Limited liability refers to the fact that shareholders' liability in case a firm fails is limited to the

amount of their original investment.

 True

Reason: Limited liability refers to the fact that shareholders' liability or potential loss in case a firm fails

is limited to the amount of their original investment.

Some distinct disadvantages that corporations have is as a result of tax laws and _______ regulation.

 Blank 1: government

Which of the following would not actually happen if one partner in a two-person partnership suddenly

withdraws from the partnership or even dies?

 The remaining partner would continue the partnership alone

Terms of the partnership should be decided ahead of time and spelled out in writing to prevent

disagreements. This is usually done in the:

 partnership agreement

Corporations have some distinct disadvantages resulting from:

  government regulation

 tax laws

When the corporation pays a tax on its profits and individual stockholders each pay tax on dividends

distributed by the corporation, it is called:

 double taxation

Revenue Canada is able to tax dividend income at a(n) ____ rate than personal income under the

Dividend Tax Credit program.

 lower

A partnership between two companies established for a specific purpose, such as sharing production

facilities, is called a:

 joint venture

A business owned and controlled by individuals or small businesses that have come together to reap

the benefits of belonging to a larger organization is a:

 cooperative

A ________ occurs when two companies combine to form a new company.

 Blank 1: merger

It is easy to start and end a sole proprietorship because:

 it may only require a simple permit or license to start

 only one person is involved in decision to dissolve the business

__________liability means that the owners of the business are responsible for its losses only up to the

amount they invest.

 Blank 1: Limited

A private corporation has:

 only a few owners who are all closely involved in managing the business

Corporations issue __________ to shareholders and this allows ownership to change when it is sold.

 Blank 1: stock or shares

A key advantage of a sole proprietorship is that:

 decisions can be made quickly

When two or more people legally agree to become co-owners of a business, the organization is called

a _______.

 Blank 1: partnership

 Larger firms are more likely to suffer from disagreements in partnerships than smaller firms because

their size often prevents a clear distinction of duties.

 False

Reason: Larger firms are less likely to suffer from disagreements in partnerships than smaller firms. The

size of smaller firms often prevents a clear distinction of duties that can be found in larger partnerships.

A _______ is a legal entity whose assets and liabilities are separate from its owners.

 Blank 1: corporation
When producers, consumers, or workers with similar needs pool their resources and come together

for mutual gain, they start a:

 cooperative

An acquisition occurs when two companies combine to form a new company.

 False

Reason: A merger occurs when two companies combine to form a new company.