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Chapter 4 Review

Quiz by Meredith Schwartzlose

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20 questions
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  • Q1
    Which of the following is necessary for starting a sole proprietorship?
    an application to the secretary of state
    a contract
    articles of proprietorship
    no specific legal documents
  • Q2
    Which of the following is not a disadvantage of sole proprietorships?
    lack of continuity
    double taxation
    lack of money
    unlimited liability
  • Q3
    Unlimited liability means
    there is no limit on the amount an owner can borrow
    the business can borrow money for any type of purchase
    creditors will absorb any loss from nonpayment of debt
    the owner is responsible for all business debts
  • Q4
    When the owner of a sole proprietorship dies, what becomes of the business?
    it ceases to exist, and no one may legally take it over
    the employees take over the business
    it is automatically auctioned to the highest bidder
    it ceases to exist unless the heirs take it over or sell it
  • Q5
    The person who assumes full co-ownership of a partnership, including unlimited liability, is a
    limited partner
    general partner
  • Q6
    The _______ is a legal document that lists and explains the terms of the partnership.
    articles of partnership
    co-owner's agreement
  • Q7
    As a limited partner in a construction business, Joe
    has input only on major company decisions
    only risks his initial investment
    does not receive any portion of the profits
    contributes only his time and not his money
  • Q8
    With regard to taxation of partnerships, which of the following statements is true?
    a partnership is exempt from taxes
    profits are taxed twice
    each partner is taxed in the same way as a sole proprietor
    taxes are paid on a partnership's profits, after which each partner pays taxes on his or her share of the profits.
  • Q9
    Kayla purchases shares of ownership in General Electric. These shares are referred to as
    articles of ownership
    ownership documents
  • Q10
    A corporation whose stock can be purchased by anyone and is traded in stock markets is known as a(n) _______
    closed corporation
    sole proprietorship
    open corporation
  • Q11
    A distribution of earnings to the stockholders of a corporation is a(n) ______
    earnings per share
    distributed payment
    par distribution
  • Q12
    When incorporating, a business
    must incorporate in the state in which it does the most business
    may incorporate in any state it chooses
    must incorporate in the state in which its headquarters are located
    must receive the secretary of state's permission to incorporate in any state other than the one in which its corporate headquarters will be located
  • Q13
    Which of the following is not a disadvantage of the corporate form of ownership?
    difficulty of formation
    limited liability
    lack of secrecy
    expense of incorporation and selling stock
  • Q14
    Which of the following is an advantage of the corporate form of organization?
    the corporation and its stockholders pay taxes on profits
    a corporation must submit detailed information to government agencies
    ownership of stock is easy to transfer
    forming a corporation is a complex and costly process
  • Q15
    Unless specififed in the charter, a corporation has a
    life of fifty years
    life of seventeen years, which is renewable
    legal life of one decade
    perpetual life

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