Business Organizations Overview
40 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the main purpose of the articles of incorporation?

  • To serve as the legal document for forming a new corporation (correct)
  • To outline the rights of shareholders
  • To define the managerial roles within the corporation
  • To certify the operations of a foreign corporation

    • Which of the following describes an alien corporation?

  • A business created under the authority of a foreign country (correct)
  • A foreign corporation operating under local regulations
  • A corporation operating in multiple states within a country
  • A domestic corporation that has expanded internationally

    • Who are the individuals responsible for bringing a corporation into being?

  • Directors
  • Incorporators (correct)
  • Officers
  • Shareholders

    • What is the role of directors in a corporation?

    <p>To decide the goals and objectives for the organization</p> Signup and view all the answers

    What defines a foreign corporation?

    <p>A corporation created in one state but operates in others</p> Signup and view all the answers

    What is the primary characteristic of a trading partnership?

    <p>It is focused on providing services.</p> Signup and view all the answers

    What does the doctrine of respondeat superior establish?

    <p>An employer is liable for the torts of an employee under their control.</p> Signup and view all the answers

    What is a characteristic of a nontrading partnership?

    <p>It operates primarily in buying and selling goods.</p> Signup and view all the answers

    What is the role of a principal in an agency relationship?

    <p>A person who gives an agent authority to act on their behalf.</p> Signup and view all the answers

    What is the purpose of the business judgement rule?

    <p>To presuppose that directors are acting in good faith and care.</p> Signup and view all the answers

    What distinguishes a benefit corporation from a traditional corporation?

    <p>It requires adherence to social goals in addition to profit production.</p> Signup and view all the answers

    Which type of authority involves the principal expressly giving authority to the agent?

    <p>Actual authority</p> Signup and view all the answers

    What is implied authority in an agency relationship?

    <p>Authority that is incidental to express authority granted.</p> Signup and view all the answers

    Which statement best describes apparent authority?

    <p>It is authority perceived to exist by a third party despite its absence.</p> Signup and view all the answers

    Who are the members of a limited liability company?

    <p>Individuals or business entities that belong to the company.</p> Signup and view all the answers

    What is a characteristic of a publicly held organization?

    <p>It has owners who can trade ownership interests on exchanges.</p> Signup and view all the answers

    Which factor is NOT important when selecting a business's organizational form?

    <p>Access to global markets</p> Signup and view all the answers

    What does the term 'continuity' refer to in the context of business organizations?

    <p>The stability and durability of the organization.</p> Signup and view all the answers

    Which statement best defines 'dissolution' in a business context?

    <p>The cancellation of an agreement, rescinding its binding force.</p> Signup and view all the answers

    What is one of the most significant creation-related issues when forming an organization?

    <p>The time it takes to create the organization.</p> Signup and view all the answers

    What describes a closely held organization?

    <p>A business owned by only a few individuals.</p> Signup and view all the answers

    Which factor can significantly affect the taxation of an organization's earnings?

    <p>The formal structure of the organization.</p> Signup and view all the answers

    What is an essential consideration regarding the control of decisions in a business organization?

    <p>How many owners are involved in the decision-making process?</p> Signup and view all the answers

    What happens to a general partnership when there is a change in partners?

    <p>It is automatically dissolved.</p> Signup and view all the answers

    Which statement best describes the liability of partners in a general partnership?

    <p>Partners' personal assets may be claimed by creditors.</p> Signup and view all the answers

    What characterizes the managerial control in a general partnership?

    <p>All partners have an equal voice unless agreed otherwise.</p> Signup and view all the answers

    How is a partnership treated for taxation purposes?

    <p>Partners report their share of profits and losses on individual tax returns.</p> Signup and view all the answers

    What does the term 'jointly and severally liable' mean in the context of a partnership?

    <p>Partners are liable in any proportional combination for the entire debt.</p> Signup and view all the answers

    If a partnership incurs a net loss, how can it benefit the partners regarding their personal taxes?

    <p>The loss can reduce their taxable income.</p> Signup and view all the answers

    What is a key feature of the continuity of a general partnership?

    <p>The organization is easily dissolved upon a change in partners.</p> Signup and view all the answers

    What is the consequence of wrongfully dissolving a partnership?

    <p>The guilty partner may incur liability for damages.</p> Signup and view all the answers

    What defines a corporation in contrast to a partnership?

    <p>An artificial legal person created by the state's law.</p> Signup and view all the answers

    What is the purpose of piercing the corporate veil?

    <p>To disregard the corporation and hold shareholders personally liable</p> Signup and view all the answers

    What distinguishes limited partners from general partners in a limited partnership?

    <p>General partners are liable for the debts of the partnership</p> Signup and view all the answers

    Which of the following accurately describes an S corporation?

    <p>Its shareholders pay a single level of taxation as a partnership.</p> Signup and view all the answers

    What is a characteristic of a limited liability company (LLC)?

    <p>Members are only liable for their capital contributions.</p> Signup and view all the answers

    What document is necessary for the creation of a limited liability company?

    <p>Articles of Organization</p> Signup and view all the answers

    Why is double taxation considered a disadvantage of a corporate structure?

    <p>Income is taxed at both the corporate level and upon dividend distribution.</p> Signup and view all the answers

    Under the alter-ego theory, what do court typically look for?

    <p>Commingling of personal and corporate assets</p> Signup and view all the answers

    Which type of partner in a limited partnership has no control over business decisions?

    <p>Limited partner</p> Signup and view all the answers

    Study Notes

    Business Organizations

    • People conduct business using various organizational forms
    • Laws recognize three basic forms and hybrid forms combining aspects of two or more basic forms

    Forms of Business

    • Sole Proprietorship: Owned and controlled by one person. Has limited use because multiple owners aren't possible.
    • General Partnership: Two or more people agree to a business venture with shared profits and losses. Easy to form, low cost.
    • Corporations : A legally recognized entity separate from its owners, offering flexibility in ownership and management.
      • Domestic Corporation: Operates within the state that issued the charter.
      • Foreign Corporation: Operates outside the state of incorporation.
      • Alien Corporation: Foreign company
      • Charter: Legal document that creates a corporation.

    Important Terms

    • Closely Held: Businesses owned by a small group of people.
    • Publicly Held: Businesses with many owners who can trade ownership through public exchanges.

    Factors in Selecting a Form

    • Cost of Creation: Legal and administrative expenses.
    • Organization Continuity: Stability of the business
    • Control of Decisions: How ownership structures affect who controls decision-making.
    • Personal Liability: Responsibility of owners for business debts.
    • Taxation: The way business transactions are taxed affects ownership choice.

    Creation

    • The legal steps required to establish a business organization; involved in time and paperwork.

    Continuity

    • The lasting nature or stability of an organization. Dissolution is the cancellation of an agreement. Types of dissolution vary by organizational form.

    Managerial Control

    • Who is in charge of the business organization, a key concern for its owners.
    • Owner liability in business organization.

    Liability

    • The owner's personal obligation for the business's debts.

    Taxation

    • How the organization's income is taxed (personal tax on earnings vs corporate tax followed by personal tax on income distributions). An important factor when selecting a form.

    Selecting the Best Form

    • Sole Proprietorship: The simplest form, easily created and inexpensive but with unlimited personal liability for owners.

    • Partnership: Easy formation, but partners have unlimited liability

    • Corporation: Offers limited liability for owners but involves more paperwork.

    Partnerships

    • Partnership. Two or more parties agree on a business venture and share profits and losses 。
    • Creation A partnership is easily created.
    • Continuity Dissolves with any change in partners; though dissolution does not necessarily mean termination the entity. Buy and sell agreements can help streamline transitions.
    • Managerial Control Unless agreed otherwise, partners share equal control, though disagreements may arise.
    • Liability General partnerships have unlimited liability, meaning personal assets can be used to pay off business debts.

    Anticipating Dissolution

    • Using buy-sell agreements to establish a plan for handling ownership transitions like death or withdrawal of a partner.

    Business Judgment Rule

    • Directors are presumed to act in good faith according to the best interest of the firm.

    Benefit Corporation

    • Corporations are required to meet social goals (besides profit maximization).

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Related Documents

    Business Organization PDF

    Description

    This quiz explores various forms of business organizations, including sole proprietorships, partnerships, and corporations. Learn about the differences between domestic, foreign, and alien corporations, as well as key terms related to ownership structures. Test your knowledge on how these entities operate and are recognized by law.

    More Like This

    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser