CH 1: BENEFITS OF A COMPANY VERSUS OTHER FORMS OF OWNERSHIP
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Questions and Answers

What is a crucial decision when embarking on a business venture?

  • Deciding on the business location
  • Selecting business partners
  • Setting the product prices
  • Choosing the form of ownership (correct)

    • Which of the following is NOT a primary form of business ownership mentioned in the text?

  • Limited Liability Companies (correct)
  • Sole Proprietorships
  • Partnerships
  • Close Corporations

    • What legal protection does a company offer to its shareholders?

  • Liability equal to personal assets
  • Limited liability (correct)
  • Unlimited liability
  • No liability protection

    • What is a requirement for forming a company under specific legal frameworks?

    <p>Registration with the relevant authorities</p> Signup and view all the answers

    Which advantage makes establishing a company more attractive to investors compared to sole proprietorships and partnerships?

    <p>Limited liability protection</p> Signup and view all the answers

    What document needs to be prepared when forming a company under specific legal frameworks?

    <p>Memorandum of Incorporation (MOI)</p> Signup and view all the answers

    What distinguishes companies from other forms of business in terms of continuity?

    <p>Perpetual existence regardless of ownership or management changes</p> Signup and view all the answers

    How do companies differ from sole proprietorships and partnerships in terms of raising capital?

    <p>Can issue shares and bonds</p> Signup and view all the answers

    What tax advantage do companies have over sole proprietors and partners?

    <p>Benefit from corporate tax rates and tax-deductible expenses</p> Signup and view all the answers

    Which challenge is typically associated with forming a company?

    <p>Complexity and cost of formation</p> Signup and view all the answers

    What is a notable consideration regarding the taxation of public companies mentioned in the text?

    <p>Double taxation of dividends</p> Signup and view all the answers

    Why do companies require careful planning and management according to the text?

    <p>Due to the complexities of formation and operation</p> Signup and view all the answers

    What is a key factor influencing various aspects of a business when choosing the form of ownership?

    <p>Liability, taxation, continuity, and capital acquisition</p> Signup and view all the answers

    Which business ownership form offers limited liability protection to its owners?

    <p>Companies</p> Signup and view all the answers

    What is a crucial requirement for forming a company under specific legal frameworks?

    <p>Preparation of a Memorandum of Incorporation (MOI)</p> Signup and view all the answers

    Which benefit makes establishing a company more appealing to investors compared to sole proprietorships and partnerships?

    <p>Limited liability protection</p> Signup and view all the answers

    Which aspect significantly protects personal assets from business debts and liabilities?

    <p>Limited liability feature in companies</p> Signup and view all the answers

    What distinguishes companies from close corporations in terms of liability protection for owners?

    <p>Companies offer limited liability</p> Signup and view all the answers

    Which of the following is a key advantage of companies in terms of continuity?

    <p>Companies enjoy perpetual existence, unaffected by changes in ownership or management.</p> Signup and view all the answers

    What advantage do companies have over sole proprietorships and partnerships in terms of raising capital?

    <p>Companies have more avenues for raising capital, including issuing shares (equity financing) and bonds (debt financing).</p> Signup and view all the answers

    Which of the following is a potential tax benefit for companies?

    <p>Companies may benefit from corporate tax rates and tax-deductible expenses.</p> Signup and view all the answers

    What is a notable consideration regarding the taxation of public companies mentioned in the text?

    <p>The double taxation of dividends is a notable consideration for public companies.</p> Signup and view all the answers

    Which of the following is a challenge associated with establishing a company?

    <p>The complexity and cost of formation is a challenge when establishing a company.</p> Signup and view all the answers

    What is crucial when choosing the form of business ownership?

    <p>Understanding the taxation implications is crucial when choosing the form of business ownership.</p> Signup and view all the answers

    Which of the following is a primary form of business ownership mentioned in the text?

    <p>Sole proprietorship</p> Signup and view all the answers

    What is the primary advantage of establishing a company over a sole proprietorship or partnership?

    <p>Limited liability for owners</p> Signup and view all the answers

    What is a key requirement for forming a company under specific legal frameworks?

    <p>Preparing a Memorandum of Incorporation (MOI)</p> Signup and view all the answers

    Which of the following is a key characteristic of a company as a legal entity?

    <p>Separation of ownership and management</p> Signup and view all the answers

    What is a notable difference between companies and sole proprietorships or partnerships in terms of capital acquisition?

    <p>Companies have greater access to debt financing</p> Signup and view all the answers

    Which of the following is a key advantage of companies in raising capital?

    <p>The ability to issue shares (equity financing)</p> Signup and view all the answers

    What is a notable consideration regarding the taxation of public companies mentioned in the text?

    <p>The double taxation of dividends</p> Signup and view all the answers

    Which of the following is NOT a challenge associated with establishing a company?

    <p>Unlimited liability for business debts</p> Signup and view all the answers

    What distinguishes companies from other forms of business in terms of continuity?

    <p>Companies enjoy perpetual existence regardless of changes in ownership or management</p> Signup and view all the answers

    Which aspect of companies potentially results in more favorable tax treatment compared to individual taxation rates?

    <p>The ability to benefit from corporate tax rates and tax-deductible expenses</p> Signup and view all the answers

    What is a critical advantage of companies over sole proprietorships and partnerships in terms of capital acquisition?

    <p>The ability to attract investment through issuing shares and bonds</p> Signup and view all the answers

    What is the fundamental characteristic that distinguishes a company from other forms of business ownership?

    <p>Companies are legally separate entities from their owners, offering limited liability protection to shareholders.</p> Signup and view all the answers

    Which of the following is NOT a requirement for forming a company under specific legal frameworks?

    <p>Obtaining approval from existing companies in the same industry</p> Signup and view all the answers

    Which of the following statements about the taxation of companies is accurate based on the information provided?

    <p>The text does not provide any specific information about the taxation of companies.</p> Signup and view all the answers

    Which of the following is NOT a primary advantage of establishing a company over other forms of business ownership mentioned in the text?

    <p>Exemption from operational and financial reporting standards</p> Signup and view all the answers

    Based on the information provided, what can be inferred about the continuity of companies compared to other forms of business ownership?

    <p>The text does not provide any information about the continuity of companies compared to other forms of ownership.</p> Signup and view all the answers

    According to the information provided, which of the following statements about raising capital for companies is accurate?

    <p>Companies have an advantage in raising capital through the issuance of shares, but the text does not provide specific details.</p> Signup and view all the answers

    Which of the following accurately describes the taxation implication for public companies?

    <p>Dividends distributed to shareholders are taxed twice, once at the corporate level and again at the individual level.</p> Signup and view all the answers

    Which of the following statements accurately describes the advantage of companies over sole proprietorships and partnerships in terms of capital acquisition?

    <p>Companies have access to issuing shares and bonds, whereas sole proprietorships and partnerships can only rely on personal funds and loans.</p> Signup and view all the answers

    Based on the information provided in the text, which of the following statements accurately describes the continuity aspect of companies?

    <p>Companies enjoy perpetual existence, meaning the business continues to operate regardless of changes in ownership or management.</p> Signup and view all the answers

    Which of the following statements accurately reflects a challenge associated with establishing a company?

    <p>The complexity and cost of formation, as well as regulatory compliance.</p> Signup and view all the answers

    Based on the information provided in the text, which of the following statements accurately describes a potential tax benefit for companies?

    <p>Companies may benefit from corporate tax rates and tax-deductible expenses, potentially resulting in more favorable tax treatment compared to individual taxation rates applicable to sole proprietors and partners.</p> Signup and view all the answers

    Which of the following statements accurately reflects the advantage of companies over sole proprietorships and partnerships in terms of liability protection?

    <p>Companies offer limited liability protection to their shareholders, while sole proprietorships and partnerships do not.</p> Signup and view all the answers

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