Business Structures Overview

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Questions and Answers

What is the main liability difference between general and limited partners in a partnership?

Both general and limited partners have no personal liability for the firm's debts.

General partners are liable only for their investment, while limited partners face unlimited liability.

General partners have limited liability, while limited partners have unlimited liability.

General partners have unlimited liability, whereas limited partners are liable only up to their investment. (correct)

What is a significant characteristic of a corporation compared to a partnership?

Corporations are not subject to taxation.

Corporations can enter into legal contracts independently of their owners. (correct)

Corporations cannot own property.

Corporations are required to disclose their financial information to the public.

What primarily influences the lifespan of a partnership?

The contributions made by limited partners.

The life of the general partner. (correct)

The agreement between the partners.

The financial health of the business.

Who elects the Board of Directors in a corporation?

The shareholders. Signup and view all the answers

Which form of business organization is owned by a single individual and also faces unlimited liability for debts?

Sole Proprietorship Signup and view all the answers

What is the main difference in liability between a general partner and a limited partner in a limited partnership?

General partners have unlimited liability, while limited partners are liable only to the extent of their investment. Signup and view all the answers

What happens to the life of a partnership when a general partner dies?

The partnership is dissolved. Signup and view all the answers

Which of the following statements correctly describes corporations?

Corporations function separately from their shareholders. Signup and view all the answers

How do sole proprietors generally raise funds for their business?

By investing personal funds and bank loans. Signup and view all the answers

Who is responsible for electing the Board of Directors in a corporation?

The shareholders. Signup and view all the answers

In a general partnership, what is the primary purpose of the partners coming together?

To operate a business for profit. Signup and view all the answers

What distinguishes a corporation's ability to act legally from that of its shareholders?

The corporation can sue and be sued independently of its owners. Signup and view all the answers

What type of partnership involves partners who have liabilities limited to their investment?

Limited partnership. Signup and view all the answers

Study Notes

Sole Proprietorship

Single owner entitled to all profits.
Owner is responsible for all debts.
Funding typically comes from owner investment and bank loans.

Partnership (General)

Association of two or more co-owners operating a business for profit.

Partnership (Limited)

Two classes of partners: general and limited.
General partners manage the business and have unlimited liability for debts.
Limited partners' liability is limited to their investment.
Partnership lifespan is tied to the general partner's involvement.

Corporation

Chosen when significant funding is needed.
Functions separately from its owners (shareholders).
Can sue and be sued, and own property.
Legally owned by stockholders.
Board of directors, elected by shareholders, appoints senior management.

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Description

This quiz covers the fundamental concepts of different business structures, including sole proprietorships, general partnerships, limited partnerships, and corporations. Understand the characteristics, advantages, and liabilities associated with each type of business entity.