Launching New Ventures An Entrepreneurial Approach 6th Edition By Kathleen R. Allen – Test Bank

Launching New Ventures An Entrepreneurial Approach 6th Edition By Kathleen R. Allen – Test Bank

Chapter 10—Choosing the Legal Form of Organization

TRUE/FALSE

1. DBA stands for a certificate of doing business under an assumed name.

ANS: T PTS: 1 REF: p. 228

2. Sole proprietorships, partnerships, S-corporations, and limited liability companies all permit pass-through earnings and losses, but S-corporations and LLCs offer more protection from liability.

ANS: T PTS: 1 REF: p. 228

3. In a sole proprietorship, the owner is the only person responsible for the activities of the business and, therefore, is the only one to enjoy the profits and suffer the losses.

ANS: T PTS: 1 REF: p. 228

4. A high-growth venture cannot be started as a sole proprietorship.

ANS: F PTS: 1 REF: p. 230

5. In terms of its treatment of income, expenses, and taxes, a partnership is essentially a sole proprietorship consisting of more than one person.

ANS: T PTS: 1 REF: p. 231

6. The law requires a partnership to draw up a written partnership agreement based on the Uniform Partnership Act.

ANS: F PTS: 1 REF: p. 232

7. Common stockholders are entitled to vote at stockholder meetings.

ANS: T PTS: 1 REF: p. 235

8. LLCs are becoming a popular vehicle for companies that may have global investors, because the C-corporation does not permit foreign ownership.

ANS: F PTS: 1 REF: p. 242

9. Having a strategic plan in place for the venture enables the entrepreneur to choose a legal form that won’t have to be changed or one that can easily be shifted to when the time is right.

ANS: T PTS: 1 REF: p. 242

10. Nonprofit corporations are not allowed to make a profit, according to the Internal Revenue Service.

ANS: F PTS: 1 REF: p. 240