Chapter 1 - Page 1

(Difficulty: E = Easy, M = Medium, and T = Tough)

Multiple Choice: Conceptual

Easy:

Firm organization Answer: c Diff: E

1. Which of the following statements is true?

a. One of the benefits of incorporating your business is that you becomeentitled to receive unlimited liability.

b. Sole proprietorships are subject to more regulations thancorporations.

c. Sole proprietorships do not have to pay corporate tax.

d. All of the statements above are correct.e. None of the statements above is correct.

Firm organization Answer: c Diff: E

2. Which of the following statements is most correct?

a. One of the advantages of the corporate form of organization is thatthere is no double taxation.

b. The partnership form of organization has easy transferability ofownership

c. One of the disadvantages of the sole proprietorship form of organi-zation is that there is unlimited liability.

d. Statements b and c are correct.e. None of the statements above is correct.

Firm organization Answer: a Diff: E

3. Which of the following statements is most correct?

a. One advantage of forming a corporation is that you have limitedliability.

. Corporations face fewer regulations than sole proprietorships.

c. One disadvantage of being a sole proprietor is that you have to paycorporate taxes, even though you dont realize
the benefits of being acorporation.

d. Statements b and c are correct.

e. None of the statements above is correct.