Lesson 1

Question 1

Is an enterprise or any lawful activity that provides
products or services desired by customers for
profit.

Answer 1

Business

Question 2

forms of Business Organization:

Answer 2

Sole Proprietorship

Partnership

Corporation

Cooperative

Limited Liability Company

Question 3

This popular form of business structure is the easiest to
set up. Have one owner who makes all of the business
decisions, and there is no distinction between the business and the owner.

Answer 3

SOLE PROPRIETORSHIP

Question 4

ADVANTAGES OF SOLE:

Answer 4

Total control of the business

Simple Taxation

The owner can freely mix
personal assets with business
asset

Owner has all the profits for
himself or herself

Ease of formation

Question 5

DISADVANTAGES OF SOLE:

Answer 5

Unlimited liability

Difficulty in raising additional
funds or capital

Owner’s bias

Question 6

You can classify a business either general or
limited.

Answer 6

PARTNERSHIP

Question 7

allow both partners to invest in
a business with 100%
responsibility for any business
debts.

They don’t require a formal
agreement.

Answer 7

GENERAL PARTNERSHIP

Question 8

require owners to file
paperwork with the state and
compose formal agreements
that describe all of the
important details of the
partnership, such as who is
responsible for certain debts.

Answer 8

LIMITED PARTNERSHIP

Question 9

ADVANTAGES OF PARTNERSHIP:

Answer 9

Easy to establish

Partners can combine expertise

Distributed workload

Question 10

DISADVANTAGES OF PARTNERSHIP:

Answer 10

Possibility for disagreements

Difficulty in transferring
ownership

Full liability

Question 11

is a business organization that acts as a unique and separate
entity from its shareholders. Pays its own taxes before distributing
profits or dividends to shareholders.

Answer 11

CORPORATION

Question 12

three main forms of corporations:

Answer 12

C Corporation
S Corporation
LLC or Limited Liability Corporation

Question 13

separate taxable entities,
subject to double taxation.

offer more flexibility but
potentially higher tax implications.

Answer 13

C corps

Question 14

are pass-through entities, where profits and losses pass through to shareholders’ personal tax returns.

have ownership restrictions

Answer 14

S Corporation

Question 15

A domestic corporation takes on its own liabilities and is held
responsible for its debts, and its
shareholder will only be held
liable to the level of their share
capital.

Answer 15

LLC or Limited Liability Corporation

Question 16

ADVANTAGES OF CORPORATION:

Answer 16

Limited liability of stockholders

Virtually unlimited life

Ability to acquire additional
capital

Transferable ownership rights

Large pool of human capital

Question 17

DISADVANTAGES OF CORPORATION:

Answer 17

Not easy to form

More expensive to form than
sole proprietorship and
partnership

Heavily regulated by
government

Double Taxation

Question 18

autonomous and duly registered association of
persons, with a common bond of interest, who have
voluntarily joined together to achieve their social,
economic, and cultural needs and aspirations by making
equitable contributions to the capital required,
patronizing their products and services.

Answer 18

COOPERATIVE

Question 19

ADVANTAGES OF COOPERATIVE:

Answer 19

there are equal voting rights for
members

this structure encourages
member contribution and
shared responsibility

liability for members is limited

there is no limit on the number
of members.

Question 20

DISADVANTAGES OF COOPERATIVE:

Answer 20

Limited Capital

Inefficient Management

Lack of Secrecy

Excessive State Regulation

Internal Quarrels among
Members

Question 21

A domestic corporation takes on its own
liabilities and is held responsible for its
debts, and its shareholder will only be held
liable to the level of their share capital.

Answer 21

LIMITED LIABILITY COMPANY

Question 22

ADVANTAGES OF LLC:

Answer 22

No ownership restrictions

Ability to place membership
interests in a living trust

Ability to deduct losses

Tax flexibility

Question 23

DISADVANTAGES OF LLC:

Answer 23

higher taxes

lack of flexibility