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Types of Business Organizations Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Page 1

Question 1 1. Jerry and Jenny are partners in a real estate investment group. Jerry invests $500,000 of his own money to acquire properties. Jenny handles the real estate transactions. Jenny makes some bad deals and now the group owes $800,000 in delinquent mortgage payments. Jenny can be held personally liable for:

Question 2 2. A corporation is taxed on its profits, and the owners are taxed on the income they receive from the corporation. What does this refer to?

Question 3 3.

One of the main disadvantages of a C Corp is that the business is taxed on its profits. Portions of these profits become the shareholders' salaries, bonuses and dividends. The shareholders then pay individual income taxes on the money they receive from the corporation.

This is known as:

Question 4 4. Let's say D.D.'s Duds is set up as a limited partnership. This is a business partnership where at least one partner has limited liability for business debts and no responsibility for the business. This type of partnership limits personal liability for partners who are _ and _.

Question 5 5. A limited liability company is a hybrid of which two business structures?

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Question 6 6.

True or false:

1. Officers are agents for the corporation, meaning that they act on behalf of the corporation and can bind the corporation to contracts.

2. Officers cannot be held personally liable for corporate misconduct or for gross failures.

3. The board of directors appoints the officers.

Question 7 7. Ernie and Ellis are partners in an engineering firm. They have a limited liability partnership. Each invested $20,000 to start the firm. Ernie recently gave bad advice that resulted in a large office building being built on a known land fault. The engineering firm was sued and now has to pay a $1,000,000 court judgment. Ellis can be held personally liable for:

Question 8 8. Partnerships are a popular type of business because:

Question 9 9. How does an owner start a sole proprietorship?

Question 10 10. What actions are required in order to form a limited liability partnership?

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Question 11 11.

True or false:

1. Dissolution serves as the beginning of the termination process for the partnership.

2. Many states require a Statement of Dissolution be filed with the Secretary of State, followed by a 720-day winding up time period.

3. Once the wind up is complete, the partnership is terminated.

Question 12 12. When is it necessary to file a Doing Business As form?

Question 13 13. A limited liability partnership is where:

Question 14 14. Ben, Bob and Brandi are partners in owning and running a bookstore. They own The Book Nook. Per their partnership agreement, Ben and Bob are limited partners. They are investors in the store. They each gave $50,000 to establish the store. Brandi is a book expert, so she runs the store. The general partner(s) is/are?

Question 15 15. Ben, Bob and Brandi are all lawyers. They decide to form a law firm as partners. They each contribute $50,000 to form a limited liability partnership. They will each work at the law firm and earn money for the firm. The general partner(s) is/are:

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Question 16 16. Hannah, Liz, and Stacey started a limited liability company, an online jewelry business that really took off. In its first year, The Triple Bedazzle company brought in $60,000 in profits. Since the three women had previously decided to split the profits equally, they each made an income of $20,000. How will The Triple Bedazzle company's income tax be handled on its $60,000 profit?

Question 17 17. In a partnership, the business isn't separately taxed but the partners are. This is commonly called:

Question 18 18. Most corporations have perpetual existence. This means that:

Question 19 19. Betty and Bert start a bicycle repair business. Betty runs the shop and Bert fixes the bikes. Bert repairs Bea's bike, but he forgets to tighten the bolts on her seat. Bea falls off the bike and is injured. She sues the bike shop and is awarded a money judgment. Which of the following is true?

Question 20 20.

To register her business name, Monica first needs to make sure 'Monica's Monograms' isn't already taken. Then she'll file the proper paperwork claiming the name. These forms are known as:

1. Assumed name forms

2. Trade name forms

3. Doing business as (DBA) forms

Page 5

Question 21 21. Let's say that Andrew owns 20 shares of stock in ABC, Inc. The ABC board of directors approves a dividend distribution. It will be paid in the form of cash dividends, paid at a rate of $5.00 per share. ABC will therefore issue payment to Andrew in the amount of $_.

Question 22 22. The main difference between a C Corp and an S Corp is:

Question 23 23. Which of the following is usually an attribute of common stock?

Question 24 24. Alisa owns Alright Business Services. It is a corporation, but Alisa does not use the word 'Incorporated' or 'Inc.' anywhere on her correspondence. Alisa is in charge of paying the bills for the business and sometimes writes rent checks out of her personal account. The business is not doing well, and is several months behind on making rent payments. Her landlord sues Alright Business Services and Alisa for the rent. How will the landlord recover the unpaid rent?

Question 25 25. A partnership agreement is:

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Question 26 26. In order to create a corporation, a company must file a charter with the state. These papers are called:

Question 27 27. A business partnership is a _ business established and run by or more individuals.

Question 28 28. Andrew, Allen, Alex and Abby are general partners. They own and run an Antelope farm. Andrew put up most of the money to establish the farm, while Abby spends the most time running the farm. There's no partnership agreement on how profits will be shared. How will the farm's profits be split?

Question 29 29. Betty and Bert start a bicycle repair business. Betty gives Bert $50,000 to start the business but Betty won't be involved in business operations. Bert will run the business by himself. Which of the following is NOT true?

Question 30 30. The Book Nook is an LLC organized by Bob, Ben, and Brandi, who agree to split all business profits equally. The Book Nook makes $75,000 net profit in its first year. The Book Nook won't pay taxes on its $75,000 profit. Instead, Ben, Bob and Brandi will each pay income taxes on _.

Types of Business Organizations Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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