01
True or false
1 point
Rina runs a shop as a sole proprietorship. If the business cannot pay a business debt, Rina may be personally responsible because the owner and business are not legally separate for liability.
Free Practice Quiz Question List
5 Business Organizations Online Quiz Questions
Use this free practice quiz with 20 questions to review 5 Business Organizations, test your knowledge, and prepare for your next test or exam.
20 questions
02
Choose one
1 point
Mara starts a consulting practice on her own without forming another entity. Which business form does this most likely describe?
- A
Sole proprietorship
- B
General partnership
- C
Corporation
- D
Limited liability company
03
Choose one
1 point
Two designers jointly run a studio as co-owners and share its profits, but they have not filed to form an entity. Under applicable law, which form may describe their business?
- A
Sole proprietorship
- B
General partnership
- C
Corporation
- D
Limited liability company
04
Fill in the blank
1 point
In a corporation, shareholders generally elect a of directors, which oversees the corporation; handle day-to-day operations.
05
Written response
1 point
An LLC member agrees to be personally responsible for a business loan if the LLC does not repay it. What is this commitment called?
06
Choose all
1 point
Which statements correctly match business forms with documents commonly used to help define their rules? Select all that apply.
- A
A corporation commonly uses bylaws.
- B
An LLC commonly uses an operating agreement.
- C
Partners may use a partnership agreement.
- D
An LLC commonly uses corporate bylaws as its governing document.
07
True or false
1 point
An LLC’s legal form under state law and its federal income-tax classification are separate questions; tax treatment may depend on the LLC’s number of members and elections.
- A
True
- B
False
08
Choose one
1 point
A general partner arranges a routine purchase needed for the partnership’s business. Which statement best describes the partner’s possible authority?
- A
The partner can never act for the partnership unless every co-owner approves each transaction.
- B
The partner may have authority to act for the partnership in ordinary business matters, subject to the agreement and state law.
- C
The partner’s actions automatically create a corporation.
- D
Only a state-appointed manager can act for a general partnership.
09
Choose one
1 point
The owners of a newly formed LLC want to decide whether to manage it themselves or appoint managers. Which statement best describes their options?
- A
The LLC must always be managed by its members, regardless of its agreement.
- B
The LLC must always appoint managers who are not members.
- C
The members may manage the LLC themselves or appoint managers, subject to the operating agreement and state law.
- D
The shareholders elect a board that manages every LLC.
10
Fill in the blank
1 point
For federal income-tax purposes, a domestic single-member LLC is generally treated by default as , while a domestic multi-member LLC is generally treated by default as a .
11
Written response
1 point
A founder plans to create an LLC as a formal entity. Under what level of law is an LLC generally formed?
12
Choose all
1 point
Which circumstances may leave an owner personally responsible despite an entity’s limited-liability status? Select all that apply.
- A
An owner personally commits wrongful conduct.
- B
A person is an LLC member, without any other relevant circumstance.
- C
An owner signs a personal guarantee.
- D
The business has an ordinary debt, which automatically makes every owner personally liable.
- E
A court disregards the entity after serious misuse, such as mixing personal and business assets.
13
Choose one
1 point
An LLC wants federal income-tax treatment as a corporation while remaining an LLC under state law. What may it do if eligible?
- A
It must convert into a corporation under state law before any tax election is possible.
- B
It cannot change its federal income-tax treatment.
- C
It may elect corporate tax treatment if eligible.
- D
It automatically receives corporate tax treatment solely because it is an LLC.
14
Open ended
1 point
A founder has formed an LLC and assumes that the entity alone will protect the business in every situation. What ongoing practices does the chapter recommend, and why should the founder not rely on entity status alone?
15
Written response
1 point
A business is formed as a limited liability company. What are its owners called?
16
Written response
1 point
A newly formed corporation needs an internal document to help set its governance procedures and decision-making rules. What is this document commonly called?
17
Choose one
1 point
In a corporation, which description best explains the usual division of governance responsibilities?
- A
Shareholders oversee daily operations, while directors elect the officers and manage the board.
- B
Shareholders generally elect directors, the board oversees the corporation, and officers handle day-to-day operations.
- C
Officers elect shareholders, who oversee the board's daily operations.
- D
Directors own the corporation, and shareholders handle its daily operations.
18
Choose one
1 point
An entrepreneur wants to create a corporation under state law. Which step is identified as the corporation's formation method?
- A
Adopt an operating agreement with the state.
- B
Begin conducting business as a co-owner with another person.
- C
File articles of incorporation under state law.
- D
Register a trade name with a local government.
19
Choose one
1 point
Two people run a design studio as co-owners and share its profits, but file no formation papers. What is a possible result under applicable law?
- A
They may be treated as partners under applicable law because they operate as co-owners, even without formation filings.
- B
They cannot be partners unless they first file articles of incorporation.
- C
They automatically form an LLC because they share profits.
- D
They form a corporation as soon as they begin selling services.
20
True or false
1 point
A domestic single-member LLC is generally treated by default as disregarded from its owner for federal income-tax purposes.
- A
True
- B
False