ENG106: Academic Oral Communication Skills for Managerial Ethics (BU103)
Ch. Bauer-Ramazani



Types of Business Organization / Forms of Business Ownership


DIRECTIONS: Use the notes you took in class to complete the following questions.  T/F, MC, and Fill-in-the-blank questions count 1 point; points for essay questions vary (see points in parentheses).


1.     LIST the four  forms of business ownership discussed and give examples of each one.  (6 pts)



2.   T/F A law firm or a doctor's office is a typical example of a single proprietorship.


3.   Synonyms of stockholders are _____________, _______________, and ___________. 


4.  The most distinguishing characteristic of corporations is that they _____________________.


5.  T/F   The number of corporations in the US is greater than the number of single proprietorships.


6.  T/F    A sale is generated (made) by exchanging money for a good or service.


8.    T/F   The partnership has similar advantages and disadvantages as the single proprietorship.


9.  T/F   Corporations dominate the dollar value of business.


10. T/F  There are so many single proprietorships in the US because there are many advantages associated
 with single proprietorships.


11.    EXPLAIN why the single proprietorship has a tax advantage (over the corporation).




12.  T/F  In a single proprietorship, the profit that the business makes is included in the owner’s personal income tax.


13.  The risk of losing one's car or house in case a single proprietorship goes bankrupt is called __________________________________.


14.  T/F If a business fails, the bank can seize the owner’s personal assets.


15.  NAME the 2 reasons why it is difficult for sole proprietors to raise money (funds) for expanding the business.




16.  In a sole proprietorship, the ____________________ makes all the decisions and has all the control.


17.   DEFINE continuity




18.  T/F It is easy and quick to sell a single proprietorship or partnership.


19.   DEFINE bankrupt.  (2 pts)





20.  T/F Single proprietors can issue stock.


21.  T/F In a stock issue, a company sells stock to shareholders, and the shareholders pay money to the company for the stock.


22.  If you have invested $100 in a corporation by buying its stock, and the company goes bankrupt, how much money can you lose?  ___________________


23.  If you want to buy stock in a corporation, you call a ______________________.


24.  The fact that we can buy and sell stock on the Internet or over the phone in about 5 minutes shows the concept of _________________________________. 


25.   T/F  An investor in a corporation can lose his car and house if the corporation goes bankrupt.


26.   The corporation is a legal entity and has perpetual life.  What do these 2 terms mean? 



27.  T/F  A corporation can sign contracts, borrow money, own property, sue, and be sued in court.


28.  T/F  When one shareholder sells all of his investment (stock) to another shareholder (investor), the corporation will cease to exist (= die).


29.  NAME the 2 reasons why corporations have easier access to capital to grow their business.




30.  Look at the corporation’s income statement.  Write it here.  How can you calculate pre-tax income?









31.   Money that the company pays out to its shareholders on a regular basis is called ____________________. 


32.  T/F    Dividends are income to the investor.


33.  T/F   All companies pay dividends to their stockholders.


34.  T/F   Investors are taxed by the government on their dividends.


35./36.  Corporations have to pay income taxes to the government.  When corporations declare a dividend, the shareholders have to pay income taxes on the dividend.  This business principle is called ________________________________ and is a major ADVANTAGE / DISADVANTAGE of the corporation.


37.  T/F  Corporations are more complex and costly to form than sole proprietorships.


38.  Publicly-held corporations are subject to disclosure requirements.  This means that they must provide the public with information on __________________________________.


39.  T/F   Stockholders are always employees of an organization.


40.  T/F   The Board of Directors is a group of employees of a company.


41.  LIST at least 3 rights and risks of the stockholders.  (Extra credit for more than 3)


42.  T/F   When a company goes bankrupt, the stockholders are the first to receive the money owed to them.


43.  T/F   The Board of Directors is a group of representatives of all the company's stockholders.


44.  T/F   The Board of Directors is elected by the stockholders.


45.   LIST at least 3 responsibilities of the Board of Directors.     (Extra credit for more than 3)  






46.  T/F   The CEO (Chief Executive Officer) manages the day-to-day operations of the company.


47.  T/F    A Limited Liability Corporation (LLC) provides limited liability for its owners but is taxed only once, at the personal income level.


48. The owners' investment in a company is called ____________________.


49. Return on Equity (ROE) measures how much ____________________________________________________________ (2 points)


50. When a business has a net income of $100,000 and its investors have invested $1,000,000 in equity, it has a return on equity of ________ %.


51.  ROE is calculated by dividing ____________ into _______________.


52.  When a business has an ROE of 10%, this means that for every dollar the shareholders invested, they earned (returned)

           a. $1

           b. 10 cents

           c. $100

           d. $1,000 


53.  When a larger company buys a smaller company, this is called a(n) __________________.


54.  When a company divides its business into 2 or 3 new businesses, this is called a _________________________.


55.  When two companies set up a new company together, this is called a _________________________.


56.  List the four stakeholders in a business.


57.  Each type of business impacts stakeholders differently. For each of the four stakeholder groups, state one positive and one negative impact.

Stakeholder Positive impact Negative Impact


  2011  Christine Bauer-Ramazani, Saint Michael's College. Last updated: September 7, 2017