Reflection – Entity Types
Based on the attached document(Organizational Types and Considerations for a Small Business ) from the Small Business Administration, document the advantages and disadvantages of different business entity types.
Pre–Test
Test your knowledge of organizational types and considerations before you go through the training.
1. Which of the following best describes a sole proprietorship?
a. Business is one and the same as the owner
b. Business is an unincorporated hybrid entity with traits of a corporation and a general partnership
c. Business is an incorporated hybrid entity with traits of a limited liability company and a general partnership
d. Business is sometimes called a “taxable corporation”
2. What should be considered when selecting a business organizational type? Select all that apply.
a. Taxation
b. Transferability of ownership
c. Expense of creating the organizational type
d. Your liability and risk
3. Control of a sole proprietorship belongs entirely to the owner, who also assumes full risk of the business.
a. True
b. False
4. Which of the following is true about a general partnership?
a. Owners are subject to “pass–through” taxation
b. Owners are personally liable for the debts of the business
c. A partnership is a tax-reporting entity, not a tax-paying entity
d. Both a. and b.
e. All three: a., b., and c.
5. Which of the following is true about a limited liability company (LLC)?
a. LLC owners are subject to “pass–through” taxation
b. LLC owners are called shareholders
c. An LLC is a hybrid business entity sharing characteristics of both a corporation and a partnership
(or sole proprietorship)
d. Both a. and c.
e. Both b. and c.
6. Which of the following is true about a corporation?
a. A corporation is created under the laws of a state
b. Corporation owners are called property-holders
c. A corporation one of the simpler forms of business organization
d. Both a. and b.
e. Both a. and c.
7. A C-corporation is sometimes called a ____________________ corporation.
a. Taxable
b. Regular
c. Transferrable
d. Limited liability
e. T-
8. The major difference between a C-corporation and an S-corporation is ownership liability and risk.
a. True
b. False
9. Organizational types are sometimes called “legal structures”.
a. True
b. False
10. The overall management of a corporation is the responsibility of which of the following?
a. Owner(s)
b. Shareholders
c. Board of directors
d. State commissioner
Post–Test
1. Which of the following best describes an LLC?
a. Business is one and the same as the owner
b. Business is an unincorporated hybrid entity with traits of a corporation and a partnership
c. Business is an incorporated hybrid entity with traits of a corporation and a partnership
d. Business that is sometimes called a “corporate partnership”
2. A corporation is a ____________________, created under the laws of a state, having its own privileges and
liabilities distinct from those of its members.
a. Shared estate
b. Owner-operator partnership
c. Formal sole proprietorship
d. Separate legal entity
3. A unique employer identification number (EIN) is required for all corporations.
a. True
b. False
4. Which of the following is true about a general partnership?
a. Each partner must make quarterly estimated tax payments to the IRS
b. In general, each partner is jointly liable for the partnership’s obligations; partners can be sued as a group
c. A partnership is a tax-reporting entity, not a tax-paying entity
d. All three: a., b., and c.
e. None of the above
5. Which of the following is true about a sole proprietorship?
a. Owners are subject to “pass–through” taxation
b. Surprisingly, it is one of the more complex forms of business organizational types
c. There is no legal distinction between owner and the business
d. Both a. and c.
e. Both b. and c.
6. Which of the following is true about a corporation?
a. A corporation is created under the laws of a state
b. Owners are called shareholders
c. Shareholders are not personally responsible for corporation debts and obligations
d. Both a. and b.
e. All three: a., b., and c.
7. Ownership in a corporation can be transferred by ____________________.
a. Filing with the state in which the corporation was first created
b. Selling stock
c. Changing the corporation into a limited liability company (LLC)
d. Referring to its articles of organization, which will be unique for each corporation
8. The term, “pierce the corporate veil,” refers to which of the following?
a. Combining a C-corporation and an S-corporation into one legal structure
b. Creating shareholder value
c. Combining business operations with personal actions, opening one to liability caused by a business
d. Converting a corporation into a partnership
9. An officer is a person voted by a corporation board of directors to manage day-to-day operations and to
carry out policies.
a. True
b. False
10. Which of the following best defines the term “pass–through taxation?”
a. Paying taxes on income as an owner as opposed to the business paying taxes on profit
b. Tax imposed on corporations for imported products
c. Tax that is collected on income that has been previously taxed
d. Tax imposed on a business that the business in turn adds to the price of its products
