21) GAAP are the rules that govern accounting in the United States. The acronym GAAP in this statement refers to ________.
A) Globally Accepted and Accurate Policies
B) Global Accommodation Accounting Principles
C) Generally Accredited Accounting Policies
D) Generally Accepted Accounting Principles
22) The formation of a partnership firm requires a minimum of ________.
A) four partners
B) three partners
C) one partner
D) two partners
23) Which of the following is a major reason why corporate ownership is popular in the United States?
A) Stockholders have limited liability for the debts of the corporation.
B) Most corporations are small or medium-sized.
C) The life of a corporation is limited by the death of the owner.
D) A corporation is usually managed by the owners.
24) Which of the following is a characteristic of a corporation?
A) A corporation is owned by stockholders.
B) Lenders of a corporation do not have the right to claim the corporation's assets to satisfy their obligations.
C) All shares of a corporation must be held by a single individual.
D) Each stockholder has the authority to commit the corporation to a binding contract through his/her actions.
25) Which of the following statements is true of a sole proprietorship?
A) A sole proprietorship joins two or more individuals as co-owners.
B) The sole proprietor is personally liable for the liabilities of the business.
C) A sole proprietorship is taxed separately from the owner.
D) A sole proprietorship has to pay business income taxes.
26) Which of the following is a characteristic of a limited-liability company (LLC)?
A) An LLC's life is terminated at any member's choice or death.
B) Each member of an LLC is liable only for his or her own actions.
C) An LLC must have more than five members.
D) The income of members from an LLC is not taxed.
27) Caleb Brown has been the sole owner of a bicycle sales and repair shop for several years. Which of the following business types would limit Caleb's personal liability exposure to the entity's debts?
B) limited-liability company
C) sole proprietorship
D) limited-liability partnership
28) David has decided to open an auto-detailing business. He will pick up an automobile from the client, take it to his parents' garage, detail it, and return it to the client. If he does all of the work himself and takes no legal steps to form a special organization, which type of business organization, in effect, has he chosen?
A) A limited-liability company
B) A partnership
C) A corporation
D) A sole proprietorship
29) In a limited-liability company, the ________.
A) members are personally liable to pay the entity's debts
B) business pays the tax on earnings
C) members are liable for each other's actions
D) members pay tax on their share of earnings
30) From a legal perspective, a sole proprietorship is ________.
A) an entity separate from its proprietor
B) not favored by small businesses
C) not a distinct entity from its proprietor
D) subject to strict regulation of the SEC