From a legal point of view, which form of business ownership is the most complicated to set up?
Sole proprietorship
Incorrect. This is relatively simple because only one person is involved. Try again.
Partnership
Incorrect. It is useful to have a formal partnership agreement, but this is still not the most complicated form in legal terms.
Corporation
Correct. There are usually many laws governing the setting up and running of corporations, even for small businesses.
Which form of business entity involves shareholders?
Sole proprietorship
Incorrect. The owner owns the business directly, as an individual.
Partnership
Incorrect. The partners own the business directly, as individuals.
Corporation
Correct. The business is owned by shareholders, who may or may not include the founder or managing director.
If one partner decides to leave a partnership, the partnership continues and the remaining partners simply carry on running the business as before – true or false?
True
Incorrect. The partnership is dissolved when one partner leaves.
False
Correct. The partnership is dissolved when one partner leaves.
Which form of business ownership provides the most continuity if the founder leaves?
Corporation
Correct. The shareholders continue to own the company and can appoint new managers and officers to replace anyone who leaves.
Partnership
Incorrect. If the founder is a partner and chooses to leave the partnership, the partnership is dissolved.
Sole proprietorship
Incorrect. There is no legal structure to continue the business if the owner/founder decides to stop running the business.
Which form of business ownership gives the founder the most control and freedom over how to run their business?
Corporation
Incorrect. The Board of Directors and shareholders have ultimate control over the company.
Partnership
Incorrect. Although each individual partner is a principal and and agent of the partnership and can commit the partners by their actions, in practice a successful partnership requires consultation and agreement on important decisions affecting the business.
Sole proprietorship
Correct. A sole proprietor does not need to consult with anyone else when making decisions about the business. This can be a strength and a weakness of this form of business entity.
Business ownership quiz