Corporate Structures and Ownership quiz

(sole proprietorship) is correctbecause "the simplest business structure is the sole proprietorship, also called the sole trader....key features of sole proprietorships include: Operational simplicity and flexibility".

(limited partnership) is incorrect because "key features of limited partnerships include the following:

• GP operates the business, having unlimited liability,
•  LPs have limited liability but lack control over business operations.

" Due to multiple partners and partnership agreement, this structure is not as simple and flexible as a sole proprietorship. "Key features of sole proprietorships include: Operational simplicity and flexibility."

(general partnership) is incorrect because "a general partnership...has two or more owners called partners whose roles and responsibilities in the business are outlined in a partnership agreement." As such, this structure is not as simple and flexible as a sole proprietorship. "Key features of sole proprietorships include: Operational simplicity and flexibility".

Assuming a company is repaying interest and principal in full and on time, debt holders have no further claims. Equity holders benefit from company growth .

Double taxation refers to a situation in which a country taxes corporations' gross earnings and then taxes net earnings distributed to owners (dividends) as personal income. Partnership profits are subject to only one level of taxation (they are personal income of the partners) .

In a corporation, owners are most often not directly involved in operating the business. Both general partnerships and limited partnerships have general partners who operate the business .

An initial public offering is a sale of equity shares to the public. Proceeds from the sale increase the issuer's equity capital. A direct listing does not raise capital. A management buyout is a method to take a public company private.

Leveraged buyouts can result in a public company going private. Direct listings and special purpose acquisition companies are methods for a private company to go public.

A sole proprietorship is legally an extension of the individual who owns and operates it. The owner has unlimited liability for obligations the business incurs.

(partner in a general partnership) is correct because general partnerships are like sole proprietorships with the important distinction that they allow for additional resources to be brought into the business along with the sharing of business risk among a larger group of individuals.

(sole trader) is incorrect because a sole trader "retains all return and assumes all risk ".

(general partner in a limited partnership) is incorrect because "a limited partnership must have at least one general partner with unlimited liability who is responsible for the management of the business " .

Because the upside for lenders is limited to the promised interest payments and repayment of principal, they do not benefit from an increased growth rate of the company and are unlikely to favor actions that increase a company's risk exposure and potential for default. Because owners have potentially unlimited upside from a company's growth, they are more likely to favor actions that increase a company's potential growth rate.

the statement is true. If a company fails to meet its obligation to bondholders and ultimately needs to petition the courts for bankruptcy protection, a potential alternative to asset liquidation to maximize proceeds for debt repayment is business reorganization. Following that path through the legal process as opposed to transactions in private or public markets, the company can be reorganized with shareholders getting wiped out and bondholders becoming its new shareholders.