Introduction to entrepreneurship/IENT102/Legalities/Knowledge check

Business ownership quiz

• 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.