Firm

### What is a key characteristic of a partnership firm? - [ ] It is owned by a single individual. - [x] It is owned by two or more individuals who share responsibilities. - [ ] It is a publicly traded entity. - [ ] It has no legal separation from its owners. > **Explanation:** A partnership firm is characterized by its ownership by two or more individuals who share responsibilities, profits, and losses. ### Which type of firm offers limited liability to its owners? - [ ] Sole Proprietorship - [x] Corporation - [ ] Partnership - [ ] General Partnership > **Explanation:** A corporation is a type of firm that offers limited liability to its owners, protecting their personal assets from business debts and liabilities. ### Can a firm be a combination of partnership and corporation? - [ ] No, a firm can only be one or the other. - [x] Yes, through structures like Limited Liability Companies (LLCs). - [ ] Only in the case of sole proprietorships. - [ ] Only if the firm chooses not to incorporate. > **Explanation:** LLCs are a hybrid business structure that combines elements of partnerships and corporations, offering limited liability protection and flexible management. ### What must a firm do to become a legal entity? - [x] Register the business with the relevant government authorities. - [ ] Hire at least one employee. - [ ] Generate a minimum revenue. - [ ] Invest in a physical office space. > **Explanation:** To become a legal entity, a firm must register its business with the relevant government authorities and meet other regulatory requirements such as obtaining necessary licenses and permits. ### How is the management of a corporation typically structured? - [ ] Managed solely by the owners. - [ ] Managed by a single individual without oversight. - [x] Managed by a board of directors appointed by shareholders. - [ ] Managed by a rotating committee of employees. > **Explanation:** A corporation is typically managed by a board of directors that is appointed by the shareholders, separating ownership from management responsibilities. ### What is one key benefit sole proprietorships offer? - [ ] More limited liability. - [x] Simplicity and ease of formation. - [ ] Requires a board of directors. - [ ] Strong asset protection. > **Explanation:** Sole proprietorships offer the benefit of simplicity and ease of formation, as they are the easiest and least expensive business structure to establish. ### Which type of firm structure is often used by professional service providers like lawyers or accountants? - [ ] Sole Proprietorship - [ ] Corporation - [ ] LLC - [x] Partnership > **Explanation:** Partnerships are often used by professional service providers such as lawyers or accountants, facilitating mutual ownership and shared responsibility. ### What is an essential legal document for forming a partnership firm? - [ ] Articles of Incorporation - [ ] An Operating Agreement - [x] A Partnership Agreement - [ ] A Business License > **Explanation:** A Partnership Agreement is essential for forming a partnership firm, outlining the terms of the partnership, responsibilities, profit-sharing, and other operational details. ### How are profits typically distributed in a partnership firm? - [ ] Equally regardless of contribution. - [x] Based on the terms agreed upon in the partnership agreement. - [ ] Entirely to the managing partner. - [ ] Proportionally to the firm’s debts. > **Explanation:** Profits in a partnership firm are typically distributed based on the terms agreed upon in the partnership agreement, which can vary according to the contributions and roles of the partners. ### What primary purpose does forming a corporation serve? - [ ] Avoiding taxes. - [x] Providing limited liability to its shareholders. - [ ] Simplifying the business structure. - [ ] Enhancing employee benefits. > **Explanation:** Forming a corporation primarily serves the purpose of providing limited liability to its shareholders, protecting their personal assets from business liabilities and debts.