Question 1

Explain in general terms what the rules are for deciding if a person who does work for a company is an employee or an independent contractor.

Accepted Answer

The rules for determining if a person is...

Question 2

An advantage of a partnership over a C corporation is that there is no "double taxation" of partnership income.

Accepted Answer

A) True 
 B)False

Question 3

The partners of a partnership have only "limited liability" for partnership debts.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following methods of financing increases the financial leverage of the business?

Accepted Answer

A)   Sales of common stock by a C corporation
B)   Sales of bonds by a C corporation
C)   Sales of additional partnership interests by a general partnership
D)   Reinvestment of income earned in the year by a general partnershipE) All of the above
F) C) and D)

Question 5

One of the advantages of a proprietorship is that the business assets are legally separate from the owner's assets for all purposes.

Accepted Answer

A) True 
 B)False

Question 6

An advantage of the corporate form of business over a general partnership is:

Accepted Answer

A)   The business will last indefinitely, and its life is not tied to that of the owners.
B)   Shareholders have unlimited liability for business debts.
C)   Corporations are easier to form than partnerships.
D)   Corporations avoid the "double taxation" that exists for partnership income.E) C) and D)
F) A) and D)

Question 7

"Commercial paper" is a form of company debt that usually has relatively short maturity periods.

Accepted Answer

A) True 
 B)False

Question 8

The income of a "limited liability corporation" is treated for tax purposes similarly to partnership income, and is not subject to double taxation.

Accepted Answer

A) True 
 B)False  True

Question 9

Owners of LLCs have limited liability for the business's debts.

Accepted Answer

A) True 
 B)False

Question 10

Both LLCs and Subchapter S companies are "pass-through" entities, whose owners have only "limited liability" for the business's obligations.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about social security taxes is correct?

Accepted Answer

A)   People who work as independent contractors do not have to pay any social security taxes.
B)   An employer must withhold some money for these taxes from each employee's pay, but there is no actual payroll tax expense for the employer.
C)   An employer must pay a payroll tax, but there is no tax that is paid by the employees.
D)   There is both a social security tax withheld from the employees' pay, and a related payroll tax paid by the employer.E) A) and D)
F) None of the above

Question 12

If someone works for the company as an independent contractor, the company has no obligation to report the amount paid to the IRS.

Accepted Answer

A) True 
 B)False

Question 13

One of the advantages of a partnership is:

Accepted Answer

A)   Unlimited liability of partners for the debts of the partnership
B)   Avoiding double taxation of business profits
C)   The business has an indefinite life, not related to the lives of the partners.
D)   It is easy for a partner to sell his or her interests without the permission of other owners.E) All of the above
F) None of the above

Question 14

One of the advantages of a partnership is it is easy to set up.

Accepted Answer

A) True 
 B)False

Question 15

A primary disadvantage of the corporate form of business, compared to a general partnership, is

Accepted Answer

A)   The indefinite life of the corporation, not tied to the lives of the owners
B)   Greater difficulty in transferring ownership interests
C)   Unlimited liability of shareholders for corporate liabilities
D)   Double taxation of corporate profitsE) None of the above
F) B) and C)

Question 16

To establish a partnership, the partners must first obtain a partnership charter from the state.

Accepted Answer

A) True 
 B)False  False

Question 17

An advantage of financing using debt over equity financing is that interest is tax deductible.

Accepted Answer

A) True 
 B)False

Question 18

Based on IRS statistics, the most common type of business in the U.S. is

Accepted Answer

A)   Proprietorship
B)   Partnership
C)   Regular C corporation
D)   Subchapter S corporationE) A) and B)
F) All of the above A

Question 19

Only very large, international companies have more than a single class of stock.

Accepted Answer

A) True 
 B)False

Question 20

The income of a Subchapter S corporation is subject to "double taxation," once as the income is earned by the corporation, and once as the earnings are distributed to shareholders.

Accepted Answer

A) True 
 B)False

Exam 12: Payroll Taxes

Explain in general terms what the rules are for deciding if a person who does work for a company is an employee or an independent contractor.

Correct AnswerAnswered by ExamLex AIThe rules for determining if a person is...View AnswerShow Answer

An advantage of a partnership over a C corporation is that there is no "double taxation" of partnership income.

Correct AnswerverifiedShow Answer

The partners of a partnership have only "limited liability" for partnership debts.

Correct AnswerverifiedShow Answer

Which of the following methods of financing increases the financial leverage of the business?

Correct AnswerverifiedShow Answer

One of the advantages of a proprietorship is that the business assets are legally separate from the owner's assets for all purposes.

Correct AnswerverifiedShow Answer

An advantage of the corporate form of business over a general partnership is:

Correct AnswerverifiedShow Answer

"Commercial paper" is a form of company debt that usually has relatively short maturity periods.

Correct AnswerverifiedShow Answer

The income of a "limited liability corporation" is treated for tax purposes similarly to partnership income, and is not subject to double taxation.

Correct AnswerverifiedTrue

Owners of LLCs have limited liability for the business's debts.

Correct AnswerverifiedShow Answer

Both LLCs and Subchapter S companies are "pass-through" entities, whose owners have only "limited liability" for the business's obligations.

Correct AnswerverifiedShow Answer

Which of the following statements about social security taxes is correct?

Correct AnswerverifiedShow Answer

If someone works for the company as an independent contractor, the company has no obligation to report the amount paid to the IRS.

Correct AnswerverifiedShow Answer

One of the advantages of a partnership is:

Correct AnswerverifiedShow Answer

One of the advantages of a partnership is it is easy to set up.

Correct AnswerverifiedShow Answer

A primary disadvantage of the corporate form of business, compared to a general partnership, is

Correct AnswerverifiedShow Answer

To establish a partnership, the partners must first obtain a partnership charter from the state.

Correct AnswerverifiedFalse

An advantage of financing using debt over equity financing is that interest is tax deductible.

Correct AnswerverifiedShow Answer

Based on IRS statistics, the most common type of business in the U.S. is

Correct AnswerverifiedA

Only very large, international companies have more than a single class of stock.

Correct AnswerverifiedShow Answer

The income of a Subchapter S corporation is subject to "double taxation," once as the income is earned by the corporation, and once as the earnings are distributed to shareholders.

Correct AnswerverifiedShow Answer

Correct Answer
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The rules for determining if a person is...
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