I Choose the BEST answer. Please put answers in a separate paper C) does not hire employees.

D) cannot be purchased on the New York Stock Exchange.

1. Which of the following is a disadvantage of the sole proprietorship? E) none of the above.
A) limited sources of funds C) limited liability
D) limited government regulation E) secrecy 12. When a group of investors borrows money to buy a company or division, using the purchased
company's assets to guarantee the loan, it is a(n)
2.Which of the following is a disadvantage of a corporation? A) acquisition. B) leveraged buyout.
A) perpetual life of organization B) limited liability C) merger. D) poison pill. E) tender offer
C) external funding sources D) transfer of ownership
E) double taxation 13. Partnerships do not directly pay taxes on business profits. For this reason, they are referred
to as what type of organization?
3. Which of the following requires owners to be generalist managers with many diverse skills? A) tax-free B) quasi-taxable C) totally taxable
A) sole proprietorship B) partnership D) tax-exempt E) non-taxable
C) corporation D) holding company
E) cooperative 14. A corporation is a separate legal entity created by the state. The corporation
A) has many of the same rights and duties of a person.
4. Which of the following is an advantage of the sole proprietorship form of business organization? B) cannot be sued. C) may not own property.
D) has no liability. E) all of the above.
A) ease of formation B) secrecy
C) limited government regulation 15. Which of the following is a disadvantage of a partnership?
D) control of business E) all of these A) unlimited liability B) life of partnership
C) distribution of profits D) limited funding sources
5. Cooperatives are formed to E) all of these are disadvantages
A) develop new products.
B) eliminate advertising. 16. Which form of business ownership provides limited liability but is taxed like a partnership?
C) allow individuals or small businesses to join together to gain the benefits A) cooperative B) sole proprietorship
D) of belonging to a larger organization. C) joint venture D) limited liability company E) corporation
E) distribute profits to stockholders.
F) avoid lawsuits. 17. b Ace Hardware is an example of a
A) cooperative. B )joint venture. C) merger.
6. Which of the following is a partnership established for a specific project or for a limited time? D) limited partnership. E) sole proprietorship.
A) general partnership B) limited partnership
C) joint venture D) preemptive partnership 18. Debbie has been asked to join a new partnership that is opening several yogurt stands on a
E) cooperative partnership nearby college campus. She does not want to be liable for the firm's debts if the project should fail.
She could still participate as a
7.All profits from a sole proprietorship belong exclusively to A) working partner. B) silent partner.
A) stockholders. B) partners. C) employees. C) limited partner. D)general partner. E)contributor.
D) the owner. E) the government.
19. Which of the following is a characteristic of the sole proprietorship form of business
8.When two companies combine to form a new company, it is a(n) organization?
A) white knight. B) leveraged buyout. A) It is taxed more than other forms.
C) tender offer. D) acquisition. E) merger B) The owner does not have direct control.
C) It is easy to form.
9. Which of the following is an advantage of a partnership? D) It is heavily regulated by the government.
A) availability of capital and credit E) It is hard to dissolve.
B) ease of organizing business
C) specialization of partners 20 .Shareholder is another name for a
D) relatively fast decision-making A) unitholder. B) percentageholder. C) stockholder.
E) all of these are advantages D) voteholder. E) valueholder.

10. The type of ownership form which is subject to double taxation is a(n) 21. One disadvantage to the corporate form of business organization is that
A) corporation. B) entrepreneurship. a. corporate dividends are taxed twice, once as corporate income and once as personal income
C) sole proprietorship. D)general partnership. E) limited partnership. b. decision making is complicated by the large number of shareholders
c. the threat of a takeover looms large most of the time
11. A public corporation is one that d. bondholders have first claim to a corporation’s profits
A) is owned by only a few people, and not traded on the open market. e. stockholders demand and get large dividends if any profits are made
B) pays triple-taxes on its income.

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22. A corporate owner’s — or shareholder’s — liability is limited to the value of his or her shares 34. It might be better for a corporation to fund its activities by selling common stocks than
because a corporation by selling bonds because bondholders have first claim on any corporate profits,
a. is less risky than a proprietorship or partnership whereas a stock dividend need not be distributed.
b. exists as a legal entity independent of its owners TRUE
c. provides liability insurance for shareholders
d. can never go bankrupt 35. One difference between a bondholder and a stockholder in a
e. can issue stocks corporation is that bondholders are lenders to the corporation while
stockholders are actual owners of the corporation.
23. In a partnership, liability is _______________ and __________ partner can be held liable for FALSE – Stockholders are owners of corporations and bondholders make loans to
the business’entire debt. corporations
a. limited; neither b. limited; each c. high; all
d. unlimited; each e. unlimited; neither 36. A disadvantage of the corporate form of organization is that corporate profits are taxed
twice, once as corporate profits and again as the personal income of dividend
24. The single most important advantage of a sole proprietorship is recipients, whereas profits for
a. the ease of incorporation proprietorships and partnerships are only taxed once.
b. the ability to finance expansion through stock sales TRUE
c. limited liability
d. unlimited liability 37. A corporate takeover can occur when an individual or group is able to buy and control
e. the independence it affords the owner more than 50 percent of a corporation's outstanding common stock, thus controlling
corporate decision making.
25. Unlimited liability for sole proprietors means that TRUE
a. they can lose everything they own if their businesses fail
b. they should form corporations instead 38. A multinational corporation sells its products overseas but produces them domestically.
c. proprietors are liable for all the value of all the shares they own in a business FLASE – A multinational corporations sells and produces its products overseas
d. a partnership appears relatively more attractive
e. sole proprietorships are less risky to operate than corporations 39. Registration of an assumed business name helps avoid consumers’ confusion with other
businesses operating under similar names.
II TRUE OR FALSE – if false explain why TRUE

26. The primary difference between a sole proprietorship and a partnership is that the 40. A sole proprietorship can have more than one employee.
partnership has more than one owner. TRUE
TRUE
27. The term unlimited liability means that a sole proprietor or a partner is personally 41. A partnership begins simply by one or more individuals beginning business.
responsible for all of the firm’s debts. TRUE
TRUE
28. In a partnership, the partners and the firm are legally inseparable. 42. The business income of a partnership is taxed as the personal income of the partners.
TRUE TRUE
29. The issue of corporate governance arises from the fact that it is difficult for
stockholders to exercise the power and control of a corporation through the board of 43. Creditors of a partnership may seek repayment of business debts from the personal
directors. assets of the partners.
TRUE TRUE
30. One advantage of a partnership is the ability to acquire greater access to capital
resources by taking on new partners. 44. A sole proprietorship cannot have more than 35 shareholders.
TRUE FALSE - A corporation cannot have more than 35 shareholders.
31. The law treats a corporation as a separate legal entity. 45. Principals can be held liable for the actions of their agents.
TRUE TRUE
32. Common stock is defined as stock that allows its holder a vote in corporate decisions
proportional to the stockholder's share of the outstanding common stock. III Essay:
TRUE Please answer the following questions in complete and concise sentences.

33. Preferred stockholders, in addition to being allowed to vote on corporate decisions, are 46. What is an assumed business name?
paid dividends before common stockholders. It is the name under which the corporation operates and conducts business that is
FALSE – Preferred stockholders do not enjoy any of the voting rights and they are paid different from the owner’s name. This is shown in its article of incorporation.
dividends before common stockholders
47. Define the term limited liability.
Limited liability refers to the limitations in which the owners or the shareholders of a
company are not responsible for the debts and obligations of their business even if it

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 fails. Creditors cannot get the owner’s personal assets to compensate for the business’
debts and obligations.
48. Explain the difference between a sole proprietorship and a partnership.
A sole proprietorship is a business that are owned and operated by a single business
owner, while a partnership is owned by two or more individuals.
There are similarities between these two forms of business. Firstly, they are both easy
to form without many legal formalities to begin operating. Secondly, they are not
separate entities from the owner of the business. Both forms of business are taxed
individually as an owner. In terms of liability, they both have unlimited liability, which
means that the owners may be required to sell personal assets to meet the company’s
debts and obligations. This is riskier for a partnership as one person may have the risk
of losing his personal assets to compensate for another partner’s carelessness.
For sole proprietorship and partnership, the when an owner or any partner of the firm
dies, this will bring an end to the business.
There are a number of differences between these two forms of businesses. In terms of
decisions, there are no other decision makers that assist a sole proprietor. Also they
have complete control over the company’s finances and operations. For partnerships,
all partners have put regarding the allocation of the resources and other important
decision. They have the responsibility to make decisions that will impact the business.
With multiple viewpoints, they can make better decisions.
In terms of capital, sole proprietor may have a difficult time to raise one because the
owner will be funding the business with his personal funds and assets. While
partnerships, they may be able to pool more funds. Additionally, partnerships can invite
other people to join them and increase their funds.
49. What do you think is the root cause of corruption in the Philippines?
Corruption is the practice of obtaining power, influence, or other personal gains
through illegitimate means, often these are done at others’ expense. Normally, it
involves more than one person. As a whole, it involves secrecy. This is considered as
a betrayal of public trust. I think that the root cause of corruption in the Philippines is
poverty.
In the beginning, the country is already not that rich. If we take into account some
socio-economic factors, children in families living at a poverty level are more likely to
be taught to strive to get rich. This can sometime be interpreted as get rich, regardless
of any means. During this time, the word “rich” can be directly related to material things
and not the enrichment of values. With this the children are influenced on their
upbringing, thinking that money will be the solution to everything and the right thing to
do is always the way that will benefit themselves, inconsiderate of others around them.
Nowadays, with the fast-paced development of technology, the media has multiple
ways to portray corruption to these families living in poverty. The corrupt person, is
viewed as “rich” and emphasizing their wealth. With the lack of education in the area,
this may send as message as, to get rich, you must be corrupted.
Another reason if the monopoly of power in the government, with the lack of
competition they can be inefficient. They are the one who needs to allocate funds to
support the families living in poverty. If they are the corrupt one, it may be difficult to
prove them. However, this could be solved by electing the right person in person. For
the poor families, sometimes they sell their votes, because their upbringing instill in
their minds that money can help them. They did not think about what if their vote
counted towards the people who could allocate more to help the poor families.
It may be hard to change the people if they have the power already, but if we start from
the bottom, in this case educating the poor families, their vote could change the people
in positon. As stated in our Constitution, under Article 2, Section 1, “The Philippine is a
democratic and republican state, Sovereignty resides in the people and all government
authority emanates from them.”, we must show our sovereign power, the people living
in poverty must recognized their power.
50. Is the CARP successful in its objective in uplifting the life of the farmer/farmworkers in
our country? Explain why or why not.
The Comprehensive Agrarian Reform Program is still not successful in its objective in
uplifting the life of the farmers. As stated in Section 2, it is founded on the right of the
farmers, who are landless to own a land directly. Also, the state will recognize the right
of the farmers to participate in the planning.
I think that in the surface of this, a farmer does not have any fund that would allow him
to buy hectares of land just to do his job. With this Agrarian Reform Program, not only
they have a land, but they also have jobs that could support their families. It does not
only benefit the farmers, it also benefits the next generation of the family. With more
lands for farmers, this will include the agriculture of the country. However, this is not
enough as farmers need more than just land in order to uplift their families’ life. The
support and compensation stated in the Agrarian reform is not enough to support the
farmers. They should have more education in their entrepreneurial skills, this is to
prevent them from selling their products at a low price just to have money. Such
programs that could be implemented to farmers are basic financial literacy and
financial management. It is a difficult job; therefore, we must let them know their role in
improving our country. Given that the land is given to them, if they don’t know what to
do with it then it is worth nothing. The and may end up being sold to other people for a
quick cash, that they may use up fairly fast.
The CARP is on track to its objectives. The farmers need to work harder with the use
of new techniques and equipment to make their jobs more efficient. As of now, we are
still importing rice where the land could be used to produce them. The distribution limit
in section 23 make sure that there will be no corruption that will happen and will make
sure that landless farmers will get theirs.
ONLY THIS PORTION IS SUBJECT TO OPEN NOTES:
IV CASE STUDY
51. Regina, Angela, and Efraim are equal partners in a bakery. For years the bakery has
sold cakes to Justine Ernest, a local restaurant, as part of its business. Efraim has grown
concerned that the cake business with Justine Ernest takes up too much the bakery's
resources for too little profit. Efraim a expressed strong disapproval for the cake
business, but Regina and Angela disagreed and continued the cake business with
Justine Ernest. Efraim then notified Justine Ernest of her disapproval and informed it that
she was not responsible for any problems that may arise from the cake business.
Which of the following statements is correct? Explain:
(a) Regina and Angela violated their fiduciary obligation to Efraim by forcing her to
continue a business that she felt was not sufficiently profitable.
(b) By notifying Justine Ernest that she would not be responsible for the cake Business,
Efraim has relieved herself of any risk of liability to Justine Ernest that may arise from the cake
business.
(c) By notifying Justine Ernest that she would not be responsible for the cake business, Efraim
has eliminated Regina and Angela’s authority to conduct the cake business.
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 (d) None of the above
This is because two or more partners have equal share and the decision of the two has
outweighed the decision of one. As partner, Efraim still has unlimited liability, and they
each share the risk.
52. Ivy, Grace, Elizabeth and Alice form a partnership. The partnership
agreement states that it is formed for the purpose of constructing and
then selling an apartment complex in SmallVille. No specific duration for the partnership
is included in the partnership agreement. Before the project is completed Alice suffers
from some severe financial problems and wishes to leave the partnership.
Which of the following best describes Alice 's rights and obligations?
(A) Alice has no right or power to dissolve the partnership
(B) Because no duration for the partnership was set forth in the partnership agreement, this
is an at will partnership. Alice has the right and power to dissolve the partnership and may
do so with impunity.
(C) Because the partnership agreement did not state that the partnership was at will, this will
not be an at will partnership. Alice has the power to dissolve the partnership, but is liable
for any damages her breach causes to the other partners.
(D) This may be a partnership for an implied term. If this is a partnership for an implied
term, Alice has the power to dissolve the partnership, but is liable for any damages
her breach causes to the other partner.
(E)
This is an agreement of the partners may evidence an understanding that the relation should
continue until the accomplishment of the building. Dissolution of partnership may be done by
Alice provided that she must act in good faith.
53. Borrometro, Escolar and Tagle formed a partnership ("BET Partners") to
research and develop an experimental herbal medication that has potential curative effects for the
coming bird flu pandemic. Borrometro contributed P700,000 and his business acumen. Escolar
contributed P200,000 and his medical background. Tagle contributed P100,000 and her invaluable
knowledge of herbal remedies and holistic healing. Trusting that their friendship and mutual respect
for each other would see them through any and all matters, the three never entered into a formal
partnership agreement, with one exception. They did agree that profits would be divided as follows:
50% to Borrometro; 25% to Escolar; and 25% to Tagle.
Please assume the following additional
Facts: BET Partners' work on developing a vaccine/cure for the bird flu went very poorly and ABC
Partners incurred substantial losses. Borrometro Escolar and Tagle never agreed on how losses
were to be allocated.
Which of the following statements most accurately describes the responsibilities of.
Borrometro Escolar and Tagle for those losses?
(A) Because the partners did not agree on the allocation of losses, the losses are to be shared
equally among the partners.
(B) Borrometro will bear 50% of the losses, Escolar 25% and Tagle 25%.
This is because Borrometro is the capitalist partner, he is not bound to contribute more
than what he agreed to contribute. However, to save the business, it is his obligation to
contribute additional share to save the venture. Article 1797, the share of each losses
shall be in the same proportion. Since there is an agreement, the distribution of losses
shall be in accordance with the agreement.
(C) Borrometro will bear 70% of the losses, Escolar 20% and Tagle 10%.
(D) The allocation of losses depends upon the parties' intent. As a result, the
specific allocation of losses is a question of fact for the court to determine.
54. For the purpose of Question No. 54 only, please assume the following additional facts:
BET Partners research for a vaccine/cure for the bird flu has progressed nicely. Word
got out of the advances being made by BET Partners, which resulted in the World Health
Organization pledging to assist in a field test of BETPartners' primary product. Pfizer, a
major drug company, has become highly interested in BET Partners' progress and has
offered to license the vaccine from BET Partners for P3 million. Borrometro and Escolar
are ecstatic about the Pfizer deal, but Tagle hates the idea of doing business with a
major, multinational corporation. Tagle would like to use her position as a partner to try
to prevent the transaction with Pfizer. For purposes of this question, please assume the
Pfizer transaction qualifies as an "ordinary matter" for BET Partners.
Which of the following is an accurate statement?
(A) Borrometro and Escolar can bind BET Partners to a deal with Pfizer
(B) Because all partners have equal rights in the management and conduct of the
partnership business, Borrometro and Escoalr must persuade Tagle a to consent
to the transaction.
This is because the decision of the majority shall prevail. Also, Borrometro and Escolar
cannot make the decision without the consent of Tagle. There are no specifications of
their respective duties
(C) Because of the pass-through nature of partnerships, Borrometro and Escolar can
individually enter into the license agreement with Pfizer and eliminate Tagle from the
transaction.
(D) None of the above.
55. Anne and Rome want to start a business together. Based on recent advancements in the field
of cryogenics, the two of them want to form a company that manufactures and sells high-end
cryogenic chambers (i.e., devices to freeze a person who has recently died with the hopes of
reanimating that person at some point in the future). Anne and Rome plan
on forming the company as a corporation (which they will name "Ice, Ice Baby, Inc."). For purposes
of this question, Ice, Ice Baby, Inc. will be referred to as 1IB. Anne and Rome will be the only two
shareholders for IIB (each will own 50% of the company) (since incorporation needs five, three
incorporators will just be a token of 1 share)
Prior to forming the corporation, Rome informed Anne that she was personal a friend of Tom Cruise,
the famous actor, and that she believed that Tom would be interested in buying a cryogenic chamber.
Anne was very excited about this news and told Rome to "Go get a contract with Tom Cruise!" Rome
met with Tom. Tom was excited about the product and he entered into a contract with Rome to
purchase a cryogenic chamber. IIB was formed two weeks after the Tom Cruise contract was
entered into. What is the most correct statement regarding Rome 's ability to bind IIB to a contract
with Tom?
(A) Rome has actal authority to bind the 1IB to the contract
(B) Corporations are liable for contracts entered into by Promoters
(C) IIB is not bound until it ratifies or approves the contract
This is because the acts of owner or promoters that are not authorized by the board of
directors do not bind the corporation unless the corporation ratifies the acts or holds the
officer out as a person with authority to transact on its behalf.
(D) None of the above
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