Business Organization Types Flashcards
7 cards from real CLA/CP Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Business Organization Types flashcards as text
Which entity type requires an S corporation election to be made by filing Form 2553 with the IRS?
Answer: S corporation
A corporation must affirmatively elect S corporation status by filing IRS Form 2553, which must be signed by all shareholders.
How many shareholders may an S corporation have?
Answer: No more than 100
Under current IRS rules, an S corporation may have no more than 100 shareholders, and all must be eligible (U.S. citizens or resident aliens, not corporations or partnerships).
A corporation incorporated in Delaware but operating primarily in California is considered a ________ in California.
Answer: Foreign corporation
A corporation is 'domestic' in its state of incorporation and 'foreign' in every other state where it transacts business.
Which of the following is required to form a corporation in most states?
Answer: Filing articles of incorporation with the state
A corporation is formed by filing articles of incorporation (also called a certificate of incorporation) with the appropriate state authority, typically the Secretary of State.
In a limited liability partnership (LLP), a partner is generally NOT liable for:
Answer: Partnership debts arising from another partner's malpractice
LLPs protect partners from vicarious liability for the negligent acts or misconduct of other partners, though each partner remains personally liable for their own wrongful conduct.
A joint venture differs from a partnership primarily because:
Answer: A joint venture is typically formed for a single specific project or transaction
A joint venture is generally a short-term arrangement for a specific project, while a partnership is intended for an ongoing business relationship.
Which statement about a sole proprietorship is TRUE?
Answer: The owner and the business are legally the same entity
In a sole proprietorship, no legal distinction exists between the owner and the business—the owner is personally liable for all business debts and reports all income on their personal tax return.