JAMHURIYA UNIVERSITY OF SCIENCE AND TECHNOLOGY

(JUST)
PART 1: Multiple Choice
1. Which of the following is a characteristic of a sole proprietorship?
a) Unlimited liability
b) Limited liability
c) Double taxation
d) Corporate formalities
Answer: a) Unlimited liability

2. Which form of ownership provides the owner with the greatest control over
decision-making?
a) Partnership
b) Sole proprietorship
c) Corporation
d) Cooperative
Answer: b) Sole proprietorship

3. Which type of business structure offers the advantage of limited liability but is
taxed as a partnership?
a) General partnership
b) Sole proprietorship
c) Limited liability company (LLC)
d) Corporation
Answer: c) Limited liability company (LLC)

4. Which type of partnership includes at least one partner with unlimited liability
and another with limited liability?
a) General partnership
b) Limited partnership
c) Sole proprietorship
d) Corporation
Answer: b) Limited partnership
5. Which of the following is a disadvantage of a corporation?
a) Unlimited liability
b) Complex regulations and reporting
c) Pass-through taxation
d) Flexibility in management
Answer: b) Complex regulations and reporting

6. Which of the following forms of ownership is most likely to face double

taxation?
a) Sole proprietorship
b) Partnership
c) Corporation
d) Limited Liability Company (LLC)
Answer: c) Corporation

7. In a sole proprietorship, the owner’s personal assets are at risk due to which of
the following?
a) Limited liability
b) Transferability of shares
c) Unlimited liability
d) corporate veil
Answer: c) Unlimited liability

8. Which form of ownership is easiest to establish with minimal legal formalities?

a) Corporation
b) Limited Liability Company (LLC)
c) Partnership
d) Sole proprietorship
Answer: d) Sole proprietorship

9. Which of the following ownership structures is best for raising large amounts
of capital?
 a) Corporation
b) Sole proprietorship
c) Partnership
d) Limited liability company (LLC)
Answer: a) Corporation

10. Who controls the day-to-day operations in a general partnership?

a) Board of directors
b) All partners
c) A managing partner only
d) Shareholders
Answer: b) All partners

11. Which of the following is true for an S Corporation?

a) It faces double taxation
b) It has pass-through taxation
c) It cannot have more than 100 shareholders
d) It is similar to a sole proprietorship
Answer: b) It has pass-through taxation

12. What is the main advantage of a limited liability partnership (LLP)?

a) Limited liability for all partners
b) Unlimited liability for all partners
c) Simplified tax reporting
d) Easier management structure
Answer: a) Limited liability for all partners

13. Which form of business ownership combines the benefits of both a

corporation and a partnership?
a) Limited Liability Company (LLC)
b) Sole proprietorship
c) General partnership
 d) Cooperative
Answer: a) Limited Liability Company (LLC)

14. Which type of business can continue to exist even if an owner leaves or dies?
a) Sole proprietorship
b) General partnership
c) Corporation
d) Limited partnership
Answer: c) Corporation

15. What is one primary disadvantage of a sole proprietorship?

a) Difficulty in forming the business
b) Limited management flexibility
c) Unlimited personal liability
d) Complex tax structures
Answer: c) Unlimited personal liability

16. What is the main benefit of a partnership compared to a sole proprietorship?

a) Less management control
b) Shared risk and resources
c) Easier taxation
d) Limited liability
Answer: b) Shared risk and resources

17. Which of the following is an advantage of a corporation?

a) Double taxation
b) Unlimited liability
c) Easier transfer of ownership
d) Simpler management structure
Answer: c) Easier transfer of ownership
18. Which form of business ownership allows for an unlimited number of
shareholders?
a) Sole proprietorship
b) Partnership
c) S Corporation
d) C Corporation
Answer: d) C Corporation

19. In a corporation, who is responsible for electing the board of directors?

a) Shareholders
b) Employees
c) CEO
d) Government regulators
Answer: a) Shareholders

20. Which form of ownership allows profits to be distributed in the form of

dividends?
a) Sole proprietorship
b) Corporation
c) Limited partnership
d) General partnership
Answer: b) Corporation

21. Which of the following entities can be taxed either as a corporation or a

partnership depending on its structure?
a) Sole proprietorship
b) S Corporation
c) Limited Liability Company (LLC)
d) Cooperative
Answer: c) Limited Liability Company (LLC)

22. Which of the following forms of ownership involves a contract to operate a

business owned by another entity?
 a) Franchise
b) Corporation
c) Partnership
d) Cooperative
Answer: a) Franchise

23. Who assumes the most financial risk in a general partnership?

a) Only the managing partner
b) All partners
c) The board of directors
d) Shareholders
Answer: b) All partners

24. What is the main disadvantage of forming a partnership?

a) Limited access to capital
b) Unlimited liability for partners
c) Double taxation
d) Difficult transfer of ownership
Answer: b) Unlimited liability for partners

25. Which business structure allows the easiest transfer of ownership?

a) Sole proprietorship
b) Partnership
c) Corporation
d) Cooperative
Answer: c) Corporation

26. Which form of ownership limits personal liability to the amount of

investment?
a) Sole proprietorship
b) Corporation
c) General partnership
 d) Cooperative
Answer: b) Corporation

27. Which type of business is typically formed by professionals like doctors and
lawyers to limit personal liability?
a) Sole proprietorship
b) Professional Corporation (PC)
c) Limited Liability Partnership (LLP)
d) Franchise
Answer: c) Limited Liability Partnership (LLP)

28. Which of the following is an advantage of a sole proprietorship?

a) Ease of formation
b) Limited liability
c) Complex tax reporting
d) Difficulty in raising capital
Answer: a) Ease of formation
29. Which of the following industries is commonly associated with franchise
businesses?
a) Fast food
b) Oil and gas production
c) Pharmaceutical research
d) Aerospace engineering
Answer: a) Fast food

30. A franchisor may terminate a franchise agreement if:

a) The franchisee consistently violates operational standards
b) The franchisee increases sales
c) The franchisee opens a new location
d) The franchisor changes their business model
Answer: a) The franchisee consistently violates operational standards

31. Which of the following is a benefit of franchising for the franchisor?

 a) No need for ongoing support
b) Ability to expand with less capital investment
c) Complete control of every franchise location
d) Guaranteed market success
Answer: b) Ability to expand with less capital investment

32. What is one risk of investing in a franchise?

a) Immediate profits are guaranteed
b) Total independence from the franchisor
c) High initial costs and ongoing fees
d) No access to business support from the franchisor
Answer: c) High initial costs and ongoing fees

33. Franchisees are often required to contribute to a national or regional:

a) Employee pension fund
b) Advertising fund
c) Research and development fund
d) Stock option plan
Answer: b) Advertising fund

34. Franchise disclosure documents (FDD) are required by law to:

a) Set business goals
b) Provide prospective franchisees with information about the franchisor
c) Outline only the potential profits of the franchise
d) Replace the need for a franchise agreement
Answer: b) Provide prospective franchisees with information about the
franchisor

35. Which of the following is an example of a product distribution franchise?

a) McDonald’s
b) Ford dealership
c) Subway
 d) 7-Eleven
Answer: b) Ford dealership

36. Which of the following sectors is most likely to use a franchising model?
a) Technology innovation
b) Automotive repair services
c) Non-profit organizations
d) Government offices
Answer: b) Automotive repair services

37. In a business format franchise, what is one of the key benefits for the
franchisee?
a) Freedom to change the brand image
b) Access to a proven business model and ongoing support
c) Independence from the franchisor
d) Minimal financial investment
Answer: b) Access to a proven business model and ongoing support

38. Franchisees must often follow standardized procedures to:

a) Lower operating costs
b) Ensure uniformity and quality across all locations
c) Avoid paying franchise fees
d) Reduce employee training
Answer: b) Ensure uniformity and quality across all locations

39. A multi-unit franchise allows the franchisee to:

a) Operate multiple franchises in different geographic areas
b) Have more control over the franchise brand
c) Modify the franchisor's business model
d) Operate without paying royalty fees
Answer: a) Operate multiple franchises in different geographic areas
40. Which of the following is NOT typically part of a franchise agreement?
a) The duration of the franchise contract
b) The franchisor's obligations
c) The option to alter the brand image freely
d) The franchisee's ongoing fees and payments
Answer: c) The option to alter the brand image freely

41. What is one of the primary reasons people choose to invest in a franchise
a) High risk and uncertainty
b) Established brand recognition
c) Guaranteed profits
d) Total creative freedom
Answer: b) Established brand recognition

42. Franchisees must follow certain operational guidelines set by the franchisor
to ensure:
a) Flexibility in business models
b) Consistency across franchise locations
c) Higher royalty fees
d) Ownership of intellectual property
Answer: b) Consistency across franchise locations

43. Franchisors often provide franchisees with access to:

a) A proven business model
b) Unlimited product customization
c) Free labor
d) Government funding
Answer: a) A proven business model

44. In which type of franchise does the franchisee have more control over the
product or service?
a) Business format franchise
b) Product distribution franchise
 c) Corporate-owned franchise
d) Independent franchise
Answer: b) Product distribution franchise

45. Franchise agreements usually last for:

a) 1 year
b) 5-10 years
c) 20-30 years
d) Indefinitely
Answer: b) 5-10 years

46. Which of the following best describes a royalty fee?

a) One-time payment made when signing the franchise agreement
b) Percentage of the franchisee's revenue paid regularly to the franchisor
c) Fee paid for legal protection of the franchise name
d) None of the above
Answer: b) Percentage of the franchisee's revenue paid regularly to the
franchisor

47. What is the initial fee paid by a franchisee to start a franchise called?
a) Royalty fee
b) Advertising fee
c) Franchise fee
d) Management fee
Answer: c) Franchise fee

48. Which of the following is an advantage of buying a franchise?

a) Complete freedom to create new products
b) Reduced risk due to an established brand
c) No need to follow franchisor guidelines
d) High initial investment with no support
Answer: b) Reduced risk due to an established brand
49. In a franchise agreement, what is typically paid on an ongoing basis to the
franchisor by the franchisee?
a) Franchise fee
b) Royalty fee
c) Operational fee
d) Equipment fee
Answer: b) Royalty fee

50. Who is the franchisor in a franchise agreement?

a) The individual who buys the franchise
b) The entity that owns the overall brand and licenses its business model
c) The customer using the franchise services
d) The legal consultant for the franchisee
Answer: b) The entity that owns the overall brand and licenses its business
model

PART 2: TRUE OR FALSE

1. In a sole proprietorship, the owner has unlimited liability for business debts.
True
2. A corporation can have unlimited shareholders in both S and C corporations.
False
3. Limited Liability Companies (LLCs) are taxed as corporations by default.
False
4. In a general partnership, all partners share both profits and losses equally.
True
5. An advantage of forming a corporation is that it is easier to raise capital
through the sale of shares.
True
6. A sole proprietorship has the same legal status as a corporation.
False
7. A Limited Liability Company (LLC) combines the liability protection of a
corporation with the taxation benefits of a partnership.
True
8. Partnerships are required to file separate tax returns from the individual
partners.
False
9. Sole proprietorships are the most common form of business ownership due to
their simplicity.
True
10. In a corporation, shareholders are personally liable for the company’s debts.
False
11. A franchise is a type of business ownership where an individual or group
operates under the branding of another established business.
True
12. In a partnership, one partner can make decisions without the consent of the
others.
False
13. Limited partnerships allow for both general and limited partners with
different levels of liability.
True
14. Double taxation is a disadvantage associated with a sole proprietorship.
False
15. Corporations face less government regulation compared to other forms of
ownership.
False
16. The main reason businesses choose an LLC structure is for flexibility in
taxation and management.
True
17. S Corporations are taxed at both the corporate and personal level.
False
18. Franchisees have full control over all aspects of the business they run.
False
19. Franchisors often provide ongoing training to their franchisees.
True
20. A franchisee usually pays both an initial franchise fee and ongoing royalty
fees.
True

21. Franchise agreements do not need to follow any legal regulations.

False
22. Franchise businesses are always successful due to brand recognition.
False
23. A franchise disclosure document (FDD) includes important financial
information for prospective franchisees.
True
24. One of the benefits of franchising is that it allows for rapid business
expansion with less capital investment.
True
25. In a franchise system, all marketing efforts are the responsibility of the
franchisee.
False
26. Franchisees can modify the franchisor’s business model as they see fit.
False
27. Franchising offers franchisees a proven business model, reducing some of
the risks of starting a new business.
True
28. Franchisors cannot legally control how franchisees run their day-to-day
operations.
False
29. The franchisee must typically operate within a specified territory or
geographic area.
True
30. Master franchising allows a franchisee to manage other franchisees in a
specific area.
True
31. Franchise agreements usually last for more than 10 years without the need
for renewal.
False
32. Franchisees receive total independence from the franchisor once the
franchise is operational.
 False
33. Franchisors provide the franchisee with the flexibility to create new product
lines under the franchise name.
False
34. Franchisees are required to maintain the franchisor's brand standards.
True
35. Franchising is a method used by companies to expand their operations and
brand presence.
True
36. Franchisors always retain ownership of all physical franchise locations.
False
37. Royalty fees paid by the franchisee are based on a percentage of sales
revenue.
True
38. Franchise agreements often include restrictions on where a franchisee can
operate.
True
39. Franchisees are allowed to sell their franchise to anyone without the
franchisor's approval.
False
40. Franchisees are responsible for maintaining the quality and standards set by
the franchisor.
True