Although It Is a Small Company, Zorn Enterprises Owns a Large

question 319

Multiple Choice

Although it is a small company, Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisiana. Currently, the company is a chartered C-corporation, but the owners are interested in switching to an S corporation. After consulting a lawyer, they learned that Zorn Enterprises does not qualify to be designated as an S corporation. Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation?

• A)The firm has fewer than 75 stockholders.
• B) The firm is chartered in one state, but owns property in another.
• C) The firm has only one class of stock, all owned by U.S. citizens.
• D)The firm receives more than 70 percent of its income from rents and other passive sources.

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Definitions:

Constitutional Convention

The gathering that took place in 1787, in Philadelphia, to draft the United States Constitution, replacing the Articles of Confederation.

Ben Franklin

Benjamin Franklin was one of the Founding Fathers of the United States, known for his contributions as an inventor, scientist, diplomat, and philosopher, as well as for his pivotal role in the American Revolution and the drafting of the U.S. Constitution.

James Madison

The fourth President of the United States (1809-1817) and is considered one of the Founding Fathers, known for his role in drafting the U.S. Constitution and the Bill of Rights.

Diversity

The inclusion and representation of different types of people (such as different races, cultures, genders, etc.) in a group or organization to reflect a variety of backgrounds and perspectives.