Question 1

Which of the following organizational types results in the business owner having unlimited liability?

Accepted Answer

A)  Sole proprietorship 
B)  LLC 
C)  Limited partnership 
D)  Corporation 
A)  Sole proprietorship 
B)  LLC 
C)  Limited partnership 
D)  Corporation

Question 2

A risk for a small firm creating a strategic alliance with a larger company is

Accepted Answer

A)  not being able to keep up with the fast speed of a large company. 
B)  not having enough creative talent to join forces effectively. 
C)  being squeezed financially. 
D)  being too rigid for a large company's standards. 
A)  not being able to keep up with the fast speed of a large company. 
B)  not having enough creative talent to join forces effectively. 
C)  being squeezed financially. 
D)  being too rigid for a large company's standards.

Question 3

Abby, Adam, and Arnold are partners. They have planned to continue the partnership even after the death of any one partner. To this end, the partners have

Accepted Answer

A)  stipulated in their wills that their share of the partnership is bequeathed to the other two partners. 
B)  purchased life insurance policies naming the other two partners as beneficiaries. 
C)  created trust funds that can be used to pay off the heirs of the deceased partner. 
D)  secretly signed documents to be opened only after the death of the deceased partner that relinquish all claims to the partnership. 
A)  stipulated in their wills that their share of the partnership is bequeathed to the other two partners. 
B)  purchased life insurance policies naming the other two partners as beneficiaries. 
C)  created trust funds that can be used to pay off the heirs of the deceased partner. 
D)  secretly signed documents to be opened only after the death of the deceased partner that relinquish all claims to the partnership.

Question 4

Startup owners may increase their chances for success by seeking _____ over a management team with family and friends.

Accepted Answer

A)  a good CPA 
B)  an outstanding law firm 
C)  members with a balance of expertise 
D)  a business consultant team 
A)  a good CPA 
B)  an outstanding law firm 
C)  members with a balance of expertise 
D)  a business consultant team

Question 5

Frank would like to avoid personal financial loss if his business idea does not work. Which of the following forms of ownership would you suggest?

Accepted Answer

A)  Sole proprietorship 
B)  Partnership 
C)  Professional corporation 
D)  Corporation 
A)  Sole proprietorship 
B)  Partnership 
C)  Professional corporation 
D)  Corporation

Question 6

Explain how income is taxed in a sole proprietorship, a partnership, and a C corporation.

Accepted Answer

•	Sole proprietorship. Self-employed ind

Question 7

Incorporation will not protect a firm's owners from liability if it is used to perpetrate a fraud, skirt a law, or commit some other wrongful act.

Accepted Answer

A) True 
 B)False

Question 8

Because the corporation is a legal entity, one of its responsibilities is to

Accepted Answer

A)  have its accounting records audited. 
B)  sell stock. 
C)  pay dividends. 
D)  file annual tax returns. 
A)  have its accounting records audited. 
B)  sell stock. 
C)  pay dividends. 
D)  file annual tax returns.

Question 9

Upton was surprised to find his partner had signed an agreement to sell product to a customer at below cost. He tried to cancel the contract but found out that

Accepted Answer

A)  partners have legal power of attorney to do as they please. 
B)  each partner is in essence a sole proprietor. 
C)  partners are seldom trustworthy. 
D)  any partner can legally bind the company without the consent of any other partner. 
A)  partners have legal power of attorney to do as they please. 
B)  each partner is in essence a sole proprietor. 
C)  partners are seldom trustworthy. 
D)  any partner can legally bind the company without the consent of any other partner.

Question 10

A highly competent management team can rescue a firm that is based on a weak business concept or that lacks adequate
resources.

Accepted Answer

A) True 
 B)False

Question 11

An entrepreneur can best build social capital by

Accepted Answer

A)  joining several social networking sites. 
B)  building contacts through community organizations. 
C)  letting others know when the company has done something well. 
D)  using reciprocation. 
A)  joining several social networking sites. 
B)  building contacts through community organizations. 
C)  letting others know when the company has done something well. 
D)  using reciprocation.

Question 12

Match the term with its definition.
-An organizational relationship that links two or more independent business entities in a common endeavor

Accepted Answer

A) corporation 
B) limited partnership 
C) management team 
D) organizational test 
E) piercing the corporate veil
F)preemptive right
G)reciprocation
H)social capital
I)strategic alliance 
A) corporation 
B) limited partnership 
C) management team 
D) organizational test 
E) piercing the corporate veil
F)preemptive right
G)reciprocation
H)social capital
I)strategic alliance

Question 13

For a corporate charter to be obtained,

Accepted Answer

A)  one or more persons must apply to the secretary of state for permission to incorporate. 
B)  the owner(s) must agree to be interviewed by a state department official. 
C)  the owner(s) must negotiate an incorporation fee. 
D)  the partners involved must outline a division of assets. 
A)  one or more persons must apply to the secretary of state for permission to incorporate. 
B)  the owner(s) must agree to be interviewed by a state department official. 
C)  the owner(s) must negotiate an incorporation fee. 
D)  the partners involved must outline a division of assets.

Question 14

Which of the following organizational forms would be best if the new company owners intend to provide extensive fringe benefits for owners or employees that would not be treated as taxable income to employees?

Accepted Answer

A)  Sole proprietorship 
B)  Partnership 
C)  C corporation 
D)  Limited liability company 
A)  Sole proprietorship 
B)  Partnership 
C)  C corporation 
D)  Limited liability company

Question 15

Match the term with its definition.
-A business owned by one person, who bears unlimited liability for the enterprise.

Accepted Answer

A) board of directors 
B) general partner 
C) legal entity 
D) limited liability company 
E) limited partners
F)nonprofit corporation
G)partnership agreement
H)sole proprietorship
I)social network 
A) board of directors 
B) general partner 
C) legal entity 
D) limited liability company 
E) limited partners
F)nonprofit corporation
G)partnership agreement
H)sole proprietorship
I)social network

Question 16

Ingrid has asked 110 of her closest friends to invest in her company, promising them protection from personal liability. Which of the following forms of ownership would you recommend that Ingrid use?

Accepted Answer

A)  Professional corporation 
B)  Nonprofit corporation 
C)  S corporation 
D)  Limited liability company 
A)  Professional corporation 
B)  Nonprofit corporation 
C)  S corporation 
D)  Limited liability company

Question 17

A key characteristic of a partnership is that each partner

Accepted Answer

A)  must contribute capital to the business. 
B)  shares in company assets upon the dissolution of the partnership. 
C)  is capable of legally contracting. 
D)  must manage the business. 
A)  must contribute capital to the business. 
B)  shares in company assets upon the dissolution of the partnership. 
C)  is capable of legally contracting. 
D)  must manage the business.

Question 18

A corporation

Accepted Answer

A)  is chartered under state laws. 
B)  is chartered under federal laws. 
C)  remains in existence only as long as its owners are alive. 
D)  shifts liability of its debts to its owners. 
A)  is chartered under state laws. 
B)  is chartered under federal laws. 
C)  remains in existence only as long as its owners are alive. 
D)  shifts liability of its debts to its owners.

Question 19

The limited liability company form of organization

Accepted Answer

A)  avoids the double taxation of C corporations. 
B)  affords less protection from liability than partnerships. 
C)  is a poor choice for new businesses. 
D)  can offer stock incentives to employees. 
A)  avoids the double taxation of C corporations. 
B)  affords less protection from liability than partnerships. 
C)  is a poor choice for new businesses. 
D)  can offer stock incentives to employees.

Question 20

Reciprocation is

Accepted Answer

A)  responding to competitor's marketing efforts. 
B)  a powerful sense of obligation to repay what has been done for you. 
C)  not important when building social capital. 
D)  only important once you have established your business. 
A)  responding to competitor's marketing efforts. 
B)  a powerful sense of obligation to repay what has been done for you. 
C)  not important when building social capital. 
D)  only important once you have established your business.

Exam 8: The Organizational Plan: Teams, Legal Structures, Alliances, and Directors

Which of the following organizational types results in the business owner having unlimited liability?

A risk for a small firm creating a strategic alliance with a larger company is

Abby, Adam, and Arnold are partners. They have planned to continue the partnership even after the death of any one partner. To this end, the partners have

Startup owners may increase their chances for success by seeking _____ over a management team with family and friends.

Frank would like to avoid personal financial loss if his business idea does not work. Which of the following forms of ownership would you suggest?

Explain how income is taxed in a sole proprietorship, a partnership, and a C corporation.

Incorporation will not protect a firm's owners from liability if it is used to perpetrate a fraud, skirt a law, or commit some other wrongful act.

Because the corporation is a legal entity, one of its responsibilities is to

Upton was surprised to find his partner had signed an agreement to sell product to a customer at below cost. He tried to cancel the contract but found out that

A highly competent management team can rescue a firm that is based on a weak business concept or that lacks adequate resources.

An entrepreneur can best build social capital by

Match the term with its definition. -An organizational relationship that links two or more independent business entities in a common endeavor

For a corporate charter to be obtained,

Which of the following organizational forms would be best if the new company owners intend to provide extensive fringe benefits for owners or employees that would not be treated as taxable income to employees?

Match the term with its definition. -A business owned by one person, who bears unlimited liability for the enterprise.

Ingrid has asked 110 of her closest friends to invest in her company, promising them protection from personal liability. Which of the following forms of ownership would you recommend that Ingrid use?

A key characteristic of a partnership is that each partner

A corporation

The limited liability company form of organization

Reciprocation is

The Entrepreneurial Lifethe Entrepreneurial Life

Integrity, Ethics, and Social Entrepreneurship

Starting a Small Business

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Location Plan

Understanding a Firms Financial Statements

Forecasting Financial Requirements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product Development and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Businesses

Professional Management and the Small Business

Managing Human Resources

Managing Small Business Operations

Managing the Firms Assets

Managing Risk

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