Exam 7: Preparing the Proper Ethical and Legal Foundation

A disadvantage of corporations is that they are subject to ________, which means that a corporation is taxed on its net income and when the same income is distributed to shareholders in the form of dividends it is taxed again on shareholders' personal income tax returns.

The limited liability corporation is a form of business organization that is rapidly gaining popularity in the United States.

The What Went Wrong? feature in Chapter 7 focuses on Green Planet Juicery, a smoothie drink restaurant that went out of business. According to the feature, the primary reasons that Green Planet Juicery went out of business were:

The vast majority of corporations in the United States are public corporations.

A narrow group of businesses are required to have a federal business license, including investment advising, drug manufacturing, and interstate trucking.

Which of the following is a disadvantage of a C Corporation?

The idea that it's important to get "everything in writing" in regard to business agreements causes unnecessary work and can lead to an erosion of trust between business partners.

________ is the process in which an impartial third party helps those involved in a dispute reach an agreement.

A disadvantage of a sole proprietorship is that it is subject to double taxation.

The Savvy Entrepreneurial Firm feature in Chapter 7 focuses on Globat.com, a Web hosting company, which encountered a crisis described in the feature. The main point of the feature was to illustrate that the manner in which a company handles a crisis:

If the owners of a corporation don't file their annual paperwork, neglect to pay their annual fees, or commit fraud, a court could ignore the fact that a corporation has been established and the owners could be held personally liable for the actions of the corporation. This chain of effects is referred to as:

Corporations that trade their stock on organized exchanges like the New York Stock Exchange and the NASDAQ are called:

Stock options are a special form of incentive compensation.

Which of the following statements regarding business licenses and permits is incorrect?

The ________ is a form of business organization that is rapidly gaining popularity in the United States. The concept originated in Germany and was first introduced in the United States in the state of Wyoming.

A ________ is a formal statement of an organization's values on certain ethical and social issues.

Rachael James just took a job with IKEA. As part of her employment agreement, IKEA required Rachael to sign an agreement, which states that if she leaves IKEA, she will not work for a firm that competes against IKEA for at least two years. The agreement that Rachael signed is called a:

According to the textbook, the limited liability company combines the limited liability advantage of the ________ with the tax advantages of the ________.

The most compelling advantage of stock options is the potential rewards to participants when:

The single most important thing the founders of an entrepreneurial venture can do to avoid ethical misconduct is to establish a strong ethical culture for their firms.