Exam 15: Succession Planning and Strategies for Harvesting and Ending the Venture

Bankruptcy protects entrepreneurs from creditors and competitors.

In 2014 both business and non-business bankruptcy filings were:

It is best for the entrepreneur to have any litigation in existence transferred to the bankruptcy court.

The majority of bankruptcies are mid-size businesses.

Explain the advantages and disadvantages of an ESOP. A.Advantages 1.It offers a unique incentive to employees that can enhance their motivation to put in extra time or effort.Employees recognize that they are working for themselves and hence will focus their efforts on innovations that contribute to the long-term success of the venture. 2.It provides a mechanism to pay back those employees who have been loyal to the venture,particularly during more difficult times. 3.It allows the transfer of the business under a carefully planned written agreement. 4.The company can reap the advantage of deducting the contributions to the ESOP or any dividends paid on the stock. B.Disadvantages 1.Complex to establish. a.It requires a complete valuation of the venture to establish the amount of the ESOP package. B.it raises issues such as taxes,payout ratios,amount of equity to be transferred per year,and the amount actually invested by the employees. c.The agreement also must specify if the employees can buy or sell additional shares of stock once the plan has been completed.

Passing the business to an employee ensures the new principal is familiar with the business and the market.

The Family Business Institute indicates that about 12 percent of successful ventures survive into the third generation of ownership.

Given the cultural climate of the U.S. ,business failure and bankruptcy:

Chapter 11 is the type of bankruptcy that results in:

Chapter 7 is the most severe alternative in bankruptcy.

An effective succession plan should be communicated only to top management and not all employees.

Identify and define the three major types of bankruptcy. Provides the opportunity to reorganize and make the venture more solvent Voluntarily allows individuals with regular income the opportunity to make extended time payments Requires the venture to liquidate,either voluntarily or involuntarily

Around ____ of businesses make it to the third generation.

Under Chapter 13,the key to enhancing the bankruptcy process is by stressing the significance of the creditors' support during the process.

When a venture is in trouble and facing bankruptcy,the entrepreneur should first sit down with his or her spouse and explain what is happening.

The best management style for a manager undertaking a business turnaround is a bunker mentality.

An ESOP:

One advantage of an ESOP is that the company can obtain a tax benefit by deducting ESOP contributions.

All of the following are benefits of an ESOP except:

One key advantage of an ESOP is that it enhances employee motivation.