Question 1

Xplosafe, the company profiled in the opening feature for Chapter 7, interviewed four attorneys before selecting the attorney they now use. They selected the attorney they did for two reasons:

Accepted Answer

A)  his fees were the lowest and he is an entrepreneur himself 
B)  his references were the strongest and he is a former examiner for the U.S. Copyright Office 
C)  he is the President of the Oklahoma City, Oklahoma, bar association and he had experience working with startups 
D)  he is a startup entrepreneur himself and he is a former examiner for the U.S. Patent and Trademark Office 
E)  he had more experience working with startups and he agreed to alter his fee structure to charge less at the beginning and more as Xplosafe became profitable

Question 2

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n):

Accepted Answer

A)  ethical quandary 
B)  ethical predicament 
C)  ethical dilemma 
D)  principled quandary 
E)  just dilemma

Question 3

List and briefly describe three specific steps that an entrepreneurial organization can take to build a strong ethical culture.

Accepted Answer

The answer of List and briefly describe three specific steps...

Question 4

A separate legal entity organized under the authority of a state is referred to as a:

Accepted Answer

A)  limited partnership 
B)  conglomerate 
C)  general partnership 
D)  sole proprietorship 
E)  corporation

Question 5

A(n) ________ details the responsibilities and the ownership shares of the partners involved with an organization.

Accepted Answer

A)  partnership agreement 
B)  industry contract 
C)  business pledge 
D)  business agreement 
E)  partnership pledge

Question 6

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

Accepted Answer

A)  code of conduct 
B)  code of behavior 
C)  code of performance 
D)  code of principles 
E)  code of morals

Question 7

Corporations are organized as either C Corporations, T Corporation, or subchapter S corporations.

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

It is usually easier for a corporation to raise investment capital than a sole proprietorship or a general partnership because the shareholders are not liable beyond their investment in the firm.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A(n) ________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founder will have to remain with the firm for their shares to fully vest.

Accepted Answer

A)  entrepreneurs' agreement 
B)  creators' agreement 
C)  founders' agreement 
D)  initiators' agreement 
E)  originators' agreement

Question 12

According to the 2009 National Business Ethics Survey, a total of ________ of the employees surveyed said they had observed misconduct or unethical behavior in the past year.

Accepted Answer

A)  12 percent 
B)  21 percent 
C)  32 percent 
D)  49 percent 
E)  60 percent

Question 13

It is important for an entrepreneur to select an attorney as early as possible when developing a business venture.

Accepted Answer

A) True 
 B)False

Question 14

What is a founders' agreement? Describe the purpose of a buyback clause and why it's important?

Accepted Answer

The answer of What is a founders' agreement? Describe the...

Question 15

Which of the following is the most important thing that an entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization?

Accepted Answer

A)  implement an ethics training program 
B)  write a mission statement 
C)  lead by example 
D)  hire an ethics compliance officer 
E)  write a code of conduct

Question 16

Which of the following statements is incorrect regarding sole proprietorships?

Accepted Answer

A)  There is one owner. 
B)  Sole proprietor is in full control. 
C)  Business ends at the owner's death or loss of interest in the business. 
D)  Liquidity of the investment is high. 
E)  Money must be raised by the sole proprietor.

Question 17

Partnerships are organized as either:

Accepted Answer

A)  specific or general partnerships 
B)  narrow or broad partnerships 
C)  inward or outward partnerships 
D)  general or limited partnerships 
E)  partial or full partnerships

Question 18

What is meant by the term "piercing the corporate veil"? How can the corporate veil be pierced?

Accepted Answer

The answer of What is meant by the term "piercing...

Question 19

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.

Accepted Answer

A)  limited partnership 
B)  general partnership 
C)  limited liability company 
D)  subchapter S corporation 
E)  C corporation

Question 20

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

Accepted Answer

A)  Most business licenses and permits can wait until after a business is launched to be obtained. 
B)  A business license can be obtained at the city clerk's office in the community where the business will be located. 
C)  If a business will be run out of a home, a home occupation business license is often required. 
D)  Some business licenses are hard to get. 
E)  The business licenses and permits that are needed vary by city, county, and state.

Exam 7: Preparing the Proper Ethical and Legal Foundation

Xplosafe, the company profiled in the opening feature for Chapter 7, interviewed four attorneys before selecting the attorney they now use. They selected the attorney they did for two reasons:

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n) :

List and briefly describe three specific steps that an entrepreneurial organization can take to build a strong ethical culture.

A separate legal entity organized under the authority of a state is referred to as a:

A(n) ________ details the responsibilities and the ownership shares of the partners involved with an organization.

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

Corporations are organized as either C Corporations, T Corporation, or subchapter S corporations.

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.

It is usually easier for a corporation to raise investment capital than a sole proprietorship or a general partnership because the shareholders are not liable beyond their investment in the firm.

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

According to the 2009 National Business Ethics Survey, a total of ________ of the employees surveyed said they had observed misconduct or unethical behavior in the past year.

It is important for an entrepreneur to select an attorney as early as possible when developing a business venture.

What is a founders' agreement? Describe the purpose of a buyback clause and why it's important?

Which of the following is the most important thing that an entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization?

Which of the following statements is incorrect regarding sole proprietorships?

Partnerships are organized as either:

What is meant by the term "piercing the corporate veil"? How can the corporate veil be pierced?

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.

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