Deck 2: Family-Owned Businesses

Question 1

Which of the following steps should a family-owned business take to compensate family members?

A) Every relative who wishes to work for the business should be hired.
B) Family members should be financially rewarded on the basis of their position in the family.
C) A managerial title should be offered to motivate a productive family member.
D) Relatives should be offered positions according to their status in the family.

Answer 1

C

Question 2

A number of entrepreneurs are turning to formal succession plans for their family-owned businesses to:

A) ensure they get proper returns on their investment.
B) allow themselves to go on a short leave.
C) prevent endless disputes over ownership between their heirs.
D) devote time to face-to-face teaching and training.

Answer 2

C

Question 3

Expansion for small family-owned businesses may be limited by:

A) the size of the family.
B) low motivation level of employees.
C) the amount of family assets available.
D) the retirement age of the owner.

Answer 3

C

Question 4

How can copreneurs efficiently manage their family-owned business?

A) Keep personal issues aside while holding business arguments.
B) Let one spouse work for the other as an employee.
C) Make major decisions independently, without having to consult the other,
D) Spend more time tending to the business and less time in personal matters.

Question 5

A characteristic of family-owned businesses in the U.S. is that they:

A) have less potential financial risks.
B) can be a source of unresolved family conflicts.
C) have little disagreement among members on how to meet business goals.
D) rarely have family members with differing value systems.

Question 6

A(n) _____ is a document that contains instructions about what should be done with the family-owned business if the owner suddenly dies or becomes incapacitated.

A) bequest
B) will
C) instrument
D) claim

Question 7

_____ refer(s) to family-owned businesses run by husband-and-wife teams.

A) Angel investors
B) Intrapreneurs
C) Copreneurs
D) Strategic alliances

Question 8

According to the Family Firm Institute of Boston:

A) family-owned businesses in the U.S. are predominantly small.
B) a majority of family-owned businesses in the U.S. flourish.
C) family-owned businesses in the U.S. must hire college graduates.
D) emotions and business do not mix in a family-owned business.

Question 9

Which of the following is an advantage of hiring professional managers to run family-owned businesses?

A) More employment opportunities for family members
B) Retained "personal touch"
C) Fair treatment of employees
D) Concentration of power in small cliques

Question 10

According to the Family Firm Institute of Boston, family-owned businesses have a high mortality rate primarily because:

A) there is little personal satisfaction.
B) they are too large.
C) family members lose interest.
D) the estate taxes are high.

Question 11

Conflicts are likely to arise in a small family-owned business when:

A) each family member has a different perspective, leading to dissension.
B) a family member is clearly in command, at least in a given area of management.
C) the role of each family member is distinct, based on sound business practices.
D) family members agree to disagree and set ground rules.

Question 12

How can children be prepared to enter the family-owned business?

A) Allow them to work in senior management positions and make important decisions.
B) Give them a permanent leadership position in the business.
C) Promote them rapidly in the business out of turn.
D) Let them work for another company to gain experience.

Question 13

Which of the following situations should copreneurs avoid?

A) Agreeing to disagree on several business issues
B) Ignoring business conflicts in an attempt to save the relationship
C) Setting aside time for the family and sticking to it
D) Defining each person's role and accentuating each other's talents

Question 14

Why is management succession a problem for family-owned businesses?

A) Employees may dislike the chosen successor.
B) Children may choose their own successor.
C) Potential candidates may be groomed too early.
D) There is a defined hierarchy for decision-making.

Question 15

A developing trend in family businesses is that young people:

A) offer an executive position to their parents in their company in return for funding.
B) show disinterest in continuing the work of their parents.
C) prefer to look for jobs in major corporations rather than focus on the business.
D) are not interested in gaining experience by working part-time.

Question 16

A disadvantage of organizing a family business into a corporation and hiring professional managers is the:

A) concentration of power in small cliques.
B) unfair treatment of employees.
C) loss of family time for other purposes.
D) increasing friction between family members.

Question 17

A way to deal with incompetent family members in a family-owned business is to:

A) allow them to take special privileges.
B) tolerate them when they avoid unpleasant tasks.
C) place them in responsible positions to encourage them to work.
D) assign jobs to them that allow minimal contact with other employees.

Question 18

A limitation of a small family-owned business is that a family manager may:

A) refuse to hire family members who want to enter the business.
B) lack general management skills, being proficient in a specific activity.
C) ignore top family members when a matter needs to be cleared.
D) guard against letting past successes lead to trying to maintain the status quo.

Question 19

In order to cope with the daily challenges of a family-owned business, the family should:

A) hire more relatives to work in the business.
B) keep children out of the decision-making process.
C) reduce time spent on home activities.
D) develop an appropriate family mission statement.

Question 20

A home-based business is an attractive option for working mothers because:

A) most corporations encourage telecommuting.
B) there has been a decrease in job sharing.
C) many companies are adopting flextime.
D) daycare services are relatively inexpensive.

Question 21

Family-owned businesses need an appropriate mission statement to cope with the demands of business operation.

Question 22

The transition of a family-owned business to a successor can be made easier for the former owner by:

A) devoting lesser time to hobbies and other outside activities.
B) keeping the owner engaged in a top management position.
C) narrowing his/her skills to focus on a single task.
D) handing over to the successor in phases.

Question 23

A _____ provides for a corporation to repurchase a shareholder's stock when he/she leaves the company.

A) living trust
B) buy-sell agreement
C) family limited partnership
D) recovery fund

Question 24

In the context of a family-owned business, which of the following is a disadvantage of a living trust?

A) The business goes to the designated heirs without going through probate court.
B) Property can be put into the trust while the owner is alive.
C) The ownership still remains with the owner after transferring the title to the trust.
D) The title on real estate and securities must be changed to the name of the trust.

Question 25

The involvement of relatives in a family-owned business should always be based on the family status of the person.

Question 26

If a family-owned business is a corporation, replacement of ownership is decided by:

A) the spouse of the former owner.
B) a court-appointed attorney.
C) the board of directors.
D) family law.

Question 27

In family-owned businesses run by copreneurs, both partners have equal roles in all management areas.

Question 28

A recent trend in the operation of a family business is that of retired parents wanting to buy their children's business.

Question 29

A family limited partnership allows business owners to:

A) choose people who could be considered owners of the business in their absence.
B) remain part of the ownership group when the business is sold.
C) pass assets to heirs with a minimum of income and estate tax costs while retaining control of assets during their lifetime.
D) name a family member as the successor when the business is up for sale.

Question 30

Most people-related challenges faced by family-owned businesses result from interactions of business necessity with family values and relationships.

Question 31

Family-owned businesses run by husband-and-wife teams are referred to as copreneurs.

Question 32

An advantage of selling a family-owned business to outsiders is that:

A) the former owner receives an assured income.
B) it provides a constant source of income to all the family members.
C) the stature of the family is maintained.
D) the owner assumes more responsibility with resultant happiness.

Question 33

Daughters interested in leading the family business should gain experience by working outside.

Question 34

What is estate planning?

A) Planning for a new buyer of a family-owned business that is up for sale
B) Compensating the owner of a family-owned business when the family wants to sell it
C) Preparing for the orderly transfer of the owner's equity when death occurs
D) Assessing the real-estate value of a family-owned business before it is sold

Question 35

Due to their inexperience, children must be excluded when making important decisions and setting goals for a family-owned business.

Question 36

Which of the following is an advantage of selling a family-owned business to family members?

A) Fewer family members are hired in the business.
B) The former owner has to take some responsibility toward the business.
C) Family bonds are strengthened and additional friction is reduced.
D) The former owner still owns the business until retirement.

Question 37

According to the Family Firm Institute of Boston, a majority of family-owned businesses close down due to high estate taxes.

Question 38

Family-owned businesses run so smoothly that there is rarely any conflict among family members.

Question 39

In the context of family-owned businesses, which of the following can be used to minimize estate taxes?

A) Buy-sell agreement
B) Family limited partnership
C) Formal succession planning
D) Selling stock to outsiders

Question 40

A(n) _____ resembles a will, but, in addition to providing for distributing personal assets on the maker's death, it also contains instructions for managing those assets, should a person become disabled.

A) living trust
B) promissory note
C) white paper
D) attestation

Question 41

The attitudes of incompetent relatives working in a family-owned business can be changed by formal or informal education.

Question 42

As the leader of a family-owned business grows older, he/she must guard against depending on past successes.

Question 43

Deferred profit-sharing plans may be used to placate dissatisfied family members in a family-owned business-if deserved.

Question 44

Employees find themselves treated less fairly in a family-owned business that is organized into a corporation.

Question 45

A person's age must determine the lines of authority in a family-owned business.

Question 46

When success leads a family-owned business into the second generation, younger relatives begin to lose interest in job titles.

Question 47

A buy-sell agreement provides for the corporation to buy back a shareholder's stock when he/she leaves the company.

Question 48

Incompetent family members working in a family-owned business may be handled by placing them in jobs which involve frequent interaction with other employees.

Question 49

In a small family business, management succession planning can start late.

Question 50

The borrowing power of a family-owned business is limited by the amount of family assets.

Question 51

Family-owned business entrepreneurs usually make good general managers.

Question 52

When the choice of replacements is limited in a family-owned business, the owner may broaden a manager's job specification in order to utilize him/her effectively.

Question 53

Managers of family-owned businesses must agree to hire any family member who wants to join the business.

Question 54

Estate planning involves preparing for the orderly transfer of the owner's equity in the business when death occurs.

Question 55

In order to prepare children to take over the family-owned business, it is essential to hire them for higher-level positions in the business.

Question 56

In order to learn to manage a family-owned business, a family member should be given true responsibility.

Question 57

The high turnover rate of top-notch nonfamily managers and employees may be due to incompetent family members.

Question 58

A family limited partnership resembles a will and contains instructions for managing personal assets.

Question 59

Pre-nuptial agreements pose a problem when a couple running a family-owned business gets divorced.

Question 60

Working for another company to broaden their training and background helps justify moving family members into the family business at a higher level.

Question 61

What are the advantages and disadvantages of organizing a family-owned business into a corporation?

Question 62

What causes conflicts in a family-owned business?

Question 63

Discuss the different ways in which estate taxes can be minimized.

Question 64

How can family business owners prepare their children to manage the business?

Question 65

What are the limitations faced by a family-owned business?

Question 66

What are the benefits of selling a family business to family members and the benefits of selling the business to outsiders?

Question 67

Explain how a small family business owner must deal with incompetent family members working in the business.

Question 68

Describe how a family-owned business may prepare for management succession in case the owner departs suddenly.

Question 69

If you were a working mother, why would you prefer to establish a home-based business instead of looking for a corporate position?

Question 70

How can family members working in a family-owned business be compensated?