Deck 9: Establishing the Legal Foundation

Question 1

The law present in a country is called an institution.

Answer 1

True

Question 2

In the Friend's Home Health case study, the main concern of the potential investor was the type of business being formed.

Answer 2

True

Question 3

The Friend's Home Health was setting up a Subchapter S Corporation.

Answer 3

False

Question 4

A disadvantage of a sole proprietorship is that the business must involve more owners than just the founder.

Question 5

One of the advantages as a Subchapter S Corporation is having legitimacy in the market (the ability to put "Inc." after your business name).

Question 6

A compact is an agreement between two parties to perform certain activities for some consideration.

Question 7

Small businesses deal with more regulations than large businesses.

Question 8

The Americans with Disability Act (ADA) pertains only to a firm with more than 15 employees.

Question 9

A copyright assumes the creative materials developed by a business are your own original work.

Question 10

A copyright is good for the life of the author plus 50 years.

Question 11

A patent covers the claim of intellectual property that covers a specific industry.

Question 12

A patent is good for 50 years and must be filed and accepted by the United States Patent and Trademark Office.

Question 13

In the Flow Right Brewery & Bar: A Family Affair case study, Chris discovered he needed only one license to open up his business.

Question 14

A business can obtain liability insurance, which covers lawsuits/judgments.

Question 15

A small business should research buying bonding insurance, which is insurance where the employee is bonded for illegal activities.

Question 16

According to the book, an entrepreneur should always make a formal written contract whenever he/she has an agreement with another party.

Question 17

Lease contracts are of a fixed term length that is agreeable between the parties.

Question 18

The smallest business that has to comply with the Americans with Disabilities Act is any firm with more than 20 employees.

Question 19

The great majority of business licenses are issued by city and county governments.

Question 20

An institution in a country is a _________.

A) law
B) culture
C) business
D) all of these

Question 21

The owner of a sole proprietorship can claim income and losses on schedule _________ of the 1040 tax form.

A) A
B) B
C) C
D) D

Question 22

The major benefit of a sole proprietorship is:

A) It is easy to form.
B) It is easy to dissolve.
C) There is no separation between the owner and the business.
D) All of these.

Question 23

What is the disadvantage of choosing a sole proprietorship?

A) It cannot have more than one founder.
B) The law does not recognize other equity investors.
C) Liability is solely on the owner.
D) All of these.

Question 24

What are the two types of partnerships?

A) general, unlimited
B) limited, unlimited
C) general, limited
D) general, specific

Question 25

In a partnership it is expected that the founders will contribute _________ to the founding of the firm.

A) cash
B) services
C) property
D) all of these

Question 26

General partnership differs from sole partnership in:

A) liability
B) new equity investment
C) easy to form
D) easy to dissolve

Question 27

In a limited partnership, there must be a(n) _________.

A) active investor
B) unlimited liability
C) general partner
D) limited liability

Question 28

When a corporation suffers losses, the founders will:

A) lose only their investment in the business
B) be responsible for all debts of the company
C) have unlimited liability
D) share equity investments

Question 29

All of the following are benefits of a Subchapter S Corporation EXCEPT:

A) limited liability
B) easy formation
C) limited number of shareholders
D) legitimacy in the market

Question 30

Small businesses deal with _________ regulations than large firms.

A) more
B) same
C) fewer
D) proportionate

Question 31

What does LLP stand for?

A) limited loan partnership
B) limited land partnership
C) limited liability partnership
D) none of these

Question 32

Which of the following items should be included in a contract?

A) who are the parties in the contract
B) when the transaction is to take place
C) the timing of payment
D) all of these

Question 33

All of the following items should be included in a contract EXCEPT:

A) parties that are in the contract
B) the timing of payment
C) the expiration date of business license
D) warranties

Question 34

_________ is a business formed between two or more individuals who do not wish the complications of forming a corporation or limited liability firm.

Question 35

Give three reasons for an individual to form a sole proprietorship.

Question 36

What information needs to be included in the charter of a Subchapter C Corporation?