Deck 14: Navigating Legal and Ip Issues

Question 1

A C corporation's disadvantage is double taxation.This means that ______.

A)the corporation is taxed on the profit it makes and the shareholders are taxed on the dividends
B)the corporation pays taxes in April and October
C)corporations are taxed more heavily than other corporate structures
D)corporations pay taxes on the goods they purchase to create the product rather than on the profits from the sale of the goods

Answer 1

A

Question 2

If you want to seek immediate external funding from experienced investors,what type of organization would be the best to form?

A)LLC
B)benefit corporation
C)S corporation
D)C corporation

Answer 2

D

Question 3

A C corporation has transferable ownership,which refers to the fact that ______.

A)a C corporation can change its structure at any time after the first year
B)it can issue stock in exchange for capital and can be passed on to new owners
C)it can adapt to more employees as the company grows
D)it can be owned by an unlimited number of shareholders

Answer 3

B

Question 4

In an S corporation,what is the maximum number of shareholders allowed?

A)12
B)50
C)75
D)100

Question 5

What characteristic of a C corporation will make it possible to pass the corporation on to new owners after the original owners pass away?

A)vesting
B)the laws of inheritance
C)transferable ownership
D)stockholder rights

Question 6

In an LLC,how are profits and losses reported?

A)on individual tax returns
B)on the corporation's tax return
C)on both the corporate and individual tax return
D)on either the corporate or individual tax return

Question 7

What two characteristics should a lawyer have when working with a startup?

A)years of experience and willingness to work at reduced charges
B)knowledge of laws across states and knowledge of the industry
C)industry knowledge and a familiarity and comfort working with startups
D)knowledge about all aspects of the business and laws across states

Question 8

A limited partnership is made up of which of the following?

A)general partners and limited partners
B)general partners and shareholders
C)general partners only
D)limited partners only

Question 9

The term vesting can best be described as which of the following?

A)paying shares out to employees on a regular,usually annual basis
B)imposing equity forfeitures on cofounders over a certain period of time on a piecemeal basis should they not stay with the company
C)defining a particular time and range of duties the cofounders must contribute to the business
D)determining the investment that each cofounder must contribute to the start and growth of the business

Question 10

What is the simplest and most inexpensive form of legal structure for startups?

A)sole proprietorship
B)general partnership
C)C corporation
D)S corporation

Question 11

What support service for entrepreneurs is offered by the U.S.Patent and Trademark Office?

A)patent loaning
B)a pro bono legal program
C)small business grants
D)tax preparation services

Question 12

What is a major risk in following legal advice found on the Internet?

A)The advice may be given by a lawyer who does not have a physical office.
B)The advice may not be strictly accurate or relevant to your type of business.
C)The service is free and there is no paperwork to document the advice.
D)Sample documents and forms will not be available.

Question 13

How do the authors suggest the Internet's legal resources be used?

A)to access low-cost legal forms and advice
B)to identify the type of legal counsel you will need
C)to seek advice from free legal services
D)to find sample documents that match your industry,products,and services

Question 14

What business entity term refers to a business owner who has not formed a separate entity to run the business?

A)sole practitioner
B)self-employed
C)sole proprietorship
D)nonentity small business

Question 15

Which of the following conditions is applicable to all not-for-profit organizations?

A)They must be classified as a church,educational,or charitable institution.
B)Their earnings should be used to benefit the shareholders.
C)Profit must be reinvested and used for the organization's exempt purpose.
D)Shareholder earnings are limited by the tax code.

Question 16

Typically,LLPs are only popular among what type of business?

A)restaurants
B)a sole owner who wants to guard against liability
C)a professional practice,such as a legal or accounting group
D)franchises

Question 17

In a C corporation,who is legally liable for its actions?

A)the corporation
B)the shareholders
C)the owner(s)of the company
D)the board of directors

Question 18

______ is the simplest and most inexpensive form of legal structure for startups.

A)Sole proprietorship
B)General partnership
C)C corporation
D)LLC

Question 19

Which of the following can be affected by the type of legal structure your company has?

A)the authorities you need to notify,taxes,record-keeping,and decision processes
B)taxes and ability to sue the company
C)taxes and marketability of your company
D)taxes only

Question 20

What government body creates a C-corp?

A)the state government
B)the federal government
C)local county and city jurisdictions
D)the federal courts

Question 21

What step might be taken in the United States if some disclosure of your product is necessary in order to obtain funding,obtain raw materials,or otherwise develop the product?

A)Mark all prototypes and designs with the company name.
B)File for a patent under your personal name instead of the company.
C)File for a provisional patent.
D)Change the nature of the product after you have disclosed it.

Question 22

What number of employees must a company have before they are required to provide family and medical leave and,in some states,sick leave?

A)any size company
B)a company with over 10 employees
C)a company with 15 employees or more
D)a company with over 50 employees

Question 23

IP protection doesn't always work.What is the primary contributing factor in this failure?

A)Laws protecting the company's rights may not be recognized in other countries.
B)There are too many patents on record,making it difficult to monitor them.
C)Companies fail to renew their patents after the expiration date.
D)The product or service has evolved after the original protection was filed.

Question 24

An employee for a beverage company combines the ingredients used in creating a particular drink mix.Later he/she is fired from the company and decides to sell the same mix under a new label to a competing company.What concept might be represented in this action?

A)a copyright violation
B)a trade secret,provided a nondisclosure that was signed by the employee
C)a trademark violation,regardless of the lack of a nondisclosure agreement
D)No violation; secrets are secrets only until they are known.

Question 25

The most significant factor in determining whether a worker is a contractor or an employee is ______.

A)the amount of control the employer has over the work being carried out
B)the number of hours worked
C)whether the worker or employer pays expenses
D)whether the worker gets vacation time

Question 26

Which of the following forms will be needed to indicate federal unemployment tax that will be used should the employee lose his or her job?

A)Form 940
B)W-2
C)I-9
D)W-4

Question 27

Which of the following indicates that an employee is eligible to work in the United States?

A)Declaration of U.S.Citizenship
B)I-9
C)W-4
D)Form 940

Question 28

What should an entrepreneur do if he or she worked on a product with a former employer and wants to market the product as his or her own?

A)Market it before the former employer does.
B)Consult an IP attorney to review employee contracts and applicable laws.
C)Keep all documentations proving that he or she is the inventor.
D)Market the product in another country.

Question 29

Failure to assign ownership occurs in which of the following situations?

A)when someone makes significant contributions to a product design without a formal agreement regarding who owns the idea
B)only when someone makes a significant contribution and is not paid for the contribution
C)only when someone makes a significant contribution and is paid for the contribution
D)when someone fails to place the company name on the patent

Question 30

What pitfall might affect the ability to attain a patent?

A)developing a prototype
B)disclosing the product or service to the public before the patent is filed
C)not filing for the patent 45 days after the invention of the product
D)not having the company logo on the product

Question 31

Which of the following would most likely be considered fair use of copyrighted material?

A)A T-shirt company uses a famous clause from a song and places it on their T-shirts.
B)A high school teacher copies a portion of a song sheet to explain the use of timing and syncopation.
C)A nonprofit organization sells copies of a copyrighted cookbook at a fundraiser.
D)A movie producer uses a popular song as background to one of his/her movie scenes.

Question 32

After filing for a provisional patent,how long do you have before developing the idea into a working prototype?

A)1 year
B)2 years
C)3 years
D)4 years

Question 33

Which of the following would most likely be considered fair use of copyrighted material?

A)A writer references a portion of a comedian's script in a book in order to demonstrate a key point.
B)A writer copies a portion of a new book on chess in which he reveals the secrets in the competitor's book.He credits the original author.
C)A songwriter puts the words of a poem to a musical score.
D)A writer and biologist copy 30 diagrams from another textbook,citing the original author.

Question 34

Which of the following forms will let the employer know how much money to withhold from paychecks for federal taxes?

A)I-9
B)T-140
C)W-4
D)Form 940

Question 35

What is a key difference between U.S.law and that of most other countries regarding patents on publicly disclosed innovations?

A)Most nations other than the United States allow a one-year grace period after public disclosure.
B)The United States requires innovations to be publicly disclosed for one year before a patent is filed.
C)The United States allows a one-year grace period after a public disclosure.
D)U.S.patents only last for one year.

Question 36

Gary is fascinated by a new device that uses a GPS-like tracker to help owners locate their pets.He purchases the product,disassembles it,and uses it as a pattern for a similar device.The new device uses a less expensive casing,but otherwise has duplicated the technology.What legal concept may be represented in this action?

A)a copyright violation
B)a trademark violation
C)a patent violation
D)a fair use violation

Question 37

Which of the following is a key disadvantage of hiring an independent contractor?

A)A contractor has autonomy in what,when,and how he or she performs the duties of the job.
B)The contractor would not be required to perform the job to the same level as an employee.
C)The contractor could be terminated if he or she did not fulfill their contracts.
D)The contractor generally would have less of a personal commitment to doing the job well.

Question 38

An employee has been developing a company product for the last 3 years when he decides to leave the company.That product is a glue that remains tacky for hours,enabling certain types of artwork to be performed.After he leaves the company,the employee joins another company and finalizes the glue development for his new company.Who is likely to own the rights of the intellectual property involved in the formulation of the glue?

A)the employee; he invented it
B)the original company who paid for the product to be developed
C)the new company because the product was released while the employee worked for it
D)The glue cannot be considered intellectual property.

Question 39

How much does IP theft cost the United States every year?

A)$3 billion to $5 billion
B)$100 billion to $200 billion
C)$225 billion to $600 billion
D)It is incalculable.

Question 40

Any word,name,symbol,or device used in business to identify and promote a product is called a ______.

A)trademark
B)copyright
C)brand
D)patent

Question 41

A delivery service hires independent contractors as drivers to deliver products that are ordered online.The company requires that the delivery service be available from 8 am to 5 pm Monday through Friday and displays the company logo on their shirt and automobile (in the form of a magnetic sign).Procedures for logging the package and the number of attempts for delivery are defined by the company.What issues may be of concern in this situation?

A)The employer has not outlined provisions for overtime.
B)The employer may not be paying vacation time to the contractors.
C)The employer may have misclassified these workers as contractors because the employers are controlling their work hours,operations,and appearance.
D)None,as the employer and delivery service have signed an independent contractor agreement.

Question 42

Which of the following is true when compensating employees with company equity?

A)The equity to be issued will be considered salary and not subject to securities laws.
B)The equity will be considered a gift since no cash was issued.
C)The shares may be considered a taxable item.
D)The shares cannot be tied to performance of services.

Question 43

Why does the employer fill out an IRS form 940 every year?

A)to report income taxes withheld from employee wages
B)to report federal unemployment tax
C)to report the number of employees from their company who have filed for unemployment
D)to report the number of employees who filed a workers' compensation claim

Question 44

With which of the following agencies must you register to pay state unemployment compensation tax?

A)the Federal Department of Labor
B)the Labor Department of your state
C)the Franchise Tax Board
D)the State Tax Board

Question 45

How long does a federally registered trademark last before it must be renewed?

A)It is a lifelong registration.
B)100 years
C)10 years
D)25 years

Question 46

Who would be worthwhile to consult before setting up an employee benefits program for your startup?

A)your HR Director
B)an accountant experienced with employee benefits
C)the company lawyer
D)the provider,such as the insurance company or retirement fund company

Question 47

Which of the following cannot be protected as intellectual property?

A)artistic expression
B)a trademark
C)an idea
D)an invention

Question 48

Before hiring its first employee,a company must get a(n)______ to use on documents and tax returns for the IRS.

A)EEO
B)SSN
C)TIN
D)EIN

Question 49

According to the International Trade Union Confederation (ITUC),which of the following countries scores among the highest for equality at work?

A)Uruguay
B)China
C)Egypt
D)Colombia

Question 50

In a sole proprietorship,you are personally responsible for problems such as injuries on the job or loans taken out on behalf of the business.

Question 51

What legal structure determines minimum wage and overtime pay?

A)Civil Liberties Act
B)the hiring company's salary administration policy
C)Fair Labor Standards Act
D)Minimum Wage Act

Question 52

How long does a company have to register a newly hired employee with your state directory?

A)within 2 months of the hire date
B)within 5 days of the hire date
C)within 20 days of the hire date
D)at any time before filing state taxes

Question 53

Tom has been a lead salesman for a brokerage house but recently got a better position at a competing house.Prior to leaving,Tom copied the customer list and contact information from his company.What may be infringed by this action?

A)the company's patent
B)trade secrets
C)copyrights
D)No principles were violated since he contributed to the call list in the first place.

Question 54

Candy-Corp hires a summer intern to work in the candy shop during the summer.The intern works 20 hours a week and earns course credit for a course he is taking toward his culinary degree.He is learning a great deal,and at the same time,the company is benefiting from the intern because they did not need to schedule their regular employees full time and they are not paying the intern.What is the legal liability this company is incurring?

A)The summer intern is learning store operations that put him in physical danger.
B)The intern is performing actual work and not just observing.
C)The intern is benefiting the company by replacing duties which could be provided by paid employees.
D)The intern is working too many hours.

Question 55

How long does a patent generally last?

A)2 years
B)10 years
C)20 years
D)50 years

Question 56

Which of the following countries is most likely to violate IP rights?

A)England
B)Germany
C)China
D)Australia

Question 57

What is a shorter,less technical contract which is a clear agreement between founders on a number of key issues that the business might face?

A)founders' agreement
B)limited liability agreement
C)employee contract
D)independent contractor agreement

Question 58

Which of the following is true about filing for a patent in the United States?

A)Patents are based on a "first to file" basis.
B)Patents are based on a "first to invent" basis.
C)Patents can be shared if multiple people invent the same product.
D)Patents are awarded to the best design should multiple people file at the same time.

Question 59

Which of the following must be paid for by the employer in all states?

A)unemployment insurance
B)vacation leave
C)paid sick days
D)life insurance

Question 60

A limited liability partnership protects the owners from liability,and taxes are paid by the corporation.

Question 61

Once a product is protected by a patent in the United States,the product will be protected from counterfeit by other countries due to international trade agreements.

Question 62

In a C corporation,the shareholders-not the corporation-are legally liable for a company's actions.

Question 63

In a sole proprietorship,the owner is held personally liable for any problems the business incurs.

Question 64

A disadvantage of a C corporation is that it cannot survive after the demise of its owners.

Question 65

Entrepreneurs may receive legal support from clinics operated at law schools.

Question 66

In a general partnership,if one partner is responsible for running the company into the ground,the other partner is not considered liable.

Question 67

IRS regulations require that an employer keeps records of employment taxes for at least the most recent year.

Question 68

Even if an inventor makes significant improvements to another company's existing product (e.g.,changing the way the product is used and solving a problem with the original product),the improved product is still the intellectual property of the original company.

Question 69

A sole proprietorship is rarely the correct choice of legal structure for startups.

Question 70

All states forbid discrimination on the basis of sexual orientation.

Question 71

A common mistake new companies make is to hire employees rather than independent contractors.

Question 72

Both the C-corp and the S-corp have to deal with double taxation,as there are two levels of tax to pay for both types of legal structures.

Question 73

All employers have a responsibility to their employees to maintain a safe and healthy workplace environment.

Question 74

A company must have an EIN before hiring employees.

Question 75

One way that a company can protect its product is by licensing its innovation to a large organization with protection already in place.This inventor then receives royalties.

Question 76

Fair use is a clearly defined area in U.S.law with absolute rules and boundaries.

Question 77

Choosing the wrong business structure can lead to incurring higher taxes than necessary.

Question 78

A company with fewer than 50 employees does not have to offer family leave,medical leave,or health insurance.

Question 79

Regardless of the type of entity,a business partner can always maintain his or her own shares in the company,even when they leave the company,provided they were one of the company's founders.

Question 80

Every jurisdiction and industry requires a legal filing to set up a business as a sole proprietorship.