Deck 8: Legal Concerns

Question 1

According to the author, most small businesses start out as which of the following business structures?

A) sole proprietorship
B) partnership
C) corporation
D) limited proprietorship

Answer 1

sole proprietorship

Question 2

Which of the following is a federal government grant that gives an inventor exclusive rights to his or her invention?

A) trade-mark
B) patent
C) exclusive distribution rights
D) private label

Answer 2

patent

Question 3

For how many years is the registration for trade-marks valid?

A) 5
B) 10
C) 15
D) 20

Answer 3

15

Question 4

For how many years is a patent protected in the issuing country?

A) 5
B) 10
C) 15
D) 20

Question 5

For how many years is a copyright protected in Canada?

A) 5
B) 20
C) 25
D) 50

Question 6

By what date do all self-employed people have to file their annual tax returns with the CRA?

A) January 31
B) March 31
C) April 30
D) June 30

Question 7

Which of the following is characteristic of an NPO?

A) must register with the CRA
B) is not required to register with the CRA
C) can use donation receipts for income tax purposes
D) cannot use donation receipts for income tax purposes

Question 8

Which type of business structure distributes retained earnings to shareholders?

A) corporation
B) partnership
C) cooperative
D) sole partnership

Question 9

According to David Chilton, author of The Wealthy Barber, what will happen if you die without a will?

A) all your assets will be divided evenly between all partners
B) all your assets will be donated to charity
C) all your assets will be seized by the federal government
D) all your assets will be frozen

Question 10

Which of the following types of partnerships has unlimited personal liability for any debts?

A) unlimited
B) general
C) cooperative
D) corporate

Question 11

In which of the following situations is a Canada Revenue Agency business number NOT required?

A) the business is a partnership
B) the business pays GST or HST
C) the business has an export/import account
D) the business makes payroll deductions

Question 12

Which of the following does the CRA require employers to deduct from employees' salaries?

A) income tax, CPP, and EI
B) income tax, RRSP, and EI
C) CPP, provincial health insurance, and EI
D) CPP, RRSP and EI

Question 13

How many votes might a shareholder in a co-op have if she had 50 shares?

A) 0
B) 1
C) 25
D) 50

Question 14

In which type of business structure do shareholders have the potential advantage of limited liability?

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

Question 15

According to the author, which of the following legal forms of business would likely have the most difficulty raising start-up capital?

A) sole proprietorship
B) partnership
C) corporation
D) cooperative

Question 16

Which of the following Acts requires an annual return to be filed each year?

A) Canada Business Corporations Act
B) Corporation Business Canadians Act
C) Canadian Bureau of Corporations Act
D) Corporations Bureau of Canadians Act

Question 17

What is the age requirement for forming a corporation in Canada?

A) 16
B) 18
C) 19
D) 21

Question 18

Which of the following is required for the formation of an incorporated business?

A) the services of a lawyer
B) the existence of a board of directors
C) the existence of a shareholders' agreement
D) a NUANS report

Question 19

In which type of partnership does each partner have a hand in managing the business and assumes unlimited personal liability for any debts?

A) restricted partnership
B) limited partnership
C) general partnership
D) unlimited partnership

Question 20

Which of the following types of organizations would be the most expensive to form?

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

Question 21

What type of liability do shareholders have in a corporation?

A) unlimited
B) limited
C) shared
D) arm's-length

Question 22

Which of the following is an example of how start-up funds for a cooperative are raised?

A) loan from financial institution
B) family inheritance
C) member shares
D) angel investors

Question 23

Which of the following is an example of the principle of social entrepreneurship?

A) profit business
B) corporation
C) not-for-profit business
D) cooperative

Question 24

Which of the following best represents the main priority of cooperatives?

A) profit
B) protection of the planet
C) offering low prices
D) employment security

Question 25

What does Robert Berman, a business author and strategic planning expert, advise regarding the use of shotgun clauses in partnership agreements?

A) Many small businesses should choose a shotgun method of dispute resolution in a partnership or shareholders' agreement.
B) The person who receives the buyout is legally required to accept the offer.
C) A shotgun form of dispute resolution applies to both sole proprietorships and partnerships.
D) A shotgun clause is fair and efficient because it removes subjectivity and both parties should be very satisfied with the outcome of the transaction.

Question 26

Banks are likely to treat a newly incorporated business as if it were which of the following?

A) a sole proprietorship
B) a general partnership
C) a corporation
D) a cooperative

Question 27

According to Commander David Newing (retd.), what is an important distinction between an NPO and a registered charity?

A) NPOs are exempt from paying income tax
B) an NPO can use its income to personally benefit its members
C) the charity has completed the process of Canada's system of charity law
D) NPOs must register with the CRA

Question 28

What is the first step in the process of trade-mark registration?

A) a preliminary search
B) publishing the application in the Trade-marks Journal
C) registering for a BN
D) allowance and registration

Question 29

Which of the following provinces have HST?

A) Newfoundland, Nova Scotia, Quebec
B) Newfoundland, Nova Scotia, New Brunswick, Ontario, and British Columbia
C) Nova Scotia, New Brunswick, Quebec, and Prince Edward Island
D) Quebec and Prince Edward Island

Question 30

What do the author and several business experts recommend regarding the preparation of wills?

A) save the money and do it yourself
B) get a lawyer
C) conduct secondary research on the Internet
D) copy a will from another business contact

Question 31

At which level of revenue must a business register for GST/HST?

A) $10,000
B) $25,000
C) $30,000
D) $50,000

Question 32

Which level of government regulates sole proprietorships?

A) municipal
B) provincial/territorial
C) federal
D) depends on the circumstances

Question 33

Which type of business can be formed with a handshake?

A) partnership
B) cooperative
C) NPO
D) corporation

Question 34

In 2012, corporations were eligible to receive a special small business tax rate if they made under what amount of income?

A) $30,000
B) $50,000
C) $300,000
D) $500,000

Question 35

A cooperative is a special legal form of the partnership structure.

Question 36

According to the author, the best partnerships are made up of people having nearly identical personalities and skills.

Question 37

You will need a Canada Revenue Agency (CRA) business number if you are required to pay GST or HST.

Question 38

A personal guarantee, which is signed by the president of a corporation, does not protect a creditor.

Question 39

You are considered bankrupt only when your lawyer files the necessary bankruptcy forms with the Official Receiver.

Question 40

You must incorporate federally under the Canada Business Corporations Act.

Question 41

A limited partnership must contain at least one general partner.

Question 42

A general partnership limits risk to the amount invested as long as the partner has had no role in the management decisions.

Question 43

If a start-up business is incorporated, a bank will normally require personal guarantees on any business loans.

Question 44

A strong corporate shield may allow the corporate officers to protect some of their personal assets.

Question 45

Corporations have a different tax rate than sole proprietorships.

Question 46

It is advisable to request a NUANS (Newly Upgraded Automated Name Search) report if you want to protect your business name.

Question 47

Under most circumstances, it is legal to form a corporation if you are under the age of 18.

Question 48

For a partnership or small company, a shotgun clause does not constitute a recommended form of dispute resolution.

Question 49

In a sole proprietorship, a will is not necessary because if you die, the business dies with you.

Question 50

A bankruptcy cancels the responsibility of anyone who has guaranteed a loan on your behalf.

Question 51

According to the author, you can form a partnership through an oral agreement.

Question 52

Personal guarantees are illegal for corporate officers.

Question 53

Provincial registration will protect your name.

Question 54

If you incorporate, a shareholders' agreement is a legal requirement.

Question 55

All businesses in Canada are legally required to register for the GST or HST.

Question 56

In a cooperative, if you own more shares, you have more voting power.

Question 57

If you incorporate, you are not legally required to have shareholders.

Question 58

Social entrepreneurship refers to not-for-profit businesses that adopt profit-making approaches to satisfy social and community needs.

Question 59

An attractive feature of the sole proprietorship is the low start-up cost.

Question 60

As a sole proprietor, under certain circumstances, you can deduct your business losses as an expense on your personal income tax statement.

Question 61

The owner of a sole proprietorship can be held personally responsible for all debts of the business.

Question 62

Succession planning is the process of establishing the procedures to change or transfer ownership or control of a business.

Question 63

As a sole proprietor, you will be required to pay Canada Pension Plan premiums on self-employed income.

Question 64

A partnership agreement is a legal requirement in most provinces.

Question 65

A cooperative is an association of two or more individuals operating a business to earn income.

Question 66

According to most experts, a shotgun clause does not lead to dispute resolution in every case.

Question 67

Everyone who shops at Mountain Equipment Co-op (Chapter 8 case study) is a part-owner.

Question 68

A legal form of business that is taxed as though it is an individual is a sole proprietorship or ______________.

Question 69

The person who can assess your financial situation and explain other options to bankruptcy is called a _________________.

Question 70

The legal business structure that has the authority to act and have liability separate and apart from its owners is a __________.

Question 71

The partner who agrees to manage a limited partnership is called a __________ __________.

Question 72

The acronym that identifies the type of report that will make you aware of any existing business names that could prevent you from using your chosen business name is __________.

Question 73

The process of establishing the procedures to change or transfer ownership or control of a business is called _____________ ______________.

Question 74

The growing trend of not-for-profit businesses adapting creative "profit" approaches to satisfy social and community needs is often referred to as _____________ _______________.

Question 75

A provision stating that one partner or shareholder can make a buyout offer to the other partner for his/her share of the business, including certain provisions, is called a _______________ _______________.

Question 76

Identify key items that should be written into a partnership agreement.

Question 77

What are the major advantages of a corporation?

Question 78

Identify three reasons for forming a partnership.

Question 79

What two types of business structures are taxed as though they are individuals?

Question 80

What is bankruptcy? How does one declare bankruptcy?