Deck 9: The Organizational Plan

Question 1

The sole proprietorship form of ownership gives owners the most control of business operations.

Answer 1

True

Question 2

In a limited partnership,the limited partners are equally liable for the debts of the partnership.

Answer 2

False

Question 3

In a partnership,the general partners usually share the amount of personal liability according to their capital contributions.

Answer 3

False

Question 4

Method Products,Inc.is expected to surpass $110 million in sales in 2011.

Question 5

The decision regarding the legal form of organization should be made by the entrepreneur before request for venture capital.

Question 6

In a partnership,the death of a general partner generally does not result in termination of the partnership.

Question 7

Sole proprietors can access two sources of capital-personal contributions from the entrepreneur and sale of stock.

Question 8

In a limited liability partnership (LLP),the death or withdrawal of a partner dissolves the partnership.

Question 9

In order for a corporation to be legally formed the owners have to register the name and articles of incorporation and meet statutory requirements.

Question 10

Transferability of interest is easiest in a limited partnership.

Question 11

The corporation has the most continuity of the forms of business.

Question 12

Investors usually insist that the management team not operate the business as a part-time venture.

Question 13

In an LLP,the transfer of interest of one limited partner is typically not allowed.

Question 14

The only source of capital for a corporation is the sale of shares of stock.

Question 15

The most expensive type of business to start is the partnership.

Question 16

The corporation can be created only by statute.

Question 17

Investors accept that the management team draws a large salary for their contributions in early operations.

Question 18

The corporation is considered a legal person that is taxable and absorbs liability.

Question 19

The proprietor is only personally liable for all aspects of the business when gross negligence occurs.

Question 20

In an S Corporation,ownership can be freely transferred as long as the buyer is an individual.

Question 21

Shares of stock are issued to members of a limited liability company.

Question 22

The partnership is the most attractive type of business formation for raising capital.

Question 23

Corporations distribute profits primarily through dividends.

Question 24

Both partnerships and proprietorships serve as nontaxable conduits of income for their owners.

Question 25

The limited partners in a venture share control of day-to-day operations with the general partners.

Question 26

The S corporation cannot have more than 75 shareholders.

Question 27

When hiring employees for the venture,the entrepreneur should consider the candidate's skills and abilities and avoid considering the individual's personality.

Question 28

The limited liability company is automatically taxed as a corporation.

Question 29

The S corporation can deduct most fringe benefits for shareholders.

Question 30

In the partnership,profit and loss distribution is determined by the partnership agreement.

Question 31

The standard term of a limited liability company is 30 years.

Question 32

Shareholders in an S corporation have the same liability protection as shareholders in a C corporation.

Question 33

Stockholders in a corporation share day-to-day control of the entrepreneur.

Question 34

The limited liability company is the only form of organization that allows members to share liability.

Question 35

An S Corporation combines the tax advantages of the partnership and the corporation.

Question 36

Income from the partnership is taxed twice: once at the business level and once as personal income.

Question 37

Corporations are not able to distribute profits to shareholders.

Question 38

Since a corporation is recognized as a separate tax,it has the advantage of being able to take many deductions and expenses that are not available to the proprietorship or partnership.

Question 39

In a limited liability company,every member has limited liability.

Question 40

Sole proprietorships usually use a calendar year for tax purposes.

Question 41

The Sarbanes-Oxley Act reduced the responsibilities of the board of directors.

Question 42

In a limited partnership,the limited partners:

A)are liable only for the amount of their capital contributions.
B)share the amount of personal liabilities equally.
C)have only insurance as protection against liability suits.
D)are allowed to decide on the amount of individual liabilities.

Question 43

In an S corporation,the transfer of interest can occur:

A)only with the consent of the other shareholders.
B)only if there is a charter provision for doing so.
C)only as long as the buyer is an individual.
D)depending on the agreement.

Question 44

The hiring process is one area of business operation that the entrepreneur should not cut back on to save time.

Question 45

In which of the legal forms of ownership is transferability of interest the easiest?

A)Sole proprietorship
B)Limited partnership
C)General partnership
D)Corporation

Question 46

The management team of a new venture:

A)is encouraged to operate the business as a sideline.
B)must operate the business full-time.
C)can expect to draw a large salary.
D)should be employed elsewhere to assure adequate income.

Question 47

Once the board of advisors have been hired,the entrepreneur should not question their advice.

Question 48

Eric Ryan and Adam Lowry started Method Products because:

A)they were both unhappy in their jobs.
B)a friend tipped them off to market trend of green products.
C)Ryan's background as a scientist gave him the idea for a clean dish washing liquid.
D)Lowry heard,in his previous job as a marketer,that distributors were looking for green products.

Question 49

Which type of ownership is the least expensive to start?

A)Corporation
B)General partnership
C)Limited partner
D)Sole proprietorship

Question 50

Which of the following types of ownership has the most continuity?

A)General partnership
B)Corporation
C)Limited partner
D)Sole proprietorship

Question 51

The legal form of business with the most alternatives for raising capital is the:

A)proprietorship.
B)corporation.
C)limited partnership.
D)full partnership.

Question 52

Sole proprietorships:

A)have no time limit on how long they may exist.
B)are perpetual.
C)continue even upon the death of the owner.
D)allow a member of the deceased partner's family take over as a partner.

Question 53

The board of directors should be an even number of members.

Question 54

Bonds can be used to raise capital in which form of ownership?

A)Sole proprietorship
B)Limited partnership
C)General partnership
D)Corporation

Question 55

A board of advisors has less decision making authority than a board of directors does.

Question 56

Liability is one of the most critical reasons for establishing a:

A)limited liability company.
B)corporation.
C)partnership.
D)sole proprietorship.

Question 57

In which form of organization does the owner have greatest control?

A)Sole proprietorship
B)Limited partnership
C)General partnership
D)Corporation

Question 58

_____________ have unlimited liability for the actions of the business.

A)Limited liability company members
B)Corporate shareholders
C)General partners
D)Limited partners

Question 59

In a limited liability partnership (LLP)death or withdrawal of a partner:

A)results in automatic transfer of ownership to surviving partner(s).
B)may result in problems trying to find a market for the shares.
C)always results in termination of the partnership.
D)has no effect on the partnership.

Question 60

Which type of ownership is the most expensive to start?

A)Corporation
B)General partnership
C)Limited partner
D)Sole proprietorship

Question 61

Which of the following statements is (are)true?

A)Corporations are not able to take deductions and expenses available to the proprietorship or partnership.
B)Distribution of dividends is taxed once,as income of the corporation.
C)Bonuses,incentives,and profit sharing are allowable ways to distribute income of the corporation.
D)Corporate tax may be higher than the individual rate.

Question 62

A limited liability corporation:

A)has unlimited liability.
B)is automatically taxed as a partnership.
C)is decreasing in popularity among venture capitalists.
D)had been the most popular choice of organization structure by new ventures and small businesses.

Question 63

Which of the following ways of distributing the income of corporations is taxed twice?

A)Bonus
B)Salary
C)Profit sharing
D)Dividends

Question 64

To build a successful organization culture the entrepreneur:

A)should focus and not try out different things.
B)needs to remember that it is easier to change a person's attitude than it is to change the person's behavior.
C)should spend extra time in the hiring process.
D)must create a workplace where communication from the top down is encourageD.

Question 65

S corporation status means:

A)shareholders do not have limited liability.
B)the corporation is subject to a minimum tax of 34 percent.
C)consent by a majority of shareholders is required for the election of this form of business.
D)the corporation pays no tax.

Question 66

In designing the organization:

A)the initial design is usually complicated.
B)poor design is a significant cause for business failure since the entrepreneur often performs all organization functions themselves.
C)the entrepreneur easily transitions from a growing start-up to a growing,well managed business.
D)as the workload increases the organizational structure will contract.

Question 67

In a limited liability company:

A)laws governing its formation differ from state to state.
B)members may transfer their interests at any time.
C)members are not allowed to share income,profit,expense,deduction,loss and credit among themselves.
D)owners are called shareholders.

Question 68

A_____ can raise capital through bonds,stock and debt.

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

Question 69

In an S corporation:

A)gains or losses of the business are separate from the personal income of the shareholder.
B)shareholders retain unlimited liability.
C)only one class of stock is permitted.
D)most fringe benefits for shareholders can be deducteD.

Question 70

In which form of organization would it be possible for individuals that don't have any ownership stake in the business to make decisions?

A)Sole proprietorship
B)Limited partnership
C)General partnership
D)Corporation

Question 71

When it comes to decision making,in a limited partnership:

A)there is no separation of ownership and control.
B)limited partners have no control over business decisions.
C)limited partners have an equal say,but no liability.
D)the partners have control based on invested capital.

Question 72

Which of the following is not one of the main functions of the management team according to text?

A)Execute the business plan.
B)Identify fundamental changes in the business plan as they occur.
C)Make adjustments based on changes in the environment and market that will maintain profitability.
D)Help the entrepreneur write the business plan.

Question 73

Organization costs in a proprietorship are:

A)amortizable over a period of 60 months.
B)not amortizable.
C)amortizable over a period of 45 months.
D)amortizable for a period of a year.

Question 74

Corporations distribute profits to owners through:

A)bonds.
B)taxes.
C)dividends.
D)interest.

Question 75

Our text tells us that much of an entrepreneur's time during start-up is spent:

A)putting out fires.
B)negotiating.
C)delegating.
D)allocating resources.

Question 76

The standard term of a limited liability company is:

A)15 years.
B)20 years.
C)25 years.
D)30 years.

Question 77

In what form of business is it most difficult to change your taxable year?

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

Question 78

In a ________ capital losses can be carried forward indefinitely.

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

Question 79

Which for form of organization has time limits on writing off capital losses?

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

Question 80

The board of directors:

A)lacks voting authority.
B)has responsibilities to represent all shareholders.
C)is less objective than the entrepreneur.
D)are always volunteers and need not be compensateD.