Question 1

Abby, Adam, and Arnold are partners. They have planned to continue the partnership even after the death of any one partner.  To this end, the partners have:

Accepted Answer

Purchasing life insurance policies naming the other two partners as beneficiaries is the best choice. This ensures that funds are immediately available to compensate for the loss of the deceased partner's contribution to the partnership. It also eliminates the need for a probate of the deceased partner's estate, which could create delays in continuing the partnership. The other options may have limitations or complications such as taxes and ownership transfer issues.

Question 2

Which legal form allows owners to contribute no capital but still play a part in managing the business and share in its profits?

Accepted Answer

A partnership allows for owners to contribute no capital but still have a say in managing the business and share in its profits.

Question 3

A key characteristic of a partnership is that each partner

Accepted Answer

Each partner in a partnership must be legally capable of contracting in order to enter into agreements on behalf of the partnership. However, contributing capital, sharing in company assets upon dissolution, and managing the business are not necessarily required characteristics of a partnership.

Question 4

A corporation:

Accepted Answer

Corporations are chartered under state laws, which means they are granted legal recognition as an individual entity by the state in which they are incorporated. This legal recognition provides the corporation with various rights and protections, including the ability to enter into contracts, sue and be sued, and own property.

Question 5

For a corporate charter to be obtained,

Accepted Answer

To obtain a corporate charter, one or more persons must apply to the secretary of state for permission to incorporate.

Question 6

Millie has a sole proprietorship that is her only source of income.  What legal action should she take to prevent the business from being ruined if she becomes incapacitated?

Accepted Answer

Millie should give someone who is competent power of attorney to continue the business. This will allow the person to manage the business in her absence or incapacity while granting her the ability to resume control once she returns or is capable of doing so. This legal action will help ensure the continued success of the business without the need to change legal organization or sell the company. Stating what she would like done with the company in her will is not a suitable option as it does not provide any support to the business during her incapacity.

Question 7

Cameron is creating the document that specifies the size of the board, the duties of the directors, voting rights, etc.  This document is known as:

Accepted Answer

The document that specifies the size of the board, the duties of the directors, voting rights, etc. is known as the corporate bylaws. The partnership agreement outlines similar information but is for partnerships, not corporations. The employment contract pertains to individual employee agreements and the stock certificate represents an ownership interest in the corporation.

Question 8

Trevor is in his early 60s but still wants to "strike out on his own" by starting a new business.  One roadblock he may face is:

Accepted Answer

One potential roadblock for Trevor in starting a new business at his age is resistance from creditors to lend him money. Many lenders may view older individuals as higher risk borrowers due to their age and may be hesitant to provide loans without significant collateral or a proven track record of success. This can make it difficult for Trevor to finance his new venture and get it off the ground.

Question 9

Any person capable of ____ may legally become a business partner.

Accepted Answer

The ability to enter into contracts is essential for becoming a business partner, as it involves legal agreements and obligations.

Question 10

A corporate charter should be:

Accepted Answer

A corporate charter should be broad in the statement of the firm's power, indicating what the corporation can do, rather than being overly specific and restrictive. While it should be detailed, lengthy and precise, option C best reflects the overall purpose and scope of a corporate charter. The founder may be involved in preparing the charter, but it should involve input from multiple stakeholders and legal professionals.

Question 11

What legal form has the smallest percentage of new businesses?

Accepted Answer

C corporations require more formalities and paperwork than other legal forms, which can be intimidating for new business owners. The process to form a C corporation is also more complex and expensive than other forms, leading fewer entrepreneurs to choose it as their legal structure.

Question 12

As she considered becoming a partner in a new business venture, Valerie asked her potential partner about a(n) ___________ in the event that the partnership did not work out as expected.

Accepted Answer

An exit strategy is a plan for how a business partner or investor will exit their investment in the company. This can include selling their shares, buying out other partners, or even dissolving the partnership entirely. It is important for business partners to agree on an exit strategy before entering into a partnership to ensure that everyone is on the same page and has a clear understanding of what will happen if the partnership does not work out.

Question 13

Zeno, Zella, and Zorro wish to form a partnership.  Zeno is putting up 60% of the capital; Zella is putting up 40%, and Zorro is putting in no capital but will manage the business.  In the absence of a provision in the partnership agreement, how will the liability and profits be distributed?

Accepted Answer

The answer of Zeno, Zella, and Zorro wish to form...

Question 14

Becky wants to organize her startup as a regular corporation.  One of the first steps Becky should take is:

Accepted Answer

The answer of Becky wants to organize her startup as...

Question 15

Which group best defines a partnership?

Accepted Answer

A partnership is a business structure in which two or more individuals voluntarily join together for the purpose of conducting a business for profit. Option A describes a sole proprietorship, Option C describes a board of directors, and Option D describes a limited liability company (LLC).

Question 16

Which entity is liable for a corporation's debts?

Accepted Answer

The corporation itself is a legal entity that is separate from its owners (stockholders) and its managers (board of directors and president). Therefore, it is the corporation and not its owners or managers that is liable for its debts. This principle is often referred to as limited liability, which means that the owners and managers are not personally responsible for the corporation's obligations beyond their initial investment (for stockholders) or contractual agreements (for managers).

Question 17

The legal document that spells out the partners' rights and duties is called the

Accepted Answer

The partnership agreement is a legal document that outlines the terms of the partnership, including the rights and duties of each partner. The articles of incorporation apply to a corporation, not a partnership. The partnership by-laws may exist but are less important than the partnership agreement. The SS-4 form is used to obtain an Employer Identification Number (EIN) for tax purposes and is not related to the partnership agreement.

Question 18

A corporate charter should:

Accepted Answer

The answer of A corporate charter should:
...

Question 19

If partners cannot resolve disputes between themselves they may be wise to hire a(n):

Accepted Answer

Hiring a business mediator can help partners resolve disputes through facilitated communication and negotiation. Arbitration involves a third party making a binding decision, while a business judge is not a common option. A business attorney may help with legal advice but may not be as effective in resolving disputes as a mediator.

Question 20

Upton was surprised to find his partner had signed an agreement to sell product to a customer at below cost.  He tried to cancel the contract but found out that:

Accepted Answer

In a partnership, any partner can legally bind the company in contract without the consent of the other partners, as each partner acts as an agent of the partnership. This means that decisions made by one partner regarding business deals or contracts are legally binding on all partners and the partnership as a whole.

Quiz 8: The Organizational Plan Teams Legal Structures Alliances and Directors

Abby, Adam, and Arnold are partners. They have planned to continue the partnership even after the death of any one partner. To this end, the partners have:

Which legal form allows owners to contribute no capital but still play a part in managing the business and share in its profits?

A key characteristic of a partnership is that each partner

A corporation:

For a corporate charter to be obtained,

Millie has a sole proprietorship that is her only source of income. What legal action should she take to prevent the business from being ruined if she becomes incapacitated?

Cameron is creating the document that specifies the size of the board, the duties of the directors, voting rights, etc. This document is known as:

Trevor is in his early 60s but still wants to "strike out on his own" by starting a new business. One roadblock he may face is:

Any person capable of ____ may legally become a business partner.

A corporate charter should be:

What legal form has the smallest percentage of new businesses?

As she considered becoming a partner in a new business venture, Valerie asked her potential partner about a(n) ___________ in the event that the partnership did not work out as expected.

Zeno, Zella, and Zorro wish to form a partnership. Zeno is putting up 60% of the capital; Zella is putting up 40%, and Zorro is putting in no capital but will manage the business. In the absence of a provision in the partnership agreement, how will the liability and profits be distributed?

Becky wants to organize her startup as a regular corporation. One of the first steps Becky should take is:

Which group best defines a partnership?

Which entity is liable for a corporation's debts?

The legal document that spells out the partners' rights and duties is called the

A corporate charter should:

If partners cannot resolve disputes between themselves they may be wise to hire a(n) :

Upton was surprised to find his partner had signed an agreement to sell product to a customer at below cost. He tried to cancel the contract but found out that: