question

1. (T/F) Method Products, Inc is expected to surpass $110 million in sales in 2011.

answer

True

question

2. (T/F) Investors usually insist that the management team should not operate the business as a part-time venture.

answer

True

question

3. (T/F) Investors accept that the management team draws a large salary for their contributions in early operations.

answer

False, this looks bad on the management teams part

question

4. (T/F) The decision regarding the legal form of organization should be made by the entrepreneur before request for venture capital.

answer

True

question

6. (T/F) The corporation is considered a legal person that is taxable and absorbs liability.

answer

True

question

9. (T/F) The most expensive type of business to start is the partnership.

answer

False, it is the corporation

question

10. (T/F) In order for a corporation to be legally formed the owners have to register the name and articles of incorporation and meet statutory requirements.

answer

True

question

12. (T/F) In a partnership, the death of a general partner generally does not result in termination of the partnership.

answer

False, unless it is written in the partnership agreement it does

question

13. (T/F) The corporation has the most continuity of the forms of business.

answer

True

question

15. (T/F) In an LLP, the transfer of interest of one limited partner is typically not allowed.

answer

True

question

16. (T/F) In an S Corporation, ownership can be freely transferred as long as the buyer is an individual.

answer

True

question

18. (T/F) Sole proprietors can access two sources of capital- personal contributions from the entrepreneur and sale of stock.

answer

False, it's personal contributions from the entrepreneur and loans

question

20. (T/F) The sole proprietorship form of ownership gives the most control of business operations.

answer

True

question

21. (T/F) The limited partners in a venture share control of day-to-day operations with the general partners.

answer

False, Limited partners have no control of day-to-day operations.

question

24. (T/F) Corporations are not able to distribute profits to shareholders.

answer

False, they do it in the form of dividends

question

27. (T/F) Both partnerships and proprietorships serve as nontaxable conduits of income for their owners.

answer

True

question

30. (T/F) 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.

answer

True

question

32. (T/F) An S corporation combines the tax advantages of the partnership and the corporation.

answer

True

question

34. (T/F) The S corporation can deduct most fringe benefits for shareholders.

answer

True

question

36. (T/F) In a limited liability company, every member has limited liability.

answer

True

question

37. (T/F) The limited liability company is the only form of organization that allows members to share liability.

answer

False, corporations as well

question

38. (T/F) Shares of stock are issued to members of a limited liability company.

answer

False

question

40. (T/F) When hiring employees for the venture, the entrepreneur should consider the candidate's skills and abilities and avoid considering the individual's personality.

answer

False, personality is important

question

43. (T/F) The board of directors should be an even number of members.

answer

False, an odd number is better to avoid deadlock votes.

question

44. (T/F) A board of advisors has less decision making authority than a board of directors does.

answer

True

question

46. 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.

answer

a) they were both unhappy in their jobs

question

48. ____ have unlimited liability for the actions of the business. a)Limited liability company members b) Corporate shareholders c) General Partners d) Limited Partners

answer

c) General Partners

question

50. Liability is one of the most critical reasons for establishing a: a) limited liability company b) corporation c) partnership d) sole proprietorship

answer

b) corporation

question

52. Which type of ownership is the least expensive to start? a) corporation b) general partnership c) limited partner d) sole proprietorship

answer

d) sole proprietorship

question

53. Which type of ownership is the most expensive to start? a) corporation b) general partnership c) limited partner d) sole partnership

answer

a) corporation

question

55. 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 to take over as a partner

answer

a) have no time limit on how long they may exist

question

57. 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

answer

c) only as long as the buyer is an individual

question

59. Bonds can be used to raise capital in which form of ownership? a) sole proprietorship b) limited partnership c) general partnership d) corporation

answer

d) corporation

question

60. In which form of organization does the owner have greatest control? a) sole proprietorship b) limited partnership c) general partnership d) corporation

answer

a) sole proprietorship

question

62. 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

answer

d) corporation

question

64. A(n)___ can raise capital through bonds, stock, and debt. a) sole proprietorship b) partnership c) corporation d) LLP

answer

c) corporation

question

65. 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

answer

b) not amortizable

question

67. Which form of organization has time limits on writing off capital losses? a) partnership b) corporation c) sole proprietorship d) LLP

answer

b) corporation

question

69. 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

answer

c) bonuses, incentives, and profit sharing are allowable ways to distribute income of the corporation

question

70. Which of the following ways of distributing the income of corporations is taxed twice? a) bonus b) salary c) profit sharing d) dividends

answer

d) dividends

question

71. 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 venture and small businesses.

answer

b) is automatically taxed as a partnership

question

72. 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

answer

d) the corporation pays no tax

question

73. 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.

answer

d) most fringe benefits for shareholders can be deducted.

question

74. 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, expenses, deduction, loss, and credit among themselves d) owners are called shareholders

answer

b) members may transfer their interests at any time

question

75. The standard term of a limited liability company is: a) 15 years b) 20 years c) 25 years d) 30 years

answer

d) 30 years

question

77. 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

answer

a) putting out fires

question

79. 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.

answer

d) must create a workplace where communication from the top-down is encouraged.

question

81. A board of directors should not: a) have members with unlimited terms b) have an odd number of members c) be comprised of external advisors d) be compensated with anything other than stock

answer

a) have members with unlimited terms

question

83. The difference between a board of directors and a board of advisors is that: a) a board of advisors meets less frequently b) a board of directors lacks voting authority c) a board of directors is subject to less pressure of litigation d) a board of advisors is compensated

answer

a) a board of advisors meets less frequently

question

85. According to Cythia Kocialski, and advisory board should have: a) 2 members b) 4 members c) 6 members d) 8 members

answer

c) 6 members

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