Deck 9: The Organizational Plan

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

The entrepreneur should decide on the legal form of organizing the new venture before asking for venture capital. 

Question 8

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

Question 9

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

Question 10

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

Question 11

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 12

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

Question 13

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

Question 14

Transferability of interest is easiest in a limited partnership. 

Question 15

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

Question 16

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

Question 17

The corporation can be created only by statute. 

Question 18

One common problem,and a significant reason for many new venture failures,is the entrepreneur thinks they can do everything and is unwilling to give up responsibility to others. 

Question 19

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

Question 20

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

Question 21

The S corporation cannot have more than 75 shareholders. 

Question 22

The S corporation can deduct most fringe benefits for shareholders. 

Question 23

When entrepreneurs are unwilling to give up responsibility to others,it becomes difficult to transition from a start-up to a growing,well-managed business. 

Question 24

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

Question 25

In 2018,all C Corporations receive a permanent tax cut from 35 percent to 21 percent. 

Question 26

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

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 the only form of organization that allows members to share liability. 

Question 29

Corporations are not able to distribute profits to shareholders. 

Question 30

Corporations distribute profits primarily through dividends. 

Question 31

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

Question 32

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

Question 33

The entrepreneur has no control over how the informal structure evolves. 

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

The limited liability company is automatically taxed as a corporation. 

Question 39

Design decisions reflect the formal structure of the organization and the informal structure is the organization culture that evolves over time. 

Question 40

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

Question 41

In which form of organization does the owner have greatest control  

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

Question 42

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 43

With the new tax laws passed in 2017: 

A) all C Corporations receive a permanent tax cut from 35 percent to 21 percent.
B) all S Corporations receive a permanent tax cut from 35 percent to 21 percent.
C) all C Corporations receive a temporary tax cut from 35 percent to 21 percent.
D) all S Corporations receive a temporary tax cut from 35 percent to 21 percent.

Question 44

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

Question 45

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

Question 46

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 47

Which type of ownership is the least expensive to start  

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

Question 48

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 49

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 50

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 51

Recent tax changes for pass through businesses such as proprietorships,S-Corps,LLC's,and partnerships are permanent changes to the tax structure. 

Question 52

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

Question 53

________ have unlimited liability for the actions of the business. 

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

Question 54

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

Question 55

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 56

Which type of ownership is the most expensive to start  

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

Question 57

Which of the following types of ownership has the most continuity  

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

Question 58

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

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

Question 59

Sole proprietorships: 

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

Question 60

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

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

Question 61

With the new tax laws passed in 2017,all pass through businesses receive: 

A) a permanent 20 percent reduction of their business income.
B) a permanent 35 percent reduction of their business income.
C) a temporary 35 percent reduction of their business income.
D) a temporary 20 percent reduction of their business income.

Question 62

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 63

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 64

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 65

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 66

Which of the following statements is true  

A) Both the S corporation and the LLC has shareholders.
B) The S corporation is limited to 75 shareholders.
C) Venture capitalists desire the limited liability company.
D) Owners of an LLC are paid as employees and participate in employee benefits.

Question 67

Which of the following combines the tax advantages of the partnership and the corporation

A) An LLC
B) A proprietorship
C) A C Corporation
D) An S Corporation

Question 68

All the design decisions involving personnel and their roles and responsibilities reflect the ________ structure of the organization. 

A) social
B) formal
C) tax
D) informal

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

A ________ can raise capital through bonds,stock and debt. 

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

Question 71

Corporations distribute profits to owners through: 

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

Question 72

The ________ is a special type of corporation where profits are distributed to stockholders and taxed as personal income. 

A) LLC
B) partnership
C) S corporation
D) proprietorship

Question 73

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 74

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 75

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 76

A company has a formal structure and an informal structure which evolves over time.This informal structure is a company's: 

A) culture.
B) business plan.
C) legal business form.
D) board of advisors.

Question 77

The 2017 tax changes for all pass through businesses: 

A) are permanent changes.
B) expire in 2025
C) expire in 2020
D) expire in 2035

Question 78

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 79

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.

Question 80

The standard term of a limited liability company is: 

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