Deck 16: Addressing Legal Issues and Managing Risk

Question 1

If you purchase $250,000 worth of insurance to protect your restaurant, with a $10,000 deductible, how much money are you entitled to receive as a payout if a fire destroys your store, which is valued at $250,000?

A) $240,000
B) $10,000
C) $250,000
D) $350,000
E) $290,000

Answer 1

A

Question 2

The four "A's" of a successful contract include: ________.

A) Avoid misunderstanding and assure work
B) Assure payment and avoid liability
C) Assess risk and analyze profit
D) Assume parties will abide by the contract
E) Both A and B

Answer 2

E

Question 3

________ insurance is designed to cover in the event that a business's (its employees') failure to do something that causes harm to a customer.

A) Errors and omissions
B) Negligence
C) Product liability
D) Workers Comp
E) Flood

Answer 3

A

Question 4

The time period in which legal action may be taken is the ________.

A) Statute of limitations
B) Statute of legal obligations
C) Limit of liability
D) Limit of collection
E) None of the above

Question 5

Some contracts specify that conflicts may be settled through ________ instead of court.

A) Arbitration
B) Negotiation
C) Coercion
D) Litigation
E) None of the above

Question 6

The number of stockholders in a Subchapter S Corporation is limited to ________.

A) 100
B) 50
C) 250
D) 12
E) 25

Question 7

Infringement of intellectual property is ________.

A) A crime
B) Profitable
C) A business tactic
D) Commonplace
E) Acceptable

Question 8

An injured party whose rights in a contract have been breached can bring a ________ against the other party.

A) Lawsuit
B) Motion
C) Mediation
D) Judgment
E) Claim

Question 9

________ protects people from having property or wealth stolen, lost, or destroyed. There are many kinds, and in order to purchase it you pay a monthly, quarterly, or annual ________.

A) Insurance, premium
B) Insurance, dividend
C) Insurance, carrying cost
D) Protection, dividend
E) Coverage, carrying cost

Question 10

A good contract will spell out ________, or unforeseeable "acts of God" beyond anyone's control, for which neither party is responsible.

A) Contingencies
B) Liabilities
C) Amendments
D) Alterations
E) Modifications

Question 11

The form of protection offered under U.S. law to the authors of "original works of authorship" is a(n) ________.

A) Copyright
B) Electronic right
C) Patent
D) Right
E) Charter

Question 12

A low deductible will yield a ________.

A) Higher premium
B) Lower premium
C) The deductible has no impact on the premium.
D) Disaster
E) Savings in all cases

Question 13

Federal, state and local ________ may apply to a business and may affect what it can do, how it can do it, and when and where it can operate.

A) Regulations
B) Grants
C) Taxes
D) All of the above
E) None of the above

Question 14

Which of the following is not necessary for a contract to be binding?

A) Signing parties must have their signatures notarized.
B) Signing parties must exchange something of value or agree not to do something they are legally entitled to do.
C) Both parties must sign the contract.
D) Witnesses must be present.
E) All of the above

Question 15

In a corporation, all profits go to ________.

A) The owners and the shareholders
B) Reduce the surplus
C) The stockholders as salaries
D) The partners according to the terms of the agreement
E) Friends and family

Question 16

________ are the building blocks of business.

A) Contracts
B) Personal relationships
C) Letters of agreements
D) Networks
E) Loans

Question 17

You do not need a patent unless you ________.

A) Believe that someone else could successfully sell the product by copying your invention
B) Have invented a product that you intend to market yourself or sell to a manufacturer
C) Both A and B
D) Want to get sued
E) None of the above

Question 18

What is used to identify and distinguish the source of a service rather than a product?

A) Service mark
B) Trademark
C) Sales mark
D) All of the above
E) None of the above

Question 19

The main disadvantage of corporations is that corporate income is ________.

A) Taxed twice
B) Always high
C) Taxed only once
D) All of the above
E) None of the above

Question 20

Obtain a trademark in order to ________.

A) Protect your logo
B) Protect all your intellectual property
C) Register your business name
D) Pay your taxes
E) Get new customers

Question 21

Which of the following are not usually not-for-profit organizations?

A) Book stores
B) Trade associations
C) Charitable foundations
D) Churches
E) Educational institutions

Question 22

A ________ is the amount of loss or damage that you agree to cover before any insurance coverage takes over.

A) Deductible
B) Carrying cost
C) Premium
D) Policy
E) Liability

Question 23

If you invent something and don't patent it, it falls into the public domain, meaning that ________.

A) Anyone can manufacture your invention and profit from selling it without paying you
B) You can sell the right to manufacture the invention
C) You can sell your invention publicly without paying the U.S. Patent Office
D) All of the above
E) None of the above

Question 24

To protect against lawsuits brought by anyone injured by your product, you will need to buy ________.

A) Liability insurance
B) Casualty insurance
C) Business insurance
D) Life insurance
E) Fire insurance

Question 25

Corporations are considered to be legal persons or entities.

Question 26

In limited liability companies ________.

A) Income is taxed only once, as the personal earnings of members
B) Income is taxed twice, corporately and personally
C) Personal assets of the owners are left legally unprotected
D) Income is never taxed
E) Income is overtaxed

Question 27

Bankruptcy is the legal process in which an individual or business declares the inability or impaired ability to pay debts as they come due.

Question 28

A ________ is an official document that gives you the right to carry out a specific activity, such as an outdoor Festival.

A) Permit
B) Certificate
C) Warrant
D) License
E) Pass

Question 29

It is not necessary to have an attorney look at a contract prior to signing it.

Question 30

A copyright is the form of legal protection offered under U.S. law to the authors of "original works of authorship," including literary, dramatic, musical, and artistic works.

Question 31

A service mark is inferior to a trademark.

Question 32

The Limited Liability Company combines the worst features of partnerships and corporations and can be a poor choice for small businesses with a limited number of owners.

Question 33

Work-made-for-hire means you are giving up the rights to your work.

Question 34

When putting together a contract, clearly state everything that will be done by all parties, even what is obvious.

Question 35

________ insurance compensates employees for loss of income and for medical expenses due to job-related injuries.

A) Worker's compensation
B) Injury
C) Disability
D) Liability
E) Life

Question 36

Corporations may not issue stock to raise money.

Question 37

Every corporation is recognized and treated under the law as ________.

A) An entity, much like a person, that has expenses and earnings
B) A small business
C) If it were its owners and employees
D) A large business
E) A stockholder

Question 38

A 501(c)(8) is a tax-exempt legal structure that can receive charitable donations from individuals, businesses, the government, and philanthropic foundations.

Question 39

Which is not a potential penalty for breaking a contract?

A) You may lose a share of the ownership of your business to the other party who signed the contract.
B) You may be sued in a court of law by the other party who signed the contract.
C) A court may order you to pay damages to the other party who signed the contract.
D) All of the above.
E) None of the above.

Question 40

Tax-exempt, nonprofit corporations ________.

A) Are set up with a specific mission to improve society
B) Do not have legal liability
C) Pay dividends more often than do for-profit corporations
D) Do not have boards of directors
E) Pay more taxes than do other entities

Question 41

A partnership consists of two or more owners who make the decisions for the business together and share the profits, losses, assets, and liabilities.

Question 42

Why are contracts useful to business owners?

Question 43

What is the Law of Agency?

Question 44

How is a legal entity, such as a corporation, similar to a person?

Question 45

Product liability insurance covers the risks in case your product harms someone.

Question 46

The power of a contract is that, once the individuals or other entities involved have signed it, they are obligated to comply with its terms and conditions or risk being sued and penalized according to the contract terms, or in a court of law.

Question 47

An advantage of sole proprietorship is that it is an easy form of business to start.

Question 48

A contract can protect you, regardless of whether you trust the person or not.

Question 49

Explain the difference between a copyright and a trademark and how each is useful.

Question 50

What is a Subchapter S corporation?