Deck 11: Addressing Legal Issues and Managing Risk

Question 1

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) It can be costly.

Answer 1

A

Question 2

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

A) negotiation
B) coercion
C) arbitration
D) small claims

Answer 2

C

Question 3

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

A) trade associations
B) charitable foundations
C) churches
D) book stores

Answer 3

D

Question 4

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) Both A and B.

Question 5

Why are contracts useful to business owners?

Question 6

The limited liability company (LLC) combines the best features of partnerships and corporations and can be an excellent choice for small business with a limited number of owners.

Question 7

A(n) ________ is an agreement between two or more parties that is enforceable by law.

A) trust
B) contract
C) understanding
D) None of the above.

Question 8

Tax-exempt, nonprofit corporations ________.

A) cannot make a profit
B) do not have legal liability
C) are set up with a specific mission to improve society
D) pay dividends more often than for-profit corporations

Question 9

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) disasters

Question 10

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

A) limit of liability
B) statute of legal obligations
C) statute of limitations
D) None of the above.

Question 11

Contract drafting and review is something the business owner can do and should do using law books at the local library.

Question 12

How is a legal entity, such as a corporation, similar to a person? If you owned a business, why might you want it to be incorporated?

Question 13

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

A) taxed only once
B) always high
C) taxed twice
D) taxed three times

Question 14

In a corporation, all profits go to ________.

A) reduce the surplus
B) the owners and the shareholders
C) the stockholders as salaries
D) the partners according to the terms of the agreement

Question 15

In limited liability companies ________.

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

Question 16

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

A) 75
B) 50
C) 100
D) 250

Question 17

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

A) arbitration
B) motion
C) mediation
D) lawsuit

Question 18

Compare the legal structure implications of a sole proprietorship and a Subchapter S Corporation for the seven parameters of 1) ownership, 2) liability, 3) taxation issues, 4) profit distribution, 5) voting on policy, 6) life of the legal structure, and 7) capitalization.

Question 19

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) a large business
D) if it were its owners and employees

Question 20

________ are the building blocks of business.

A) Letters of agreements
B) Contracts
C) Personal relationships
D) Customer services

Question 21

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) $240,000 less co-payment

Question 22

Obtain a trademark in order to ________.

A) protect your logo
B) register your business name
C) protect all your intellectual property
D) protect your business name

Question 23

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

A) liability insurance
B) business insurance
C) casualty insurance
D) an umbrella policy

Question 24

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

A) Negligence
B) Errors and omissions
C) Product liability
D) Casualty

Question 25

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

A) sales mark
B) trademark
C) service mark
D) intellectual property

Question 26

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

A) Short-term disability
B) Disability
C) Injury
D) Worker's compensation

Question 27

Of the three types of bankruptcies, Chapter 7 or Liquidation is the best choice to take.

Question 28

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

Question 29

Explain the three types of insurance most states require business owners to carry.

Question 30

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) zoning

Question 31

________ 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/carrying cost
B) Insurance/premium
C) Insurance/dividend
D) Insurance/maintenance fee

Question 32

A low deductible will yield a ________.

A) lower premium
B) higher coverage plan
C) has no impact on the premium
D) higher premium

Question 33

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

A) patent
B) electronic right
C) trademark
D) copyright

Question 34

Permits, licenses, or certificates may be required for your business. Local, county, and state government offices, as well as chambers of commerce, are good places to contact for this information.

Question 35

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

A) license
B) certificate
C) permit
D) entitlement

Question 36

Infringement of intellectual property is ________.

A) a business tactic
B) a crime
C) profitable
D) legal in some states

Question 37

You do not need a patent unless you ________.

A) have invented a product that you intend to market yourself or sell to a manufacturer
B) believe that someone else could successfully sell the product by copying your invention
C) Both of the above.
D) None of the above.

Question 38

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) co-insurance

Question 39

A copyright protects a songwriter, author, or visual artist. It keeps someone else from copying or appropriating the work.

Question 40

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

A) you can sell your invention publicly without paying the U.S. Patent Office
B) anyone can manufacture your invention and profit from selling it without paying you
C) you can sell the right to manufacture the invention
D) you can save a lot of money