Chapter 6-7

Individuals who make contributions to _____ will receive a tax-deduction, making it easier for these organizations to raise funds from donations.

nonprofit corporations

Stockholders are _____ of a corporation. They have the right to vote on issues affecting the operation of the business.

owners

A key advantage of a corporation is that

the owners maintain limited liability

A possible drawback when buying an existing business is that

you may inherit the mistakes made by the previous owner

_____ are wealthy individuals who invest in new and growing firms.

Angel investors

Dana is thinking about starting her own graphics design business but is keenly aware of the fact that she lacks much business experience. A friend suggested that she consider going to work for a successful graphics design firm before going out on her own. This advice is

a good idea, because it allows you to learn the ins and outs of running that type of business with little personal risk. Keep in mind that if you work for someone else too long, you might get too comfortable in your position to follow through with your plans.

Which of the following is true about the SBA?

They offer microloans through community nonprofits

A corporation must register as a _____ in every state in which it operates other than its state of incorporation.

foreign corporation

Entrepreneurs who find new solutions to old problems and develop new products that people didn't even realize they needed are said to have

vision

Greg has developed an automobile engine that runs efficiently for up to three hours on a single russet potato. His friends have pointed out how difficult it will be to get car manufacturers to adopt his new technology and that it could take years to get enough service stations to stock potatoes to make it practical for people to rely on the new energy source for long trips. However, Greg is convinced he can make the U.S. economy energy independent, thus changing the world. He plans to create a new business called Spuds-to-Go to promote his new engine. Greg has

vision

One characteristic many successful entrepreneurs share includes

vision

A recent survey claims that half of all start-ups are funded _____, even though this source can result in very high financing costs

with credit cards

In most states, the document that owners must file in order to form a corporation is referred to as the

Articles of incorporation

Walmart, ExxonMobil, Intel, and virtually all other large companies in the U.S. are organized as

C corporations

Sixty-three percent of Fortune 500 firms have filed articles of incorporation in the state of

Delaware

Which of the following is NOT a significant drawback of getting into business by entering into a franchise arrangement?

Franchising is generally considered to be the riskiest option for starting a business

Raphael bought an established business a couple of years ago. As time marched on, he realized he inherited some mistakes from the deceased previous owner's estate, and now must make some tough decisions. What would an entrepreneur do?

He would realize that inheriting old mistakes is one of the key drawbacks of buying an existing business, so he would make the necessary changes and move ahead.

_____ are organizations, such as mutual funds, insurance companies, or pension funds, that pool contributions from a large number of investors, clients, or depositors to buy stock and other securities

Institutional investors

Identify the entrepreneur.

Jill holds a BS in business and another in landscape architecture. While she works at a coffee shop to make ends meet, she cannot stop herself from staying up late into the night researching the landscape architecture industry and making a strategy.

The _____ is the federal government agency dedicated to maintaining and strengthening the national economy by aiding, counseling, assisting, and protecting the interests of small business.

Small Business Administratio

Sheila loves taking care of animals and has thought about starting her own pet grooming business. However, she doesn't know much about the growth potential for this type of business or the amount of competition she would face. She also wants to find out if there are any government regulations she would need to follow. A good starting point to help her find answers to her questions is to contact the

Small Business Administration

_____ are local offices affiliated with the Small Business Administration that provide comprehensive management assistance to current and prospective small business owners.

Small Business Development Centers

_____ would be most likely to help you develop a business plan.

The Small Business Administration

What is the role of the board of directors?

They are elected by the stockholders and serve to manage the big picture elements of the company. They in turn appoint executives to handle daily concerns

The primary reasons people become entrepreneurs include all of the following EXCEPT the desire to

achieve an external locus of control.

You are in a group of investors that is considering taking over Sips and Chips, the cybercafé in town. Several investors favor reorganizing the cafe by forming a C corporation. You want to make sure these investors are aware of the possible drawbacks of this form of ownership, so you point out that

after-tax earnings that the investors receive would be taxed both as corporate income and as income to the investors.

Cynthia is a successful business woman who has amassed a large amount of money by investing in companies with the potential for rapid growth. Later, these companies are either bought by other investors or they go public and offer stock to the public. While she is excited about the possibility of helping these businesses grow, her primary motivation is to make money for herself. Cynthia matches the profile of a(n):

angel investor

All of the following are entrepreneurial characteristics, EXCEPT

aversion to risk

Stockholders in a corporation elect the _____ to oversee the operation of the company and ensure that their interests are protected.

board of directors

Burger King, McDonald's, Wendy's, and Hardee's are examples of

business franchising.

A _____ is a legal entity created by permission of a state or federal government

corporation

In the United States, _____ are the dominant form of business ownership in terms of net income.

corporations

Which of the following strategies are recommended for small business owners to succeed over the long term?

develop a business plan, gain experience, educate yourself, and learn from others

Benny's Bumpers is incorporated in Ohio but also conducts business in Florida. Benny's Bumpers is a _____ in Ohio but is a _____ in Florida.

domestic corporation; foreign corporation

Mary Kate wants to start a business. She takes a personality test at school and discovers she possesses a trait that may reduce the likelihood she will succeed. Which of the following traits does Mary Kate likely possess that will increase her risk of being successful at her own business?

external locus of control

Entrepreneurs with a strong internal locus of control tend to

feel that the success or failure of their companies are largely the result of their own actions and decisions.

Small business start-ups are likely to find that getting commercial loans is

hard to do, because commercial lenders are reluctant to make loans to firms that don't have an established record of successful performance.

Emily is a successful entrepreneur. As such, she is likely to

have a great deal of faith in her business ideas, even when others express doubts.

Small Business Development Centers

help small businesses develop their business plan and apply for loans

drawback of buying a franchise is

if the national chain suffers, so does the franchisee.

People with a(n) _____ have a strong sense of personal responsibility for what happens in their lives.

internal locus of control

Barney, a successful sales rep for a big corporation, has managed to save a large sum of money. He's tired of working for the big company and is contemplating sinking his savings into a new business. Although willing to work hard and put in long hours, he hasn't been able to develop a good business concept from scratch. He also realizes that he doesn't have strong financial skills and might need some training and assistance in this area. Someone like Barney

is likely to find franchising an attractive option

A statutory close (or closed) corporation gives its shareholders

limited liability and opportunities to participate in management

Qondile has a game-changer of an idea for electric power generation that will make solar, wind, nuclear, and petroleum totally obsolete as soon as it hits the market. The problem is, he needs money. He wants to retain control of the operation, given its potential. What should he do?

loan 100 percent of the start-up funding

The Small Business Administration offers a(n) _____ program, which lends small amounts of money to start-up businesses through community nonprofit organizations.

microloan

A funding source that makes it easier for entrepreneurs to get money with favorable terms is referred to as

peer-to-peer lending

Consumer Reports found 68% of an entrepreneur's start-up financing comes from

personal resources

Research suggests that many entrepreneurs fund their new business with

personal resources of the founder.

The majority of new small business owners rely heavily on _____ to finance their start-ups.

personal sources, including family, friends, and credit cards

A company must register as a foreign corporation if they

plan on doing business in another state

Will Gates founded a small biotech company in Portland, Oregon, in the '80s. After many years in business, he sold the company and decided to volunteer for the Service Corps of Retired Executives (SCORE). As a SCORE volunteer he will

provide free, comprehensive counseling for small businesses

Mike's Motorcycles, Inc., has operated for the last 20 years as a partnership. Recently, the partners agreed to change the structure of the business and decided to incorporate in Delaware. John Littleton, a partner, now becomes a

shareholder

Suzanne Limley was just elected to the board of directors at United Bank Corporation. As a board member, she is expected to represent the interests of

shareholders

Elaine and several friends want to start a business. They like the idea of limited liability. However, they want to keep their organization simple and avoid the need to have formal meetings. Each member of the group wants to actively participate in managing the business and share in any profits. Which of the following forms of business ownership would best satisfy the goals of Elaine and her friends?

statutory close corporation

Kerry Higgins believes his efforts will not have much impact, feels buffeted by forces such as luck, and feels no control over his own destiny. Harry has a

strong external locus of control

All of the following are duties of a company's board of directors EXCEPT

take an active role in the daily operations

When it comes to learning more about starting and running a small business,

the Small Business Administration, industry associations, blogs, and websites are only a few of the many sources that are available.

As a form of ownership, a disadvantage of general corporations is that

they are more expensive and complex to form than most other types of business