Chapter 9 LearnSmart

A ____ consist of individuals who have a fiduciary responsibility to the shareholders of an organization.

board of directors

What type of insurance can be purchased to cover losses from employee to embezzlement?

bonding

_____ insures businesses from damages caused by workers in the performance of their jobs.

bonding

In new corporations, the shareholders and board of ______ are often the same individuals.

directors

A board of ______ is required of corporations, but a board of ____ is optional regardless of the legal form.

directors; advisors

What is the initial value at which the firms shares are offered

par value

An important feature of a Subchapter C Corporation is that there are no limits to _______.

the number of shareholders that an organization can obtain.

Which law requires that there be no discrimination in the hiring, management or dismissal of employees with disabilities?

Americans with Disabilities Act

In recent years the ______ has become one of the most popular forms of incorporation for new businesses.

LLC

Which of the following incorporation formations are required to pay income tax which results in double taxation?

Subchapter C Corporations

A sole proprietorship is very popular among individuals who

-are unsure about their business idea -have a very small business -have a business where the costs and risks are low

Which of the following allow a new-business venture to mitigate the double taxation cost?

-corporation can pay owners salaries or bonuses -corporation can pay health insurance and other benefits to the owner -corporation can retain funds for future expansion

One disadvantage of the Subchapter S Corporation is the limitation to the number of shareholders, which is currently set at a maximum of ____ shareholders.

75

T or F: A Subchapter C Corporation treats fringe benefits that are paid out as income for employees.

False

T or F: Workers compensation insurance is considered a minor expense for a business.

False

Subchapter S and Subchapter C Corporations take their names from subchapters in the _______ Code.

Internal Revenue

________ are very inexpensive to form as this type of organization is formed by simply submitting the paperwork to a state government and having a charter issued prior to beginning operations.

Limited Liability Corporations

T or F: A limited liability corporation (LLC) is similar to a subchapter C corporation in that all of the information required is the same.

True

T or F: It is advisable for an entrepreneur to employ formal written contracts whenever there is an agreement with another party

True

A board of _____ is formed at the discretion of the founders and composed of individuals outside the business who advise the founders.

advisors

General and limited are two broad categories of _______.

partnership

Because it is expensive to obtain and maintain, a _____ should only be obtained if it contributes to the sustainable competitive advantage of the organization.

patent

A _____ patent is for a new process, machine, article of manufacture or composition of matter, or any new and useful improvement of those.

utility

Which of the following allow a new-business venture to migrate the double taxation cost?

-corporation can retain funds for future expansion -corporation can pay health insurance and other benefits to the owner -corporation can pay owners salaries or bonuses

Identify the similarities between general partnerships and sole proprietorships?

-expenses flow through to personal tax forms -profits or losses are reported as personal income

Which of the following is true regarding a board of advisors?

-the group is formed a the discretion of the founder -the group advises the founder on key issues -the group is composed of individuals outside the business

Besides sole proprietorships, which of the following business formations require the business debt to flow directly to the owner?

general partnership

Which type of insurance covers the building, fixtures and inventory in all of the buildings in which the business has a function?

property

Which class of partner in a limited partnership is considered the manager of the firm and has unlimited liability for any debts for judgements against the firm?

general

Similar to a sole proprietorship, which of the following business formations has the issue of unlimited liability by all the partners?

general partnership

Which type of business formation involves two or more individuals sharing unlimited liability in a business venture?

general partnership

Which of the following industries would be highly regulated by the government?

industries involving alcohol medical related industries military related businesses

The effective application of _____ is one means to limit liability concerns of the new venture.

insurance

Which of the following statements are true regarding the items in a contract?

it is not necessary to reveal any patents, trademarks or copyrights

Which type of insurance helps to protect the business against lawsuit judgements?

liability

Which of the following features of the LLC are similar to the features of the Subchapter S Corporation?

limited liability

Which type of business formation has at least two individuals who are partners in a venture but only one person declares a full pass through of all income on his or her federal taxes and assumes unlimited liability?

limited liability partnership