MGMT 310 Exam 2 (7)

Which of the following statements about limited partnerships is incorrect?

D) Both the limited partners and the general partners are responsible for the debts and obligations of the partnership.

Large firms like Apple, Facebook, General Electric, and Microsoft, that trade on organized stock exchanges, are ________.

D) C corporations

Corporations are organized as either ________ corporations or ________ corporations.

D) C; subchapter S

Which of the following statements is incorrect regarding sole proprietorships?

D) Liquidity of the investment is high.

_______ are a special form of incentive compensation. These plans provide employees the option or right to buy a certain number of shares of their company's stock at a stated price over a certain period of time.

D) Stock options

Partnerships are organized as either ________ or ________ partnerships.

D) general; limited

Which of the following statements is incorrect regarding common stock?

A) Common stock is issued more narrowly than preferred stock.

Which of the following is a disadvantage of a C Corporation?

A) Income is subject to double taxation.

Which of the following is typically not included in the founders' agreement for a firm?

A) Marketing plan

Which of the following statements regarding business licenses and permits is incorrect?

A) Most business licenses and permits can wait until after a business is launched to be obtained.

Which of the following is not one of the standards that a business must meet to qualify for status as a subchapter S corporation?

A) The business must be a subsidiary of another corporation.

A code of ________ is a formal statement of an organization's values on certain ethical and social issues.

A) conduct

A disadvantage of C corporations is that they are subject to ________, which means that a corporation is taxed on its net income and when the same income is distributed to shareholders in the form of dividends it is taxed again on shareholders' personal income tax returns.

A) double taxation

Which of the following is not one of the four factors identified in the textbook as critical in selecting a form of business ownership?

C) Accounting considerations

Which of the following is true regarding common and preferred stock?

C) Common stock is issued more broadly than preferred stock.

In which form of business ownership are the owners called "members"?

C) limited liability company

A subchapter S corporation combines the advantages of a partnership and a C corporation.

True

An ethical dilemma is a situation that involves doing something that is beneficial to oneself or the organization, but may be unethical.

True

Which form of business ownership is a particularly poor choice for an aggressive entrepreneurial firm?

B) Sole proprietorship

A disadvantage of a sole proprietorship is that it is subject to double taxation.

False

essica Marsh just took a job with Instagram. As part of her employment contract, Jessica signed an agreement that states that he will not disclose any of Instagram's trade secrets. The agreement that Jessica signed is called a(n) ________ agreement.

A) nondisclosure

A(n) ________ agreement binds an employee or another party to not disclose a company's trade secret. A ________ agreement prevents an individual from competing against a former employer for a specific period of time.

A) nondisclosure; noncompete

A(n) ________ details the responsibilities and the ownership shares of the partners involved with an organization.

A) partnership agreement

The simplest and most common form of business entity is the ________.

A) sole proprietorship

A ________ combines the advantages of a partnership and a C corporation.

A) subchapter S corporation

Which of the following is an advantage of a C Corporation?

B) Stock is liquid if traded on a major stock exchange.

The What Went Wrong? feature in Chapter 7 focuses on Fitbit. Fitbit makes wearable activity trackers that measure data such as number of steps walked, quality of sleep, and other personal metrics. The feature centered on a product that Fitbit made (the Fitbit Force) that caused some users to develop skin rashes. The ethical issue at stake was whether Fitbit ________.

B) acted quickly enough in stopping production of the product

Most founders' agreements include a ________ clause, which legally obligates the departing founder to sell to the remaining founders his or her interest in the firm if the remaining founders are interested.

B) buyback

Most C corporations have two classes of stock— ________ and ________.

B) common; preferred

A ________ partnership is a modified form of a general partnership.

B) limited

All of the following are advantages of a sole proprietorship except ________.

B) unlimited liability

Which of the following is the most important thing that an entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization?

C) Lead by example

_______ stock is typically issued to conservative investors who have preferential rights over common stockholders in regard to dividends and to the assets of the corporation in the event of liquidation.

C) Preferred

Which of the following is not an advantage of a general partnership?

C) The liquidity of each partner's investment is low.

A situation that involves doing something that is beneficial to oneself or the organization, but may be unethical, is called a(n) ________.

C) ethical dilemma

A(n) ________ is a written document that deals with issues such as the relative split of the equity among the founders of the firm, how individual founders will be compensated for the cash or the "sweat equity" they put into the firm, and how long the founder will have to remain with the firm for their shares to fully vest.

C) founders' agreement

The ________ is a form of business organization that is rapidly gaining popularity in the United States. The concept originated in Germany and was first introduced in the United States in the state of Wyoming.

C) limited liability company

Corporations that trade their stock on organized exchanges like the New York Stock Exchange and the NASDAQ are called ________ corporations.

C) public

According to the textbook, ________ are common in real estate development, oil and gas exploration, and motion picture ventures.

D) limited partnerships

Steven Diaz just took a job with Harley Davidson. As part of his employment agreement, Harley Davidson required Steven to sign an agreement, which states that if he leaves Harley Davidson, he will not work for a firm that competes against Harley Davidson for at least two years. The agreement that Steven signed is called a ________ agreement.

D) noncompete

If the owners of a corporation don't file their annual paperwork, neglect to pay their annual fees, or commit fraud, a court could ignore the fact that a corporation has been established and the owners could be held personally liable for the actions of the corporation. This chain of events is referred to as ________.

D) piercing the corporate veil

_______ is the process in which an impartial third party helps those involved in a dispute reach an agreement.

E) Mediation

A corporation is formed by filing ________ with the Secretary of State's office in the state of incorporation.

E) articles of incorporation

In a ________ corporation, the voting stock is held by a small number of individuals and is very thinly or infrequently traded.

E) closely-held

A separate legal entity organized under the authority of a state is referred to as a ________.

E) corporation

Most businesses that plan to use a fictitious name, which is any name other than the business owner's name, need a(n) ________ permit.

E) fictitious business name

A ________ sets forth the rights and duties of the general and limited partners, along with the details of how the partnership will be managed and eventually dissolved.

E) limited partnership agreement

Choosing a legal entity for a firm is a one-time event. Once a form of legal entity has been chosen, it cannot be changed.

False

Corporations are organized as either C corporations, T corporations, or subchapter S corporations.

False

Few entrepreneurial firms start as subchapter S corporations.

False

It is important for an entrepreneur to select an attorney as late as possible when developing a business venture.

False

The idea that it's important to get "everything in writing" in regard to business agreements causes unnecessary work and can lead to an erosion of trust between business partners.

False

The limited liability corporation is a form of business organization that is rapidly losing popularity in the United States.

False

The most important thing that any entrepreneur, or team of entrepreneurs, can do to build a strong ethical culture in their organization is to hire an aggressive attorney.

False

The vast majority of corporations in the United States are public corporations.

False

Very few businesses require licenses and permits to operate.

False

A disadvantage of a general partnership is that the liquidity of each partner's investment is low.

True

A founders' agreement is a written document that deals with issues such as the relative split of the equity among the founders of the firm.

True

It is usually easier for a corporation to raise investment capital than a sole proprietorship or a general partnership because the shareholders are not liable beyond their investment in the firm.

True

Mediation is the process in which an impartial third party helps those involved in a dispute reach an agreement.

True

Stock options are a special form of incentive compensation.

True

The major difference between a general and a limited partnership is that a limited partnership includes two classes of owners-general and limited partners.

True

The single most important thing the founders of an entrepreneurial venture can do to avoid ethical misconduct is to establish a strong ethical culture for their firms.

True

noncompete agreement prevents an individual from competing against a former employer for a specific period of time.

True