Small Business Management

In family businesses, the process of preparing for the orderly transfer of the owner's equity when death occurs is known as

estate planning

To make the transition of a family business easier, the owner-manager of the business should _____.

expand his or her skills and experience

True or false: For succession to be effective in a family business, the next generation primarily needs the capability to handle the business rather than education or certification.

False

According to the findings of a survey, identify the concerns that make succession a problem for family businesses. (Check all that apply.)

Family communication The responses of nonfamily employees

Jemima is the manager of a real estate firm owned by her parents. In order to minimize estate taxes, Jemima's financial planner advises her to sell part of the business to her son, Firdaus. To make this transaction effective, Jemima must ensure that _____.

Firdaus has a source of income to make nondeductible payments to her

In the context of family businesses, which of the following can be given to family members as compensation? (Check all that apply.)

Fringe benefits Stock

What should be done by the owner of a family business to determine the business' value?

He or she must determine the value of a similar business that is traded publicly.

Identify a true statement about small businesses.

Interest in small business entrepreneurship is increasing in high schools and colleges.

Which of the following is an issue involved in estate planning? (Check all that apply.)

The ways of retaining control of the business The challenges in maintaining flexibility of operation

In the context of family businesses, identify the advantages of living trusts. (Check all that apply.)

They allow people to put property into them when they are still alive. They save a considerable amount of time and money.

Identify a step that should be taken to deal with relatives who undermine a family business by their irresponsible actions.

They should be allocated to jobs that allow them to have nominal contact with their colleagues.

Identify the reasons for family businesses failing to survive succeeding generations. (Check all that apply.)

Uninterested family members Limited financial support The assets of the company being used up by estate taxes

According to divorce financial specialist Jeffrey Landers, a checklist for a pre- or postnuptial agreement between couples running a family business together should include the condition that _____.

full disclosure of all assets and liabilities must be provided by each party

A comprehensive succession plan in a family business should _____.

involve the passing of operating authority from one generation to the next

A family mission statement is important for family business because _____.

it helps the family deal with the day-to-day necessities of running the business

n a family business, family members should be compensated on the basis of _____.

job performance

In a business, estate planning to minimize the need for beneficiaries to withdraw funds and maintain their interest in keeping the funds in the business can be in the form of _____.

limited liability partnerships

A(n) _____ resembles a will, but in addition to providing for distributing personal assets on the maker's death, it also contains instructions for managing those assets should the person become disabled.

living trust

Working mothers are resigning from their current jobs and establishing home-based businesses primarily because _____.

many companies refuse to provide flextime and paid family leaves

Which of the following factors creates an incentive for working mothers to establish home-based businesses?

A decrease in telecommuting

Which of the following should be included in a comprehensive, yet flexible, succession plan of a family business?

A sudden or planned departure of the owner-manager

The process in which the owners of a family business prepare a document that specifies who will take their place if they retire or are unable to continue serving as leaders and decision makers for their company is known as

Blank 1: succession Blank 2: planning

How can children be prepared to take over a family business? (Check all that apply.)

By providing them with a part-time job in the company By allowing them to work on simple job

Identify a factor that a parent who owns a family business must consider before selling stock to his or her children.

Capital gains tax must be paid on the stock sold.

Which of the following factors are the primary causes of the people-related challenges encountered by family businesses? (Check all that apply.)

Emotions interfering with business decisions Interactions of business necessity with familial values

Which of the following are emphasized by the free enterprise system that most small business owners and managers believe in? (Check all that apply.)

Individual freedom Hard work

Which of the following factors are the primary causes of the people-related challenges encountered by family businesses? (Check all that apply.)

Interactions of business necessity with familial values Emotions interfering with business decisions

Which of the following statements are true of a buy-sell agreement? (Check all that apply.)

It assures a market for the stock when prepared well. It protects the minority stockholder of a business.

Identify the true statements about estate planning in family businesses. (Check all that apply.)

It helps in smooth transition. It minimizes the requirement for funds to be withdrawn by beneficiaries.

What is a disadvantage of hiring a professional manager for managing a family business?

It leads to concentration of power in small groups.

Identify an advantage of hiring a professional manager when none of the family members are in a position to manage a family business.

It prevents the concentration of power in small cliques.

In the context of family businesses, identify an estate planning issue.

Making efforts to minimize taxes

Identify a true statement about the interest in small business at high schools, colleges, and universities.

Many community colleges now offer courses for small business owners.

Which of the following are the advantages of selling a family business to an outsider? (Check all that apply.)

The absence of stress about the future of the business Guaranteed income from the business

Identify a rule that should be followed by an owner of a family business when giving parts of an estate as gifts to family members.

The gifts must be of "present interest," such as a direct cash gift.

In a family business, one of the ways to prepare children to run the business is to _____.

allow them to work for another firm to gain experience

Family members with little ability to contribute to a family business can be _____.

placed in job positions that prevent them from troubling other employees

When selling a family business to another family member, for the transition to be complete, the business owner should _____.

sell the business to the offspring

Estate planning in a family business can be in the form of _____.

stock sales to family members