Chapter 9 Organizational Plan

The standard acceptable term of a limited liability company (LLC) is _____.

30 years

Which is the most appealing form of business for raising capital due to its advantages regarding personal liability?

A corporation

Match the kinds of partnerships (in the left column) with the effects on them when one of the entrepreneurs dies or withdraws from the business (in the right column).

A general partnership - Death or withdrawal leads to the termination of the partnership unless the partnership agreement states otherwise. A limited liability partnership (LLP) - Death or withdrawal does not affect the continuity of the business.

Identify the forms of business that are the least attractive for raising capital, primarily owing to the problem of personal liability. (Check all that apply.)

A partnership AND A proprietorship

Which of the following is the least expensive form of business to start?

A proprietorship

Match the forms of business formation (in the left column) with their features related to their ownership (in the right column).

A proprietorship - A form of business with single owner who has unlimited liability, controls all decisions, and receives all profits A partnership - A form of business with two or more individuals having unlimited liability who have pooled resources to own a business A corporation - A form of business with a separate legal entity that is run by stockholders having limited liability

Match the forms of business (in the left column) with the descriptions on their capital requirements (in the right column).

A proprietorship - Any new capital can be gained only from loans by any number of sources or by additional personal contributions by an entrepreneur. A partnership - Loans can be obtained from banks but will likely need a change in the agreement involved in the business. A corporation - New capital can be raised in a number of ways such as selling stocks or bonds.

Match the forms of business (in the left column) with the aspects related to the right to transfer of interest in a business (in the right column).

A sole proprietorship - An entrepreneur has the freedom to sell or transfer any assets in the business. A limited liability partnership (LLP) - A single partner cannot carry out the transfer of interest.

A(n) ___ ___ is the most common form of corporation, regulated by statute and treated as a separate legal entity for liability and tax purposes.

C Corporation

Liability is a critical reason for establishing a _____ rather than any other form of business.

Corporation

Owners are liable only for the amount of their investment unless there is negligence or fraud involved in the form of business called a _____ as it is an entity, which is taxable and absorbs liability.

Corporation

Shareholders are allowed to transfer their shares in a business at any time without consent from the other shareholders in the form of business called a _____.

Corporation

Which of the following forms of business has the most freedom in terms of selling one's interest in the business?

Corporation

Which of the following is true about limited liability companies (LLCs)?

Currently, regulations allow an LLC to be automatically taxed as a partnership. AND An LLC is similar to an S corporation.

What are the functions the management team of an organization must accomplish? (Check all that apply.)

Execution of the organization's business plan AND Maintenance of profitability by making adjustments to the organization's plan based on changes in the environment and market AND Recognition of the basic changes in the business as they occur

True or false: A proprietorship is likely to require a larger sum of capital than the capital needed for a partnership or corporation.

False

True or false: In an organization, a board of advisors is more closely tied to the organization than its board of directors.

False

Which of the following are true when a limited partner in a general partnership is given some control over business decisions? (Check all that apply.)

He or she is not considered a limited partner. AND He or she assumes personal liability.

Identify a true statement about the ownership pattern of limited liability partnerships (LLPs)

In LLPs, a partnership is considered a legal entity.

Identify a true statement about management control in a corporation.

It is separated based on the types of business decisions.

Identify the characteristics of a limited liability company (LLC). (Check all that apply.)

It is typically treated by the Internal Revenue Service as partnerships for tax purposes. AND It allows a member to transfer his or her interest only with the unanimous written consent of the remaining members.

Identify a true statement about a board of advisors in an organization.

It lacks a legal status.

What is the implication of losses incurred by a corporation?

It results in no dividends to stockholders.

What happens to a sole proprietorship if its owner dies?

It results in the termination of the business.

Match the areas in which entrepreneurs can indicate to the members of an organization what is expected of them (in the left column) with their descriptions (in the right column).

Organization structure - Explains members' jobs and the communication and relationship these jobs have with each other Rewarding - Provides member with promotions, bonuses, praise, and so on Selection criteria - Defines a set of guidelines for choosing individuals for each position

What are the legal requirements owners should fulfill before forming a corporation? (Check all that apply.)

Owners should register the name and articles of incorporation. AND Owners should meet the state statutory needs.

What are the basic legal forms of business formation? (Check all that apply.)

Partnership Proprietorship Corporation

A special type of corporation where profits are distributed to stockholders and taxed as personal income is called a(n) ___ ___

S Corporation

Which of the following has been the reason for the decline in the growth rate of the formation of S corporations in the last few years in the United States?

The acceptance of limited liability companies (LLCs) in all states

What was the impact of the passage of the Small Business Job Protection Act in 1996 on the rules governing an S corporation?

The restrictions that existed in regard to the number of shareholders and classes of stock were loosened.

Identify a true statement about a proprietorship and regular partnership.

There will be no distinction between the business entity and the owner(s).

Which of the following is true about limited partners in a general partnership?

They are liable for only their contribution to the partnership.

Identify a true statement about an organization's outside advisors such as accountants, bankers, lawyers, advertising agencies, and market researchers.

They are not part of the organization's formal board of advisors.

What is the primary concern of an organization's manager as an entrepreneur?

To cope up with changes in the environment and attempt to find new ideas

True or false: An entrepreneur should be able to assign responsibility to people in order to create a vibrant organizational culture.

True

True or false: In a partnership, the distribution of profits and losses is based on the partnership agreement.

True

True or false: The relationship of an entrepreneur of a new venture and external advisors can be enhanced by seeking out the best advisors and involving them thoroughly and at an early stage of the development of the venture.

True

An S corporation integrates the tax advantages of _____.

a partnership and a corporation