Title: Legal Ownership
Course: Demo 1

Q: In a sole proprietorship, the owner of the business:
- enjoys complete control over all aspects of the business
- may be personally liable (or responsible) if anyone sues the business
- is able to borrow funds for the business without any personal liability
A: enjoys complete control over all aspects of the business; may be personally liable (or responsible) if anyone sues the business

Q: A ________ is owned and managed by a group of individuals who share in decision-making and risk.
- sole proprietorship
- C corporation
- partnership
A: partnership

Q: Which of the following statements is correct?
- a sole proprietor has no personal liability for debts of his business
- there are far more corporations that there are sole proprietorships and partnerships
- revenue produced by corporations is much greater than that produced by proprietorships and partnerships
A: revenue produced by corporations is much greater than that produced by proprietorships and partnerships

Q: The most common form of business ownership in the U.S. is:
- partnership
- corporation
- sole proprietorship
A: sole proprietorship

Q: Partnerships have several advantages over sole proprietorships including:
- the partners bring diverse skills and perspectives
- partners bring additional resources including access to funding
- the partners are not liable for business debts
A: the partners bring diverse skills and perspectives; partners bring additional resources including access to funding

Q: In a limited partnership:
- a general partner runs the business.
- the limited partners’ liability is capped at the amount of their investment in the company.
- can have no more than four limited partners.
A: a general partner runs the business.; the limited partners’ liability is capped at the amount of their investment in the company.

Q: The disadvantages of partnerships include:
- the need to share decision making across the partners.
- the risk of a single partner taking action that is damaging to the company.
- the limitations of the highly-restrictive, legal partnership requirements.
A: the need to share decision making across the partners.; the risk of a single partner taking action that is damaging to the company.

Q: A ________ is owned by a single individual who is responsible for all decisions and liabilities.
- limited liability partnership
- S corporation
- sole proprietorship
A: sole proprietorship

Q: If the owners of a business were to die, which of the following entities would continue to exist:
- a corporation
- a partnership
- a sole proprietorship
A: a corporation; a partnership

Q: A ________ is a legal entity completely separate from the entities who own it.
- sole proprietorship
- limited liability partnership
- corporation
A: corporation

Q: A corporation is legally governed by:
- majority stockholders
- primary stakeholders
- its board
A: its board

Q: When a corporation makes payments to its shareholders these are called:
- stock buy-back
- stock benefits
- dividends
A: dividends

Q: If a corporation offers 1,000 shares of stock and you buy 300 shares:
- you are legally entitled to a seat on the company’s board
- you are liable for any debts of the corporation or lawsuits against the corporation
- you are a shareholder
A: you are a shareholder

Q: You purchase 10 shares of stock in a company at a price of $1,000 per share, You shares represent 10% ownership of the company. One year later the company is sued by a competitor. It spends significant resources defending itself in the lawsuit. The company loses the lawsuit and is ordered to pay $2,000,000 in damages. In addition, the company has $1,300,000 in outstanding debt. Unable to pay the judgment and its creditors, the company closes its doors and files for bankruptcy. How much money do you stand to lose?
- $330,000
- $340,000
- $10,000
A: $10,000

Q: Corporations whose stock can be sold to the general public are, by definition:
- S corporations
- B corporations
- public corporations
A: public corporations

Q: The disadvantages to starting and running a corporation include:
- cost
- double taxation
- limited liability
A: cost; double taxation

Q: Which of the following entities are subject to limited liability?
- partnerships
- sole proprietorships
- corporations
A: corporations

Q: Which of the following entities are subject to double taxation?
- partnerships
- sole proprietorships
- corporations
A: corporations

Q: Which of the following entities provide neither protection or limitations to personal liability nor double taxation?
- S corporations
- limited liability companies
- sole proprietorships
A: S corporations; limited liability companies; sole proprietorships

Q: You are forming a new company that delivers food to students across college campuses. You have a number of partners, but your primary goals are to avoid personal liability and double taxation. You want to pay each of the partners based on the percentage of the company that they own. You could accomplish this by forming a(n):
- C corporation
- partnership
- S corporation
A: S corporation

Q: You are forming a new company that delivers food to residents across college campuses. You have a number of partners, but your primary goals are to avoid personal liability and double taxation. You want to pay each of the partners based on their contribution to the success of the company, which is NOT equal to their percentage ownership. You could accomplish this by forming a(n):
- S corporation
- C corporation
- limited liability company
A: limited liability company

Q: You form an LLC to protect yourself from personal liability. The business fails and there are debts remaining. Under which of the following circumstances would you be personally liable for business debts.
- You signed documents personally securing the debts of the business
- You engaged in illegal activities that resulted in the failure of the business and/or its debts
- You did not have sufficient experience to make good decisions on behalf of the business
A: You signed documents personally securing the debts of the business; You engaged in illegal activities that resulted in the failure of the business and/or its debts

Q: Which of the following entities can pursue a broader mission that may sometimes be at odds with maximizing profits for shareholders:
- S corporation
- limited liability company
- B corporation
A: B corporation

Q: A ________ seeks to provide a return to shareholders while pursuing other goals that benefit community or society.
- C corporation
- limited liability company
- B corporation
A: B corporation

Q: A franchise:
- provides a proven product, business model and brand to the franchisee
- may require a significant up-front investment
- allows an individual to run a business that is owned by a large corporation
A: provides a proven product, business model and brand to the franchisee; may require a significant up-front investment

Q: Examples of franchises include:
- Subway restaurants
- Jiffy Lube car servicing
- Deloitte, Haskins & Sells accounting firm
A: Subway restaurants; Jiffy Lube car servicing

Q: Benefits of a franchise include:
- access to a template for the business
- access to services from the franchiser
- the elimination of all business risks
A: access to a template for the business; access to services from the franchiser

Q: Risks of a franchise include:
- the high cost of start-up
- potential that the franchiser will fail to deliver promised resources and support
- significant limitations in the range of franchise options that are available in the U.S.
A: the high cost of start-up; potential that the franchiser will fail to deliver promised resources and support

Q: A franchisee is generally expected to pay:
- royalty fees for support from the franchiser
- a share of national advertising costs
- a fee to subsidize the start-up costs for future franchisees
A: royalty fees for support from the franchiser; a share of national advertising costs

Q: When two companies combine to form a new company it is called a(n):
- acquisition
- franchise
- merger
A: merger

Q: When one company purchases and absorbs another company it is called a(n):
- merger
- franchise
- acquisition
A: acquisition

Q: In 2014 Microsoft purchased the popular game Minecraft for $2.5B. This is an example of a(n):
- merger
- hostile takeover
- acquisition
A: acquisition

Q: In 2014 Microsoft purchased the popular game Minecraft for $2.5B. Microsoft provides a wide range of computer software, such as Internet Explorer and Microsoft Word, and devices, such as the Windows mobile phone and the xBox game system. Minecraft is a computer game that allows players to create virtual worlds. Microsoft likely purchased Minecraft to:
- expand distribution channels
- realize economies of scale
- gain complementary products
A: gain complementary products

Q: In 2012 Disney purchased Lucasfilm and the rights to the Star Wars franchise. As a result Disney will now earn revenues from the Star Wars movies and the associated licensed merchandise which they will sell in the Disney store, their theme parks and websites. The most likely reason that Disney purchased the rights to the Star Wars franchise was to:
- expand distribution channels
- realize economies of scale
- gain complementary products
A: gain complementary products

Q: Charter Communications is seeking to purchase and bring together Time Warner Cable and Bright House Networks, creating a company that will serve a collective 18.8 million Internet broadband subscribers and 17 million TV subscribers. Charter has specifically cited a desire to have greater bargaining power in negotiating with channel owners like Disney. Charter is likely seeking to:
- gain complementary products
- expand distribution channels
- realize economies of scale
A: realize economies of scale

Q: AT&T’s proposed $39 billion acquisition of T-Mobile USA would have combined two of the four major national providers of mobile telephone services for both individuals and businesses. As a result of this acquisition, AT&T would be the provider of almost 40% of all mobile service, with Verizon and Sprint making up the remainder of the market. One of the primary reasons that AT&T would seek to acquire T-Mobile USA is to:
- gain complementary products
- expand distribution channels
- realize economies of scale
A: realize economies of scale

Q: The Small Business Administration can help new businesses by:
- providing tools and advice
- finding funding sources
- acquiring the business or the business idea
A: providing tools and advice; finding funding sources

Q: The Small Business Administration is a:
- private non-profit organization
- public for-profit organization
- U.S. Government organization
A: U.S. Government organization

Q: The Small Business administration provides resources to help businesses:
- create a business plan
- export their products overseas
- compete for government contracts
A: create a business plan; export their products overseas; compete for government contracts

Q: The U.S. government sets aside some contracts specifically for:
- small businesses
- veteran-owned businesses
- socially and economically disadvantaged businesses
A: small businesses; veteran-owned businesses; socially and economically disadvantaged businesses

Q: To assist small businesses in obtaining capital or funding the SBA may:
- provide no-cost capital through grants
- loan money directly to small businesses
- guarantee some portion of a bank loan
A: guarantee some portion of a bank loan

Q: Veterans and their families can find assistance in creating and growing businesses from the:
- Small Business Administration
- Office of Veterans Business Development
- Veteran Business Growth Fund
A: Small Business Administration; Office of Veterans Business Development

Q: The Office of Veterans Business Development serves:
- veterans
- families of veterans
- reservists
A: veterans; families of veterans; reservists

Q: To assist veteran-owned businesses in obtaining capital or funding the SBA may:
- provide no-cost capital through grants
- loan money directly to small businesses
- make it easier for veterans to get business loans from a bank
A: make it easier for veterans to get business loans from a bank