Test Questions & Answers Small Business And The Law Ch9

Chapter 9- Small Business and the Law

True/False

1. Baracas is a place with maximum number of business laws

Response: See Introduction

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. For small businesses, the most popular form of legal structure is the partnership

Response: See section 9.1

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. A sole proprietorship is the most inexpensive and simplest to set up

Response: See section 9.1.1

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. In the eyes of the law, there is no difference between a proprietor and her business

Response: See section 9.1.1

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. Proprietorships are taxed at the owner’s personal tax rate

Response: See section 9.1.1

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. A sole proprietorship has a perpetual existence

Response: See section 9.1.1

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. Across many jurisdictions in United States, no legal filing is required to set up a proprietorship

Response: See section 9.1.1

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. Because the taxes of business are filed with the personal tax return of the individual owning the business, it is called a double taxation

Response: See section 9.1.1

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. In a partnership form of business, partners are held responsible for the actions of the other partners

Response: See section 9.1.2

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. Unlike sole proprietorship, a partnership pays taxes on its income and partners must exclude partnership items on their tax forms

Response: See section 9.1.2

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. A partnership is required to inform the IRS by filing a Form 1065

Response: See section 9.1.2

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. A general partnership involves anonymous partners plus one or more general partners whose identity is not known to the public at large

Response: See section 9.1.2

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. A limited partner in a limited partnership is actively engaged in the management of the firm and bears personal responsibility for all liabilities of the firm

Response: See section 9.1.2

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. Articles of copartnership is a mandatory legal agreement in a partnership form of business

Response: See section 9.1.2

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. All types of corporations face double taxation

Response: See section 9.1.3

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. An S Corporation can have only one class of common stock

Response: See section 9.1.3

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. Fractional ownership is same as timeshare

Response: See section 9.1.3

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. Handshake agreements can be enforced

Response: See section 9.2

Level: Easy

Learning Objective: Explain the basics of contracts

1. Contracts signed by minors, people with diminished mental capacity, and intoxicated persons are void

Response: See section 9.2.1

Level: Easy

Learning Objective: Explain the basics of contracts

1. Interstate contracts need to abide by laws of all states where they apply

Response: See section 9.2.1

Level: Easy

Learning Objective: Explain the basics of contracts

1. The U.S. law covers ONLY three main types of intellectual property: trademark, copyright, and patents

Response: See section 9.3

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. It is not the idea itself, but the tangible expression of the idea that is protected by copyright law

Response: See section 9.3.3

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. Copyright for new works lasts for the creator’s life plus 120 years

Response: See section 9.3.3

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. In order to obtain a patent, an applicant must show that the invention is novel, non-obvious, and useful

Response: See section 9.3.4

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. For sole proprietorships, the most common form of bankruptcy is Chapter 11

Response: See section 9.4

Level: Easy

Learning Objective: Describe the various types of bankruptcies

Multiple Choice Questions

1. Which of the following is a legal form for business in the US?
2. Partnerships
3. Proprietorships
4. Corporations
5. All of the above

Response: See section 9.1

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. A sole proprietorship involves a person who:
2. Does not fully own her business but has formed a separate legal entity for it
3. Does not fully own her business and has not formed a separate legal entity for it
4. Fully owns her business and has formed a separate legal entity for it
5. Fully owns her business but has not formed a separate legal entity for it

Response: See section 9.1.1

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. What is true about a sole proprietorship?
2. The owner is not responsible for liabilities of the business
3. The legal existence of a proprietorship ends when the owner passes
4. A proprietor and her business are legally separable
5. Proprietorships are not taxed at the owner’s personal tax rate

Response: See section 9.1.1

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. A _________is the tax form filed by a sole proprietor to report the finances of the firm
2. Schedule A
3. Schedule B
4. Schedule C
5. Schedule D

Response: See section 9.1.1

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. A partnership is a ______association of two or more people who make a _____decision to co-own a business together
2. Involuntary, conscious
3. Voluntary, conscious
4. Voluntary, subconscious
5. Involuntary, subconscious

Response: See section 9.1.2

Level: Easy

Learning Objective: Distinguish between the various legal forms of small business

1. The general partners of a limited partnership have ________liability for the debt, and any limited partners have _____ liability that may not exceed their capital contribution to the business
2. Limited, limited
3. Unlimited, limited
4. Unlimited, unlimited
5. Control, unlimited

Response: See section 9.1.2

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. Which of the following is NOT included in the articles of copartnership?
2. Duties and responsibilities of the partners
3. The preferred approach to resolve disputes
4. Steps that need to be taken to dissolve the partnership
5. Lifestyle of each partner

Response: See section 9.1.2

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. Which of the following is a drawback of partnerships?
2. Help raise more funds
3. Pool ideas from multiple people
4. Partners share workload
5. Limited autonomy

Response: See section 9.1.2

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. What is true about a Corporation?
2. It is chartered by the state in which it is headquartered
3. It dissolves when ownership changes
4. Income and expenses are filed with the owner’s personal income tax return
5. In the eyes of the law, a corporation and owner are the same

Response: See section 9.1.3

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. Which of the following statements is NOT true?
2. The traditional form of the corporation is called a C-Corporation (C-Corp)
3. The income and losses of S-corporation (S-Corps) pass through to the tax returns of its owners and are then taxed at the individual rates
4. A benefit corporation (benefit corp) is a tax exempt nonprofit corporation
5. A Limited Liability Company (LLC) can choose whether to be taxed as a partnership or as a corporation

Response: See section 9.1.3

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. What criterion must be met for a corporation to qualify for legal status as an S-Corp?
2. Must have partnerships
3. Shareholders must own more than one class of stock
4. Must have no more than 100 shareholders
5. Shareholders need not be US citizens or legal residents

Response: See section 9.1.3

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. Owners of a Limited Liability Company (LLC) enter into an _______specifying their rights and responsibilities
2. Schedule A
3. Operating agreement
4. Articles of copartnership
5. Articles of Incorporation

Response: See section 9.1.3

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. In ______the buyer gets part ownership in an asset, but with _________the buyer gets only part use of the asset
2. Fractional ownership, timeshares
3. Timeshares, fractional ownership
4. S-corp, B-corp
5. Proprietorship, partnership

Response: See section 9.1.3

Level: Medium

Learning Objective: Distinguish between the various legal forms of small business

1. Which of the following contracts are considered void?
2. Contracts signed by an intoxicated person
3. Contracts signed by a minor
4. Contracts signed by an individual with diminished mental capacity
5. All of the above

Response: See section 9.2

Level: Easy

Learning Objective: Explain the basics of contracts

1. A ________is a legal contract that stipulates that one party will not hold another party liable for risk (often physical risk) or damage
2. Non-compete contract
3. Specialty contract
4. Standard contract
5. Hold Harmless Agreement

Response: See section 9.2.1

Level: Easy

Learning Objective: Explain the basics of contracts

1. _______contracts involve one party promising not to be in a situation that would put them into direct competition with the other party
2. Non-compete contract
3. Specialty contract
4. Standard contract
5. Hold Harmless Agreement

Response: See section 9.2.1

Level: Easy

Learning Objective: Explain the basics of contracts

1. _________clause relieves one party from responsibility for damages with things that relate to the personal property, possessions, of the other party
2. Confidential
3. Exculpatory
4. Non-compete
5. Uniform disclosure

Response: See section 9.2.1

Level: Medium

Learning Objective: Explain the basics of contracts

1. Any identification used to delineate and promote a certain product is a ______
2. Copyright
3. Patent
4. Trademark
5. Trade secret

Response: See section 9.3.1

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. Copyright protection for “work for hire” bought from the creator, lasts for
2. 95 years from first publication
3. 120 years after original creation or 95 years from first publication, whichever is earlier
4. 120 years after original creation
5. Creator’s life plus seventy years

Response: See section 9.3.3

Level: Medium

Learning Objective: Identify the fundamentals of intellectual property

1. For patents in the U.S., applicants have _____year from the time the idea is disclosed to others to apply for a patent
2. Three
3. One
4. Five
5. Ten

Response: See section 9.3.4

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. A _______pertains to the look of an invention and the parts that are essential to the design
2. Utility patent
3. Design patent
4. Plant patent
5. None of the above

Response: See section 9.3.4

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. Patents are valid for _____ years from the date of filing an application
2. Three
3. One
4. Twenty
5. Ten

Response: See section 9.3.4

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. Design patents last only _______ years from application filing
2. 14
3. 5
4. 2
5. 75

Response: See section 9.3.4

Level: Easy

Learning Objective: Identify the fundamentals of intellectual property

1. Small Business Reorganization Act of 2019 allows applicants to file for Chapter 11 bankruptcy without having a _______approved by _______
2. Reorganization plan, creditors
3. Liquidity, creditors
4. Liquidity, debtors
5. Reorganization plan, debtors

Response: See section 9.4

Level: Medium

Learning Objective: Describe the various types of bankruptcies

1. Chapter 11 bankruptcy is for firms who want to turn things around through __________, whereas Chapter 13 bankruptcy is for individuals, including small business owners, with _______who want to adjust their debt repayment
2. Reorganization, regular income
3. Regular income, liquidity
4. Regular income, reorganization
5. Liquidity, reorganization

Response: See section 9.4

Level: Medium

Learning Objective: Describe the various types of bankruptcies