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CHAPTER 3
ORGANIZING AND FINANCING A NEW VENTURE
True-False Questions
T. 1. The difference between a limited partnership and a general partnership is
that the limited partnership has partners who actively manage the day-to-day
operations but also has passive investors.
obligations to the amount each paid for their partnership interests.
from the business’ assets, but the personal liabilities of the owners are not.
F. 4. Limited liability in the corporate business structure means creditors can
seize only some of the corporation’s assets.
the corporate charter.
liability and its earnings are taxed at the corporate rate.
T. 7. Partnerships are treated with pass-through taxation. This means that profits
and losses of the business pass directly through to investors on the basis
specified in the partnership agreement.
employee about the terms and conditions of employment including the
employee’s agreement to keep confidential information secret and to assign
ideas and inventions to the employer.
T. 10. The income received by a proprietorship is taxed at personal tax rates.
friends.
F. 13. An S corporation provides unlimited liability for its shareholders.
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corporate structures that “states” provide for professionals such as physicians,
dentists, lawyers, and accountants.
corporations than for individuals.
corporations is less than the highest rate for individuals.
F. 17. The highest marginal income tax rate for taxable personal income is 45
percent.
intellectual property.
labor union).
T. 21. “Collective marks” cover memberships in groups (e.g., a sorority or a
labor union).
to protect intellectual property.
F. 24. A copyright must be registered with the U.S. Copyright Office in order for
a work to be protected.
work’s creation is enough to provide copyright protection.
T. 27. “Business method” is one kind of patent.
services, and processes.
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the underlying computer codes, programs, and technology.
useful, novel, and obvious.
F. 32. Nondisclosure agreements prohibit the creator of an idea or other form of
intellectual property from sharing it with others once it has been presented the
first time.
when disclosure must be made to an outside individual or organization.
inventions and information (e.g., formulas, processes, customer lists, etc.) not
generally known to others.
T. 35. “Trademarks” are intellectual property rights that allow firms to
differentiate their products and services through the use of unique marks.
in exchange for the excitement of launching the business, as well as a share of
the firm’s financial gains.
F. 38. “Service marks” refer to services such as those provided by a sorority or a
labor union.
electronically stored forms.
T. 41. The Leahy-Smith America Invents Act of 2011 was passed, in part, to
alleviate the backlog of patent-related lawsuits.
number of patent-related lawsuits.
yours.
Multiple-Choice Questions
Chapter 3: Organizing and Financing a New Venture
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protection of limited liability?
a. proprietorship
b. limited partnership
c. corporation
d. subchapter S corporation
e. limited liability corporation
by the income flowing to shareholders taxed at personal tax rates?
a. proprietorship
b. limited partnership
c. corporation
d. subchapter S corporation
e. general partnership
start-up time and lowest legal costs?
a. proprietorship
b. limited partnership
c. corporation
d. subchapter S corporation
e. limited liability corporation
ownership?
a. proprietorship
b. limited partnership
c. corporation
d. subchapter S corporation
e. general partnership
life? a. proprietorship
b. limited partnership
c. limited liability corporation
d. subchapter S corporation
e. general partnership
a. participation in profits and losses
b. some liability for partnership obligations
c. veto right on new partners
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d. eventual return of capital
e. access to partnership books
the
a. corporate charter
b. articles of incorporation
c. corporate bylaws
d. confidentiality disclosure agreements
e. partnership agreements
group is called:
a. joint and several liability
b. joint liability
c. limited liability
d. accrued liability
e. general liability
with limited investor liability and passes its income before taxes through to the
owners?
a. partnership
b. subchapter S (or S) corporation
c. regular or (C ) corporation
d. limited liability company (LLC)
e. both a and b
f. both b and d
Subchapter S (or S) corporation business form?
a. 100
b. 125
c. 130
d. 500
taxed at which of the following marginal tax rates:
a. 5.0%
b. 10.0%
c. 15.0%
d. 20.0%
e. 25.0%
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at which of the following marginal tax rates:
a. 05.0%
b. 10.0%
c. 15.0%
d. 20.0%
e. 25.0%
taxable income is:
a. 25.0%
b. 28.0%
c. 33.0%
d. 39.6%
e. 45.0%
taxable income is:
a. 25.0%
b. 28.0%
c. 35.0%
d. 38.0%
e. 39.0%
Note: The following information should be used for multiple choice questions 15-19.
Following is a partial 2015 personal income tax schedule for a single filer:
Taxable Income
Beginning Ending Bracket Marginal
Amount Amount Amount Tax Rate
$1 $9,225 $9,225 0.10
$9,225 $37,450 $28,225 0.15
$37,450 $90,750 $53,300 0.25
income of $9,225 would be:
a. $1
b. $922.50
c. $1,383.75
d. $2,306.25
e. $4,612.50
has taxable income of $37,450 would be:
a. $1
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b. $922.50
c. $4,233.75
d. $5,156.25
e. $10,385
“bracket” paid by a single filer with taxable income of $90,750 would be:
a. $1
b. $922.50
c. $4,233.75
d. $5,156.25
e. $13,325
would be:
a. 10.0%
b. 13.8%
c. 15.0%
d. 16.7%
e. 20.0%
would be:
a. 15.0%
b. 16.5%
c. 19.7%
d. 20.4%
e. 25.0%
Note: The following information should be used for multiple choice questions 20-24.
Following is a partial 2015 corporate income tax schedule:
Taxable Income
Beginning Ending Bracket Marginal
Amount Amount Amount Tax Rate
$1 $50,000 $50,000 0.15
$50,000 $75,000 $25,000 0.25
$75,000 $100,000 $25,000 0.34
income of $50,000 would be:
a. $1,500
b. $6,250
c. $7,500
d. $8,500
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e. $10,850
taxable income of $75,000 would be:
a. $6,250
b. $7,500
c. $8,500
d. $13,750
e. $22,250
bracket paid by a corporation with taxable income of $100,000 would be:
a. $6,250
b. $7,500
c. $8,500
d. $13,750
e. $22,250
would be:
a. 15.0%
b. 18.3%
c. 20.0%
d. 22.7%
e. 25.0%
would be:
a. 15.0%
b. 16.75%
c. 20.0%
d. 22.25%
e. 25.0%
a. patents
b. trademarks
c. legal disclaimers
d. copyrights
e. trade secrets
inventions that are useful, novel, and non–obvious?
a. patents
b. trademarks
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c. legal disclaimers
d. copyrights
e. trade secrets
inventions and information such as formulas, processes, and customer lists that
are not generally known to others and which convey economic advantage to
the holders?
a. patents
b. trademarks
c. legal disclaimers
d. copyrights
e. trade secrets
differentiate their products and services through the use of unique marks which
allow consumers to easily identify the source and quality of the products and
services?
a. patents
b. trademarks
c. legal disclaimers
d. copyrights
e. trade secrets
written and electronically stored forms?
a. patents
b. trademarks
c. legal disclaimers
d. copyrights
e. trade secrets
a. family and friends
b. the entrepreneur’s physical and financial assets
c. business angels
d. venture capitalists
e. stock and bond markets
excitement of launching a business and a share in any financial rewards are
known as:
a. creditors
b. white knights
c. corporate raiders
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d. business angels
e. stakeholders
a. early stages of a venture’s lifecycle
b. middle stages of a venture’s lifecycle
c. maturity stage of a venture’s lifecycle
d. all of the above
protection limit increased from 17 to 20 years?
a. copyrights
b. trademarks
c. patents
d. trade secrets
a. not useful, novel, and non-obvious
b. not useful, not novel, and obvious
c. useful, novel, and non-obvious
d. useful, not novel, and obvious
and processes, are referred to as:
a. design patents
b. plant patents
c. utility patents
d. electrical patents
e. mechanical patents
stored forms are protected by:
a. Patents
b. copyrights
c. trade secrets
d. trademarks
has a protection limit of 20 years?
a. copyrights
b. patents
c. trade secrets
d. trademarks
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a. indicate membership in a trade group
b. indicate a certain brand of service
c. indicate quality
d. are symbols used to associate products to a specific brand
a. Utility
b. Design
c. Mark
d. Plant
e. Business method
a. Trademark
b. Service mark
c. Collective mark
d. Certification mark
e. Design mark
a. funds from business angels and venture capitalists
b. the entrepreneur’s personal assets
c. funds from family and friends
d. a, b, and c
e. only b and c
associated with products is:
a. trademarks
b. service marks
c. collective marks
d. certification marks
since 1952 involving how:
a. Patent Trolls can operate
b. the U.S. patent system operates
c. patents differ from trademarks
d. trade secrets can be converted to patents
a. U.S. Patent Office will enforce your rights
b. U.S. Government will enforce your rights
c. burden of enforcing your patent is yours
d. Leahy-Smith America Invents Act provides patent protection