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52. Candy-corp hires a summer intern to work in the candy shop during the summer.
The intern works 20 hours a week and earns course credit for a course he is taking
toward his culinary degree. He is learning a great deal, and at the same time, the
company is benefiting from the intern because they did not need to schedule their
regular employees full time and they are not paying the intern. What is the legal liability
this company is incurring?
a. The summer intern is learning store operations that may not be related to his
academic program.
b. The intern is performing actual work and not just observing.
c. The intern is benefiting the company by replacing duties which could be provided by
paid employees.
d. The intern is working too many hours.
53. What legal structure determines minimum wage and overtime pay?
a. Civil Liberties Act
b. the hiring company’s salary administration policy
c. Fair Labor Standards Act
d. Minimum Wage Act
54. Legal clinics are an excellent resource for entrepreneurs. Which of the following
would offer the best advice?
a. second- and third-year law students associated with a leading university
b. a local SCORE organization
c. a group of local entrepreneurs in the same industry
d. a lawyer who works for your former employer
55. How long does a federally registered trademark last before it must be renewed?
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a. It is a lifelong registration.
b. 100 years
c. 10 years
d. 25 years
56. Tom has been a lead salesman for a brokerage house but recently got a better
position at a competing house. Prior to leaving, Tom copied the customer list and
contact information from his company. What may be infringed by this action?
a. the company’s patent
b. trade secrets
c. copyrights
d. No principles were violated since he contributed to the call list in the first place.
57. What cannot be protected as intellectual property?
a. artistic expression
b. a trademark
c. an idea
d. an invention
58. How long does a patent generally last?
a. 2 years
b. 10 years
c. 20 years
d. 50 years
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59. Which of the following countries is most likely to violate IP rights?
a. England
b. Germany
c. China
d. Australia
60. What significant change is taking place in China that may help reduce IP theft?
a. China has signed international agreements with the World Trade Center.
b. More people in China are applying for patents to protect their own inventions.
c. China is changing the labeling on all products exported from China.
d. China is growing its economic base.
61. What is indicated by China’s announcement that they will be using a “designed in
China” rather than “made in China” label on innovations?
a. They are protecting their brands with the label.
b. China is rebranding its image of lower quality products.
c. China is investing in their own ideas, which may mean less IP theft.
d. They understand the value of a good tagline and are implementing it.
62. Which of the following is true about filing for a patent?
a. Patents are based on a “first to file” basis.
b. Patents are based on a “first to invent” basis.
c. Patents can be shared if multiple people invent the same product.
d. Patents are awarded to the best design should multiple people file at the same time.
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63. How long does a company have to register a newly hired employee with your state
directory?
a. within 2 months of the hire date
b. within 5 days of the hire date
c. within 20 days of the hire date
d. at any time before filing state taxes
64. With which of the following agencies must you register to pay state unemployment
compensation tax?
a. the federal Department of Labor
b. the labor department of your state
c. the franchise tax board
d. the state tax board
65. Why does the employer fill out an IRS form 940 every year?
a. to report income taxes withheld from employee wages
b. to report federal unemployment tax
c. to report the number of employees from their company who have filed for
unemployment
d. to report the number of employees who filed a workers’ compensation claim
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66. Which of the following must be paid for by the employer in all states?
a. Medicare
b. medical leave
c. paid sick days
d. life insurance
67. Who should be consulted before setting up an employee benefits program?
a. your HR manager
b. an accountant experienced with employee benefits
c. the company lawyer
d. the provider, such as the insurance company or retirement fund company
68. In order to know what posters need to be placed in your office, which of the
following would be a good source?
a. unions active in your industry
b. state unemployment agencies
c. the Department of Labor
d. U.S. Publications Office
69. Which of the following would NOT be placed in an employee handbook?
a. company benefits
b. attendance policy
c. smoking bans
d. promotion timelines
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70. Which of the following would NOT be a good reason to hire a contractor?
a. the job requirements are short in duration
b. it is a policy of the company to hire only contractors to perform the job
c. the job is not usually performed by regular employees
d. the contractor has knowledge that is not normally part of the company’s skillset
71. A delivery service hires independent contractors as drivers to deliver products that
are ordered online. The company requires that the delivery service be available from
8am to 5pm Monday through Friday and display the company logo on their shirt and
automobile (in the form of a magnetic sign). Procedures for logging the package and the
number of attempts for delivery are defined by the company. What issues may be of
concern in this situation?
a. The employer has not outlined provisions for overtime.
b. The employer may not be paying vacation time to the contractors.
c. The employer may have misclassified the employee because they are controlling the
work hours, operations, and appearance of the contractor.
d. None, as the employer and delivery service have signed an independent contractor
agreement.
72. According to the International Trade Union Confederation (ITUC), which of the
following countries scores highest for equality at work?
a. Uruguay
b. China
c. Egypt
d. Columbia
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True/False
1. In a sole proprietorship, you are personally responsible for problems such as injuries
on the job or loans taken out on behalf of the business.
2. A limited liability partnership protects the owners from liability, and taxes are paid by
the corporation.
3. Choosing the wrong business structure can lead to incurring higher taxes than
necessary.
4. Regardless of the type of entity, a business partner can always maintain his or her
own shares in the company, even when they leave the company, provided they were
one of the company’s founders.
5. Once a product is protected by a patent in the United States, the product will be
protected from counterfeit by other countries due to international trade agreements.
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6. One way that a company can protect its product is by licensing its innovation to a
large organization with protection already in place. This inventor then receives royalties.
7. Even if an inventor makes significant improvements to another company’s existing
product (e.g., changing the way the product is used and solving a problem with the
original product), the improved product is still the intellectual property of the original
company.
8. A company with fewer than 50 employees does not have to offer family leave,
medical leave, or health insurance.
9. A company must have an EIN before hiring employees
10. Companies with less than 10 employees are not required to post federal and state
notices informing employees of their rights under labor laws.
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11. Every jurisdiction and industry requires a legal filing to set up a business as a sole
proprietorship.
12. As a sole proprietorship, the owner is held personally liable for any problems the
business incurs.
13. Fair use is a clearly defined area in U.S. law with absolute rules and boundaries.
14. A sole proprietorship is rarely the correct choice of legal structure for startups.
15. In a general partnership, if one partner is responsible for running the company into
the ground, the other partner is not considered liable.
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16. In a C corporation, the shareholders, not the corporation, are legally liable for a
company’s actions.
17. Both the C-corp and the S-corp have to deal with double taxation, as there are two
levels of tax to pay for both types of legal structures.
18. A disadvantage of a C corporation is that it cannot survive after the demise of its
owners.
Essay
1. Bob and Karin founded a luxury health spa located near a natural hot springs. They
each owned 30% of the company, with the remaining 40% owned by other
shareholders. There were many expenses in the first few years, but by year 4, the
company was doing well and had a large base of steady customers. Both Bob and Karin
work long hours at the spa and work at marketing and operational tasks. Last week,
Bob had an offer from a New York entity to build a luxury spa in Upstate New York and
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was offered a huge salary. Bob is going to take the offer. Discuss the legal protections
that could keep Karin from assuming all the work while Bob continues to gain benefit of
the company’s growth.
2. Protecting intellectual property is of growing concern to today’s modern entrepreneur.
Briefly describe why this is so.
3. You have just developed a voice recognition system that will also translate the
spoken language into other languages. You are based in the United States but would
like to sell the product in Europe and parts of South America. Describe what steps you
might take to protect your product.
4. Darcy created a solution that prevents mildew on rosebushes using all-natural
products. The product works systemically, being placed around the plant, and is
introduced via the root system. While working on the product, Darcy frequently talks
about the product with her boyfriend who helped her with the mixing and testing, made
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suggestions, and talked to her about techniques his grandfather used. Darcy obtained a
patent for the product prior to putting it on the market. A year later, the couple broke up
and the former boyfriend created a product with the same formula and marketed it
under his own name, claiming that he owned the formula based on codevelopment.
Discuss why the former boyfriend may or may not be correct.
5. Steve works for a cement company as an IT contractor. The company does not ask
Steve to sign a nondisclosure agreement, but Steve has full access to the company
databases and documents. Steve also attends meetings during which a new, fast-drying
and injectable product is openly discussed. A year later, Steve reveals the formula to a
competitive company and is scheduled to receive royalties. Discuss the legal and
ethical issues involved in this action.
6. A construction company is rapidly hiring employees to work on the construction site.
The job will require people to occasionally lift up to 50 lbs. The job provides training to
use equipment such as forklifts and tractors. The job also mentions that duties include
putting up safety signs, directing traffic, taking measurements, and filling out paperwork.
The company has placed an advertisement in the local paper that reads, “Looking for
young men between 21 and 33 years of age to work for AJK Construction. Training will
be provided. Ex-military and college students encouraged to apply. Start your career
now and earn a salary of $26 an hour!” Discuss the ethics and legal issues raised in this
job posting.
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7. A new business owner is setting up a business and will be opening in 3 months.
While she is recruiting for full-time employees, she hires a temporary worker. The
worker is only helping out a few days a week and doing odd jobs such as being on the
premises when the owner is away, stocking office supplies, and helping arrange office
furniture. At the end of the week, the business owner pays the worker the agreed-upon
fee of $200. What issues might affect the business?
8. Bob is a massage therapist working for a company with three employees. After a
year, he asks to take a vacation only to find out that vacations are not offered by the
company. Bob argues that he is due 2 weeks of vacation based on customary vacations
received elsewhere. Discuss the legal, practical, and ethical issues.
9. Collin obtains a position as a stock clerk where he must stock and distribute office
supplies to a group of 250 employees. In his job, he uses a pull cart, ladder, and
occasionally must use small hand tools in order to assemble small furniture and office
equipment. Discuss safety precautions the employer must take.
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10. Terry does not want her employees to be on their cell phones during work hours.
She requires them to have their cell phones on mute and to remove themselves from
the office for emergency phone calls. She believes that this is necessary in order to
ensure the safety of the workplace, where machinery is in use and distractions may
cause accidents. Describe the steps Terry should take in enforcing this policy.