978-0134741086 Chapter 6 Part 2

Chapter 6, Page 105

Student responses may include, and are not limited to, the following:

 Lack of follow through based on the agreed division of partner responsibilities

and duties

 Lack of communication — talking and listening

 Lack of mutual respect

 Misuse of company funds and resources

 Dishonesty and actions that lead to mistrust

 Conflicting behavior when interacting with people — employees and customers

 Divergent behaviors regarding the management of business finances

3. Suppose that two of your friends are about to launch a business together with

nothing but a handshake. “We’ve been best friends since grammar school,” they

say. What advice would you give them? (LO 1) (AACSB: Interpersonal relations

Part 4: Chapter Discussion Questions

6-1. What factors should an entrepreneur consider before choosing a form of

ownership? (AACSB: Reflective thinking)

Chapter 6, Page 106

 Management succession plans – consider a smooth transition when passing

company to the next generation of buyers.

 Cost of formation – some forms are more costly to create.

6-2. Why are sole proprietorships so popular as a form of ownership? (LO 1)

6-3. What issues should the articles of partnership address? (LO 1) (AACSB:

Reflective thinking)

6-4. Why are the articles important to a successful partnership? (LO 1) (AACSB:

Reflective thinking)

6-5. Explain why one partner cannot commit another to a business deal without the

other’s consent. (LO 1) (AACSB: Reflective thinking)

6-6. What issues should the certificate of incorporation cover? (LO 2) (AACSB:

Reflective thinking)

6-7. How does an S corporation differ from a regular corporation? (LO 2) (AACSB:

6-8. What role do limited partners play in a partnership? (LO 1) (AACSB:

Reflective thinking)

6-9. What happens if a limited partner takes an active role in managing the

business? (LO 3) (AACSB: Reflective thinking)

Chapter 6, Page 108

Unlike a limited partnership, which prohibits limited partners from participating in the day-

to-day management of the business, an LLC does not restrict its members’ ability to

become involved in managing the company.

In the limited partnership if the limited partner does take an active part in managing the

business, a limited partner may actually forfeit limited liability, taking on the liability status

of a general partner.

6-10. What advantages does an LLC offer over an S corporation? (LO 3) (AACSB:

6-11. What advantages does an LLC offer over a partnership? (LO 3) (AACSB:

6-12. How is an LLC created? (LO 3) (AACSB: Reflective thinking)

Part 5: Case Studies

The following text case may be used for lecture and assignments for topics presented in

this chapter.

 Case 4: ThinkImpact

Part 6: Online Videos and Podcasts

These online videos may enhance class discussion and provide additional insight for the

chapter topics.

 How to Avoid 3 Common Mistakes Small Business Owners Make 12:47 minutes

http://www.youtube.com/watch?v=zahVagoP3SU

Chapter 6, Page 109

 Forms of Business Ownership 3:54 minutes

http://www.youtube.com/watch?v=Wtmw1oxNiWg

 Business Entities: Limited Liability Company 5:47 minutes

http://www.youtube.com/watch?v=aq5zdacU4E4

 The Corporation – A Legal “Person” 5:48 minutes

http://www.youtube.com/watch?v=wkygXc9IM5U

Links to additional online resources are available on the companion Web site at