Entrepreneurship: Ethical and Legal Foundations Quiz

What is one action founders can take to establish a strong ethical culture?

• Avoid hiring diverse employees

• Focus solely on profits

• Ignore ethical dilemmas

• Implement an ethics training program

What is a key component of a founders' agreement?

• The relative split of equity among founders

• The marketing strategy of the firm

• The location of the business

• The hiring process for employees

Which type of agreement prevents an individual from competing against a former employer?

• Nondisclosure agreement

• Noncompete agreement

• Partnership agreement

• Founders' agreement

What is a disadvantage of a sole proprietorship?

• Unlimited liability for the owner

• Profits are not subject to double taxation

• Easy to set up

• Complete control of the business

What is a primary advantage of a general partnership?

• No need for a partnership agreement

• Easier to raise capital than a corporation

• Limited liability for all partners

• Not dependent on a single person for success

What is a characteristic of a C corporation?

• Profits are passed through to owners' tax returns

• Easier to dissolve than a sole proprietorship

• Owners have unlimited liability

• Subject to double taxation

Which form of business ownership combines the advantages of a partnership and a corporation?

• Limited Liability Company

• C Corporation

• General Partnership

• Sole Proprietorship

What is a requirement for obtaining a sales tax permit?

• Collecting sales tax on goods sold

• Registering the business with the state

• Having a professional license

• Filing articles of incorporation

What is a disadvantage of a limited liability company?

• Setting up can be complicated and expensive

• Subject to double taxation

• Easier to raise capital than a corporation

• Unlimited liability for members

What is one of the first steps in choosing an attorney for a start-up?

• Select an attorney with no experience

• Avoid discussing fees

• Hire the first attorney you meet

• Contact the local bar association