Entrepreneurship Exam 2 Questions and Answers Already Passed
A business plan is: - Answers A written narrative typically 25 to 35 pages long, that describes what a new
business intends to accomplish and how it intends to accomplish it. It usually takes weeks to complete a
well developed one, and the founders will usually meet regularly to work on it.
The purpose of a business plan: - Answers Inside the firm, the plan helps the company develop a "road
map" to follow to execute its strategies and plans. Outside they firm,it introduces potential investors
and other stakeholders to the business opportunity the firm is pursuing and how it plans to pursue it.
Who reads a business plan - Answers A firm's employees and investors and stakeholders.
What do potential investors look for in the business plan? - Answers Structure, Content and Style
Guidelines for selecting an attorney: - Answers Contact local bar association, I interview several
attorneys, select an attorney who is familiar with the start up process, select an attorney who can assist
you in raising money for your venture, make sure your attorney has a track record of completing his or
her work on time, talk about fees, trust your intuition and learn as much about the business process
yourself as possible
What is the founder's agreement (or stakeholders' agreement)? - Answers A written document that
deals with issues such as the relative split of equity among the founders of the firm, how individual
founders will compensated for the cash or "sweat equity" they put into the firm, and how long the
founders will have to remain with the firm for their shares to fully vest.
Most founder's agreements include: - Answers A buyback clause which legally obligated departing
founders to sell to the remaining founders their interest in the firm if the remaining founders are
interested.
The founder's (or shareholders' agreement) contains: - Answers Nature of the prospective business,
identityand proposed titles of the founders, legal form of business ownership, Apportionment of stock
(or division of ownership), Consideration paid for stock or ownership share of each of the founders (may
be cash or "sweat equity"), Identification of any intellectual property signed over to the business to the
business by any of the founders, description of the initial operating capital, Buyback clause, which
explains how a founder's shares will be disposed of if she or he dies, wants to sell, or is forced to sell by
court order.
Sole Proprietorship: - Answers a form of business organization involving one person, and the person and
the business are essentially the same.
Pros of a Sole Proprietorship: - Answers Creating one is easy, The owner maintains complete control of
the business and retains all the profits, Business losses can be deducted against the sole proprietor's
other sources of income, It is not subject to double taxation, the business is easy to disssolve
, Cons of a Sole Proprietorship: - Answers Liability on the owner's part is unlimited, The business relies on
the skills and abilities of a single owner to be successful, Raising capitol can be difficult, The business
ends at the owner's death or loss of interest
A General Partnership is : - Answers A form of business organization where two or more people pool
their skills, abilities, and resources to run a business.
A partnership agreement: - Answers Details the responsibilities and the ownership shares of the
partners involved with an organization.
Advantages of a General Partnership: - Answers Creating one is relatively easy and inexpensive
compared to a corporation or limited liability company, The skills and abilities of more than one
individual are available to the firm, Having more than one owner may make it easier to raise funds,
Business losses can be deducted against the partners' other sources of income, It is not subject to
double taxation.
Disadvantages of a General Partnership: - Answers Liability on the part of each General partner is
unlimited, The business relies on the skills and abilities of a fixed number of partners, Raising capital can
be difficult, Because decision making among the partners is shared , disagreements occur, the business
ends at the death or withdrawal of one partner unless otherwise stated not the partnerships agreement,
the liquidity of each partner's investment is low
A corporation is: - Answers A seperate legal entity organized under the authority of a state
Corporations are organized as either C corporations or subchapter S corporations.
A C corporation is: - Answers A desperate legal entity that, in the eyes of the law, is desperate from its
owners. In most cases, the corporation shields it's owners, who are called shareholders.
Advantages of a C Corparation - Answers Owners are liable only for the debts and obligations of the
corporation up to the amount of their investment , the mechanics of raising capital is easier, no
restrictions exist on the n number of shareholders, which differs from subchapter S corporations, stock
is liquid if traded on a major stock exchange, the ability to share stock with employees through stock
option oother incentive planes can be a powerful form of employee motivation
Disadvantages of C corporations - Answers Setting up and maintaining one is more difficult than for a
sole proprietorship or a partnership, business losses cannot
A subchapter S corporation - Answers Combines the advantages and disadvantages of a partnership and
a C corporation. It does not pay taxes; instead, the profits or loads of the business are passed
throughout the individual tax returns of the. Owner's.
In order to be a subchapter S Corporation a business: - Answers Cannot be a subsidiary of another
corporation, the shareholders must be US citizens, it can have one class of stock issued and outstanding,
A business plan is: - Answers A written narrative typically 25 to 35 pages long, that describes what a new
business intends to accomplish and how it intends to accomplish it. It usually takes weeks to complete a
well developed one, and the founders will usually meet regularly to work on it.
The purpose of a business plan: - Answers Inside the firm, the plan helps the company develop a "road
map" to follow to execute its strategies and plans. Outside they firm,it introduces potential investors
and other stakeholders to the business opportunity the firm is pursuing and how it plans to pursue it.
Who reads a business plan - Answers A firm's employees and investors and stakeholders.
What do potential investors look for in the business plan? - Answers Structure, Content and Style
Guidelines for selecting an attorney: - Answers Contact local bar association, I interview several
attorneys, select an attorney who is familiar with the start up process, select an attorney who can assist
you in raising money for your venture, make sure your attorney has a track record of completing his or
her work on time, talk about fees, trust your intuition and learn as much about the business process
yourself as possible
What is the founder's agreement (or stakeholders' agreement)? - Answers A written document that
deals with issues such as the relative split of equity among the founders of the firm, how individual
founders will compensated for the cash or "sweat equity" they put into the firm, and how long the
founders will have to remain with the firm for their shares to fully vest.
Most founder's agreements include: - Answers A buyback clause which legally obligated departing
founders to sell to the remaining founders their interest in the firm if the remaining founders are
interested.
The founder's (or shareholders' agreement) contains: - Answers Nature of the prospective business,
identityand proposed titles of the founders, legal form of business ownership, Apportionment of stock
(or division of ownership), Consideration paid for stock or ownership share of each of the founders (may
be cash or "sweat equity"), Identification of any intellectual property signed over to the business to the
business by any of the founders, description of the initial operating capital, Buyback clause, which
explains how a founder's shares will be disposed of if she or he dies, wants to sell, or is forced to sell by
court order.
Sole Proprietorship: - Answers a form of business organization involving one person, and the person and
the business are essentially the same.
Pros of a Sole Proprietorship: - Answers Creating one is easy, The owner maintains complete control of
the business and retains all the profits, Business losses can be deducted against the sole proprietor's
other sources of income, It is not subject to double taxation, the business is easy to disssolve
, Cons of a Sole Proprietorship: - Answers Liability on the owner's part is unlimited, The business relies on
the skills and abilities of a single owner to be successful, Raising capitol can be difficult, The business
ends at the owner's death or loss of interest
A General Partnership is : - Answers A form of business organization where two or more people pool
their skills, abilities, and resources to run a business.
A partnership agreement: - Answers Details the responsibilities and the ownership shares of the
partners involved with an organization.
Advantages of a General Partnership: - Answers Creating one is relatively easy and inexpensive
compared to a corporation or limited liability company, The skills and abilities of more than one
individual are available to the firm, Having more than one owner may make it easier to raise funds,
Business losses can be deducted against the partners' other sources of income, It is not subject to
double taxation.
Disadvantages of a General Partnership: - Answers Liability on the part of each General partner is
unlimited, The business relies on the skills and abilities of a fixed number of partners, Raising capital can
be difficult, Because decision making among the partners is shared , disagreements occur, the business
ends at the death or withdrawal of one partner unless otherwise stated not the partnerships agreement,
the liquidity of each partner's investment is low
A corporation is: - Answers A seperate legal entity organized under the authority of a state
Corporations are organized as either C corporations or subchapter S corporations.
A C corporation is: - Answers A desperate legal entity that, in the eyes of the law, is desperate from its
owners. In most cases, the corporation shields it's owners, who are called shareholders.
Advantages of a C Corparation - Answers Owners are liable only for the debts and obligations of the
corporation up to the amount of their investment , the mechanics of raising capital is easier, no
restrictions exist on the n number of shareholders, which differs from subchapter S corporations, stock
is liquid if traded on a major stock exchange, the ability to share stock with employees through stock
option oother incentive planes can be a powerful form of employee motivation
Disadvantages of C corporations - Answers Setting up and maintaining one is more difficult than for a
sole proprietorship or a partnership, business losses cannot
A subchapter S corporation - Answers Combines the advantages and disadvantages of a partnership and
a C corporation. It does not pay taxes; instead, the profits or loads of the business are passed
throughout the individual tax returns of the. Owner's.
In order to be a subchapter S Corporation a business: - Answers Cannot be a subsidiary of another
corporation, the shareholders must be US citizens, it can have one class of stock issued and outstanding,
