Chapter 11- Legal Issues and Managing Risk

Question 1

What are the three legal structures?

Answer 1

1. Sloe proprietorship
2. Partnership
3. Corporation

Question 2

Sole Proprietorship Characteristics

Answer 2

Definition: Business owned by one person.

1. Unlimited liability; but right to profits
2. Personally liable for lawsuits

Question 3

Advantages of Sole Propietorship

Answer 3

1. Ease of Start
2. Simplicity of Registration
3. Fewer Govt. regulation

Question 4

Disadvantages

Answer 4

1. Difficult fund raising
2. Lack of Emotional support
3. Great time and energy invested

Question 5

Partnership

Answer 5

Definition: Two or more partners

Question 6

Limited Partnership

Answer 6

Partnership with general partner: involved in operations, unlimited liability and limited partner: not involved, limited liability

Question 7

Advantages

Answer 7

More Ideas

More capital and guidance

Question 8

Disadvantages

Answer 8

Partners can lose because of the decision of other partners even without their knowledge or agreement

Disagreement, death can end partnership

Question 9

Corporation

Answer 9

a legal entity composed of stockholders under a common name

Question 10

Characteristics of Corporations

Answer 10

1. Issue stock to shareholders (issues to owner; sells to investors)
2. Business is a separate entity
3. Continues regardless of death, disagreements

Question 11

Advantages of Corporation

Answer 11

1. Ability to sell shares
2. Easy of transfer
3. Limitation of personal liability

Question 12

Disadvantages of a Corporation

Answer 12

1. Double taxation
2. Loss of founder control
3. Higher formation costs
4. More govt. regulation

Question 13

What is a contract

Answer 13

An agreement between two or more parties that is enforceable by law

Question 14

A successful Contract Should achieve these 4 things

Answer 14

1. Avoid misunderstandings
2. Ensure work
3. Ensure payment
4. Avoid Liability

Question 15

Contingency

Answer 15

A condition that must be met for something else to occur

Question 16

Letter of Agreement

Answer 16

A document that puts an oral understanding in writing, in the form of a business letter

Question 17

Liquidation

Answer 17

Selling all assets to recover debt

Question 18

Service Mark

Answer 18

a design that identifies and distinguishes the source of a service rather than a product

Question 19

Copyright

Answer 19

Legal protection offered to authors of original works- literary, dramatic, musical and artistic works.

Question 20

Elements of Copyright

Answer 20

1. c symbol
2. the word Copyright or copr.
3. current year
4. Name of owner, or recognizable alternative

Question 21

Electronic Rights

Answer 21

the right to reproduce someone’s work online

Question 22

Patent

Answer 22

An exclusive right, granted by the govt to produce use, and sell an invention or process

Question 23

Public Domain

Answer 23

Property rights available to the public rather than held by an individual

Question 24

Insurance

Answer 24

A system of payment provided by insurance companies to reimburse individuals when their property/wealth is damaged, destroyed, or lost

Question 25

Basic Coverage for Small businesses

Answer 25

1. Worker’s compensation insurance
2. Property insurance
3. Disability insurance

Question 26

Three occurances that can wipe out data

Answer 26

1. Power surge
2. Computer viruses
3. Disk failure

Question 27

Issues to address in Disaster recovery plan

Answer 27

1. Communications
2. Base of operations
3. Priority activities
4. Return to facilities

Question 28

Permit

Answer 28

An official document that gives a party the right to hold a specific event

Question 29

License

Answer 29

An official document that grants the right to engage in an activity for a specified period of time

Question 30

Certificate

Answer 30

An official document that verifies something