Chapter 2 - Chapter 2: 1. What are some considerations in...

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Chapter 2: 1. What are some considerations in deciding on the legal form for a new venture? Answer: The tax implications associated with the legal form of the venture The effect of the legal form on the venture’s ability to raise capital The effect of the legal form on future harvesting opportunities Legal liability 2. In the case of a limited partnership , the legal liability that applies is: A) each partner is fully liable for business debts B) liability of partners is limited to the extent of their investments C) each general partner is fully liable for business debts; limited partners are liable to the extent of their investments D) partners have no legal liability Answer: C 3. In the case of a limited-liability partnership, the legal liability that applies is: A) each partner is fully liable for business debts B) liability of partners is limited to the extent of their investments C) each general partner is fully liable for business debts; limited partners are liable to the extent of their investments D) partners have no legal liability Answer: B 4. The tax treatment applicable to an S corporation is best described as: A) earnings pass through to owners B) earnings are taxable to the corporation when earned and to the shareholders when realized C) earnings pass through to shareholders (corporation does not pay taxes) D) earnings are taxable to the corporation Answer: C 5. The use of “milestone financing” is beneficial to the entrepreneur as well as the outside investors. Explain. Answer:
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Milestone financing allows the outside investor to postpone the commitment to finance additional stages. So the investor can “wait and see” the results of the initial investment
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Chapter 2 - Chapter 2: 1. What are some considerations in...

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