SPANISH TOWN HIGH

ENTREPRENEURSHIP UNIT 2

Instructions : Answer ALL questions and submit at the end

Multiple Choice Questions

1. The most critical disadvantage of the sole proprietorship is:

a. Limited access to capital
b. Lack of continuity
c. The owner's unlimited personal liability
d. Limited skills and abilities of the owner

2. Which of the following issues would a typical partnership agreement address?

a. The contributions of each partner
b. How the partnership profits (or losses) will be distributed to the business
c. How a partner can sell his/her ownership in the business
d. All of the above

3. Which of the following is true regarding the corporate form of ownership?

a. Generally has the greatest ability to accumulate capital
b. Most complex form of ownership
c. C. Separate legal entity in the eyes of the law
d. All of the above

4. Which of the following is Not a potential advantage of franchising for the franchisee?
a. Management training and assistance
b. National advertising programme
c. Centralized buying power
d. Limited product line

5. The greatest drawback of sole proprietorships is:

a. Compensation
b. Liability
c. Secured debt
d. Equity

6. Which of the following is not a basic organizational structure option?

 a. a Sole proprietorship
b. c LLC
c. Corporation
d. IPO

7. A sole proprietor has

a. Limited personal liability
b. C No personal liability
c. Unlimited personal liability
d. Shares in the business

8. One feature of a sole proprietorship is the

a. Difficulty of formation
b. Ease in shutting the business down
c. Higher start-up costs
d. All the above

8 Marks

Matching Questions
Listed below are several terms and phrases associated with the Business Ventures content in

this chapter. You are required to pair each item from List A with the item from List B that is most

appropriately associated with it.

ANSWER LIST A LIST B

sole trader Owned and operated by Corporation

person

tax considerations and Formed under state and Partnership

implication
federal laws

non- Governmental Include charities or Sole trader

organization
foundations
 partnership An issue in choosing the right Franchisee
venture

franchise Pay fees and royalties Non-Governmental

Organizations (NGOS)

corporation Approved, registered and Tax considerations and

incorporated by the state
implications
authorities

7 Marks

CASE STUDY
Tanya Taylor’s choice of business

Having received her law degree and completed her training, Tanya Taylor was recently accepted to
the Bar Association. Tanya is now optimistic, with a number of grand ideas to implement when she
starts her own firm practising corporate law. She has managed to gather some funds which she
thought would be sufficient for start-up. However, as Tanya started doing the necessary paperwork
she realised that she would have a shortfall in start-up capital if she needs to pay the rent, buy office
furniture and pay utility bills and her secretary. This situation is now causing Tanya to think twice
about starting a business and she is beginning to think she will probably just continue working for
her current employer. While she is trying to figure out her next move, Kayan, a friend from law
school, calls her to see how she is doing after graduation. Tanya relays her situation to her and Kayan
decides to pool some funds to lend to Tanya at the end of the month. A week later, Kayan calls to
say that another friend is interested in the business and suggests that instead of lending Tanya the
money they would want to come on board and start the business together. The idea sounds good to
Tanya and so she agrees.

Questions

1. What type of business was Tanya going to establish initially? (1 mark)

Ans. The type of business is a sole proprietorship.

2. What would have been three (3) advantages and three (3) disadvantages of starting that type of
business? (12 marks)

Ans. Advantages
 1. Has full control over the business.
2. has fewer formalities and costs in setting up the business
3. make all of the decision making.

disadvantages

1. lack of continuity if the owner die the business is shut down

2. the owner has to work long hours
3. it can be difficult to raise fund

3. Based on the fact that her friends are coming on board, which type of business would be the
most suitable, bearing in mind the service that they are offering? Give three (3) reasons for your
choice. (8 marks)

Ans. The type of business is a partnership.

1. It is easy to form and there are not a lot of documents required.

2. decision making can be slow.
3. If one partner dies the business continues.