Business Law 2016 - 2019

"Jean, Keisha, and Kyle want to start their own business but are concerned about the higher tax rate for corporations as well as the double taxation on corporate profits and dividends paid to stockholders. What type of business ownership should they consider? A. ""S"" corporation B. Partnership C. Open corporation D. Close corporation/"

A "S" corporation. This form of business ownership limits personal liability and offers a lower rate of taxation. Profits go directly to stockholders who pay taxes as individuals. This avoids the problem of double taxation on corporate profits. Partnerships offer lower tax rates but do not offer limited liability. Open corporations and close corporations offer limited liability but do not offer lower tax rates. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)\

"What requirement of a legally enforceable contract requires that both of the parties who are entering into the contract are sane, sober, and of legal age? A. Genuineness of assent B. Consideration C. Capacity D. Legality of purpose" "

" "C Capacity. Certain conditions must be met for a contract to be legally enforceable. Capacity involves having the mental and cognitive ability to make and understand the agreement and the consequences of their actions. If one party is a child or is found to be mentally challenged or impaired, the contract is invalid and unenforceable. Consideration means that the agreement must include something of value that both parties bargain for. Genuineness of assent means that all parties know what they are agreeing to. Legality of purpose means that the agreement must not violate any laws. SOURCE: BL:002 SOURCE: Stim, R. (2017). Who lacks the capacity to contract? Retrieved September 19, 2017, from http://www.nolo.com/legal-encyclopedia/lack-capacity-to-contract-32647.html"

"A business that fails to protect its employees from unnecessary risk or health hazards on the job may be sued for A. libel. B. misrepresentation. C. negligence. D. incompetence." "

" "C Negligence. A business might be sued for negligence if it does not take reasonable precautions to protect workers from risks or health hazards on the job. The basis of negligence is that the problems could have been easily avoided if the business had made some minor adjustments. Consequently, businesses usually try to make the workplace as safe as possible in order to avoid being sued for negligence. Misrepresentation involves making unrealistic claims about products. Libel is making false statements that harm an individual's reputation. Incompetence involves not having the skills or abilities necessary to perform satisfactorily. SOURCE: BL:001 SOURCE: FindLaw. (2017). Negligence. Retrieved September 19, 2017, from http://injury.findlaw.com/accident-injury-law/negligence.html"

"Which of the following is the type of tax that businesses are required to collect from customers when they purchase certain goods or services: A. Estate B. Income C. Sales D. Corporate" "

" "C Sales. Sales taxes are monies charged on sales of certain goods and services by state and/or local governments. The tax amount varies by location. After the business collects the sales tax from customers for their purchases, it pays the monies to the appropriate government agency. Income taxes are monies that the business withholds from its employees' wages. Estate taxes are monies that are collected from a person's estate upon his/her death. Corporations rather than customers pay corporate taxes. SOURCE: BL:009 SOURCE: Investopedia. (2017, April 27). Sales tax. Retrieved September 19, 2017, from http://www.investopedia.com/terms/s/salestax.asp"

"Which of the following is a type of intangible business property that is protected by law: A. Acreage B. Inventory C. Trademark D. Equipment" "

" "C Trademark. A trademark is a symbol, design, or word used by a business to identify a good or service and is registered with the government to prevent its use by others. A trademark is an example of intangible business property. Federal law protects a business's intangible property from being used by competitors. A business's inventory, acreage, and equipment are types of tangible property. SOURCE: BL:001 SOURCE: World Intellectual Property Organization. (n.d.). What is intellectual property? Retrieved September 17, 2018, from http://www.wipo.int/edocs/pubdocs/en/intproperty/450/wipo_pub_450.pdf"

"Which of the following is a characteristic of a business-format franchise: A. The name of the business is chosen by the franchisee. B. Products are bought directly from the supplier. C. It is the least popular franchise arrangement. D. Continuous assistance is provided by the franchisor." "

" "D Continuous assistance is provided by the franchisor. A business-format franchise is a more complex and more popular type of franchise arrangement than the product trade-name franchise. It involves a close, continuous working relationship between the franchisor and the franchisee. Examples of the business- format franchise are McDonald's, Holiday Inn, and Jiffy Lube. Products and other materials usually must be purchased from the franchisor's list of approved vendors. The franchisee must operate under the trade name of the franchisor. SOURCE: BL:003 SOURCE: LAP-BL-001—Own It Your Way (Types of Business Ownership)"

"Basic torts relating to businesses often involve disputes concerning A. emotional stress. B. assaults. C. defamation. D. contracts." "

" "D Contracts. Business torts are wrongful actions against a business that cause it harm in some way. Disputes concerning contracts are often the basis for businesses suing individuals or other businesses. Many businesses have contractual arrangements with employees or vendors. If these contracts are broken, the business might be harmed and seek compensation through the legal system. Basic torts relating to businesses do not involve disputes concerning assaults, defamation, or emotional stress. SOURCE: BL:069 SOURCE: Legal Match. (2018, May 2). Business torts. Retrieved September 17, 2018, from https://www.legalmatch.com/law-library/article/business-torts.html"

"Limited liability, indefinite length of life, ease of expansion, legal entity, and transfer of ownership are considered advantages of a A. sole proprietorship. B. partnership. C. trade union. D. corporation." "

" "D Corporation. Corporations are advantageous due to the separate legal body that is created by a state charter. The charter limits individual liability, allows for permanency of existence, ease in transferring ownership, and a greater number of resources for financial growth. Both the sole proprietorship and partnership have unlimited liability, definitive life spans, difficulty in raising capital, and are not separate legal entities. A trade union is a group that represents people in similar occupational skill areas. SOURCE: BL:006 SOURCE: LAP-BL-006—Taking Care of Business (Selecting Forms of Business Ownership)"

"The owner receives all of the profits of the business and can act quickly in making business decisions when the form of business ownership is a A. corporation. B. partnership. C. joint venture. D. sole proprietorship." "

" "D Sole proprietorship. Other advantages of a sole proprietorship are that it is easy to start, it has certain tax advantages, and the details of the business can be kept private. In a partnership, the profits are divided among the partners who sometimes disagree as to how profits should be divided. In a corporation, the profits are divided among the stockholders. The officers of the corporation are responsible for the actual operation and management of the firm. A joint venture is an arrangement that involves two or more businesses entering into a relationship by combining complementary resources, such as technology, skills, capital, or distribution channels, for the benefit of all parties. SOURCE: BL:003 SOURCE: LAP-BL-001—Own It Your Way (Types of Business Ownership)"

"Financial managers who are legally responsible for their clients' investments must demonstrate fiduciary responsibility, which involves A. acting in the best interests of their clients. B. selling financial products that generate the highest commissions. C. making risky investments without their clients' knowledge. D. speaking with their clients once a year to review their portfolios. "

"A Acting in the best interests of their clients. In the financial industry, a fiduciary is a financial professional who has been given legal authority to make financial transactions on behalf of an individual or business— the owner of the financial product (e.g., stock). Because the fiduciary has been given legal authority to act on behalf of a client, s/he must act in the best interest of the client. Fiduciary responsibility involves making wise financial decisions and obtaining financial products that will help the client achieve his/her financial goals. A fiduciary does not focus on selling products that generate the highest commissions or make risky investments without the client's knowledge. A responsible, ethical fiduciary is transparent and trustworthy and continuously communicates with her/his clients rather than communicating with them only once a year. SOURCE: BL:133 SOURCE: Sais, J., & Sais, M. (2016). Meeting your fiduciary responsibility. Retrieved September 14, 2016, from http://www.investopedia.com/articles/08/fiduciaryresponsiblity.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186"

"Which of the following is a tax-deductible gift: A. Charitable donation B. Vacation home C. Stocks D. Inherited items "

"A Charitable donation. Gifts are money, financial products, or property given to an individual or organization. Some gifts, such as charitable donations, are tax deductible. This means that the donor pays a reduced amount of tax or is exempt from paying the tax, depending on the type and value of the gift. Vacation homes, stocks, and inherited items are taxable gifts. SOURCE: BL:134 SOURCE: Internal Revenue Service. (2014, October 24). Frequently asked questions on gift taxes. Retrieved October 5, 2014, from http://www.irs.gov/businesses/small/article/0,,id=108139,00.html#3"

"One business promising to do something for another business in return for receiving compensation is an example of a A. contract. B. benefit. C. treaty. D. enterprise."

"A Contract. Contracts are agreements among two or more parties stating that one party is to do something in return for something provided by another party. If one business promises to do something for another business in return for receiving compensation, the two businesses have a contract. Then, the businesses are obligated to fulfill their part of the contract. In most cases, contracts benefit both parties, although promising to do something in return for receiving compensation is not necessarily a benefit. Treaties are trade agreements among two or more countries. An enterprise is another term for a business. SOURCE: BL:002 SOURCE: Beatty, J.F., & Samuelson, S.S. (2008). Essentials of business law (3rd ed.) [pp. 211-219]. Mason, OH: Thomson/South-Western."

"Which of the following forms of ownership is a group of individuals organized by a charter that is granted by a state: A. Corporation B. Proprietorship C. Partnership D. Cooperative"

"A Corporation. A corporation acts as a ""legal person"" in doing business and is owned by stockholders who have purchased stock. A partnership is a form of business ownership in which the business is owned by two or more persons. A sole proprietorship is a form of business ownership in which the business is owned by one person. A cooperative is owned and operated by its user-owners to supply goods and services to its members. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Business Ownership)"

"A restaurant wants to open a second location, but it doesn't have the necessary money to do so. However, it is able to borrow money from a __________ to open the new facility. A. creditor B. debtor C. borrower D. wholesaler"

"A Creditor. Creditors are individuals or businesses to whom a business or individual owes money or from whom it wants to borrow money. In this situation, a bank is most likely to be the creditor from which the restaurant is borrowing money. The debtor, in this situation the restaurant, is the individual or business who owes money to the creditor. The debtor would also be considered a borrower. A wholesaler is an intermediary who helps to move goods between producers and retailers by buying goods from producers and selling them to retailers. SOURCE: BL:071 SOURCE: Averkamp, H. (2004-2016). What is the distinction between debtor and creditor? Retrieved September 26, 2016, from http://www.accountingcoach.com/blog/debtor-creditor"

"What type of law focuses on protecting natural resources? A. Environmental B. Constitutional C. Cyber D. Securities"

"A Environmental. The purpose of environmental law is to protect natural resources—air, water, soil, wildlife, etc. Constitutional law is a category of law that involves implementing, protecting, and interpreting the foundation of law (supreme law) for the nation (e.g., the United States Constitution and the Constitution of Canada). Cyber law focuses on rules about the Internet and computer use. Securities law is a category of law that regulates the issuance and use of financial instruments such as banknotes, stocks, bonds, etc. SOURCE: BL:073 SOURCE: Brown University. (2018). Fields of law. Retrieved September 12, 2018, from https://www.brown.edu/academics/college/advising/law-school/fields-law/fields-law"

"Businesses must comply with regulations that limit the amount and type of pollution and waste they produce. These regulations are referred to as __________ laws. A. environmental B. antitrust C. property D. industrial"

"A Environmental. The purpose of environmental laws is to protect the natural environment—the air, soil, and water. Environmental laws help reduce pollution and govern the ways in which individuals and all types of businesses (e.g., service, industrial businesses) dispose of waste. Businesses that do not comply with environmental laws may be fined by the government or shut down. Antitrust laws protect free trade and competition in the marketplace. Property laws regulate the ownership of land and buildings. SOURCE: BL:073 SOURCE: Brown University. (2018). Fields of law. Retrieved September 13, 2018, from https://www.brown.edu/academics/college/advising/law-school/fields-law/fields-law"

"A financial institution fails to comply with an important government regulation. The financial institution will most likely A. pay a fine. B. get a better reputation. C. gain new business. D. avoid an audit."

"A Pay a fine. Financial institutions often have to pay fines for noncompliance. Noncompliance does not typically lead to a better reputation or new business. In fact, clients may be reluctant to do business with a financial institution known for breaking the rules. Financial institutions can be audited by government agencies. SOURCE: BL:148 SOURCE: Maguire, A. (2015, January 30). The dangers of non-compliance for your business. Retrieved September 15, 2017, from http://quickbooks.intuit.com/r/hr-laws-and-regulation/the-dangersof-non-compliance-for-your-business"

"What is a common consequence that comes with a civil lawsuit? A. Paying a fine B. Serving time in prison C. Performing community service D. Attending counseling sessions"

"A Paying a fine. Punishments for civil injuries or damages, such as a breach of contract, are usually financial. Fines differ in amount depending on the situation. Serving time in prison, performing community service, and attending counseling sessions are more likely to be consequences for a criminal offense. SOURCE: BL:163 SOURCE: LAP-BL-163—Laying Down the Law (Complying With the Spirit and Intent of Laws and Regulations)"

"Joan borrowed $10,000 from a relative to start her own business. Assuming she takes all responsibility for the company's financial risks, the company is most likely a A. sole proprietorship. B. limited partnership. C. corporation. D. partnership. "

"A Sole proprietorship. A sole proprietorship is owned and operated by one individual. Although Joan obtained a loan, she is still the sole owner/operator. A partnership is owned and operated by two or more people. A limited partnership exists when some (but not all) partners have limited legal liability for the business. A corporation is a form of business ownership in which the business is owned by stockholders who have purchased shares of stock. SOURCE: BL:003 SOURCE: LAP-BL-001—Own It Your Way (Types of Business Ownership)"

"In which of the following types of business ownership does the owner bear the entire risk of loss: A. Sole proprietorship B. General partnership C. Open corporation D. Private enterprise"

"A Sole proprietorship. One of the disadvantages of a sole proprietorship is that the owner is personally responsible for all the debts of the business. Two or more people share the risk of loss in a general partnership, and corporations spread the risk of loss among many investors. Private enterprise is not a form of business ownership. It is an economic system in which individuals and groups, rather than government, own or control the means of production. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)"

"An individual or business can minimize capital losses on investment property by A. liquidating remaining assets. B. claiming the loss as a tax deduction. C. obtaining a long-term loan. D. renegotiating property insurance premiums. "

"B Claiming the loss as a tax deduction. The difference between the cost of an investment and the selling price of that same investment is either a capital gain or capital loss. The federal government taxes the capital gains on investments. If an investment suffers a loss in value in relation to its purchase price, the government allows the owner to claim the loss as a tax deduction. Liquidating remaining assets, obtaining a loan, and renegotiating lower insurance premiums may provide the investor with needed cash or savings, but these actions do not change or minimize the monetary loss on the investment property. SOURCE: BL:134 SOURCE: Internal Revenue Service. (2017, August 17). Capital gains and losses - 10 helpful facts to know. Retrieved September 15, 2017, from https://www.irs.gov/newsroom/capital-gains-andlosses-10-helpful-facts-to-know"

"A business might conduct a compliance audit to A. manipulate financial data to indicate profitability. B. ensure that it is following government regulations. C. develop efficient production processes. D. evaluate its vendors' performance. "

"B Ensure that it is following government regulations. Government regulations affect the way that businesses record and report financial data. To ensure that the business is following all of the regulations, it should conduct a compliance audit. Because a comprehensive compliance audit can detect discrepancies, it can help a business determine what it needs to do to correct a problem, so it can comply with regulations. It is unethical and often illegal to manipulate financial data in ways that aim to mislead the audience. Developing efficient production processes and evaluating vendors' performance are not reasons for conducting a compliance audit. SOURCE: BL:148 SOURCE: Lohrey, J. (n.d.). Compliance audit objectives. Retrieved March 9, 2015, from http://smallbusiness.chron.com/compliance-audit-objectives-78248.html"

"Requiring businesses to control pollution and to dispose of hazardous waste properly are some of the main functions of __________ regulations. A. workplace B. environmental C. personnel D. geological"

"B Environmental. Environmental regulations are intended to conserve natural resources by requiring businesses to control pollution and dispose of hazardous waste properly. These regulations set pollution standards that businesses must meet, establish rules for disposing of waste, encourage recycling, and monitor illegal dumping. Workplace regulations are intended to make the work environment safe for employees. Personnel regulations are intended to promote equal opportunity in the workplace. Geological is not a type of regulation. SOURCE: BL:073 SOURCE: McAdams, T., Neslund, N., & Neslund, K. (2007). Law, business, and society (8th ed.) [pp. 673-675]. Boston: McGraw-Hill/Irwin."

"When an agent legally acts in the best interests of his/her client, the agent is establishing a(n) __________ relationship. A. authoritative B. fiduciary C. principal D. legislative"

"B Fiduciary. An agent is someone who acts on the behalf of another party. The agent often negotiates contracts and handles legal issues for another person with that person's consent. The agent who shows that s/he is loyal, trustworthy, and acting in the best interest of his/her client (principal) is fostering a fiduciary relationship. Authoritative relationships are based on a particular level of control. Principal is a legal term that describes the client. Legislative processes involve the procedures in which people or governments establish laws. SOURCE: BL:072 SOURCE: Beatty, J.F., & Samuelson, S.S. (2008). Essentials of business law (3rd ed.) [p. 625]. Mason, OH: Thomson/South-Western."

"Andrew received an official-looking email that appeared to be from a government agency. The message requested that Andrew reply immediately to the email and provide his bank account information and credit card account numbers. Fortunately, Andrew found out that the message was fraudulent before he provided the information. What illegal activity does this situation exemplify? A. Ponzi scheme B. Phishing C. Affinity fraud D. Accounting fraud "

"B Phishing. Phishing is an online identity theft scam that fools its victims into believing they are submitting sensitive, personal information such as bank or credit card numbers to a legitimate website. A Ponzi scheme is an investment scam that lures new investors by promising high rates of return with little to no risk. Accounting fraud occurs when a company or organization knowingly publishes incorrect information on its financial statements. Affinity fraud is an investment scam in which the scammer claims to be a member of the group s/he is targeting. By claiming to be a member of the group, the target audience is more likely to trust the scammer and turn over its money to him/her. SOURCE: BL:133 SOURCE: Clark, B., Basteri, C.G., Gassen, C., & Walker, M. (2014). Marketing dynamics (3rd ed.) [pp. 89-90]. Tinley Park, IL: Goodheart-Willcox"

"An important purpose of full-disclosure laws and regulations is to A. allow company employees to use inside information for personal gain. B. provide information to investors so they can make informed decisions. C. require companies to disclose all information about their operations. D. prevent a stock's par value from dropping below its market value."

"B Provide information to investors so they can make informed decisions. Full-disclosure laws and regulations require companies to disclose—publicize—any information that could affect the value of the firms' stocks. Investors need this information so they can make informed buy, hold, or sell decisions about investments. Full-disclosure laws also prevent company employees and other insiders from using privileged information for their personal gain. Full-disclosure laws do not require companies to disclose every bit of information about their operations—some undisclosed trade secrets are permitted. Full- disclosure laws and regulations are not designed to impact par values of stock. SOURCE: BL:133 SOURCE: Investopedia. (2018, April 18). Full disclosure. Retrieved September 13, 2018, from https://www.investopedia.com/terms/f/fulldisclosure.asp"

"Which of the following is a way that local zoning laws affect businesses: A. Prohibit price discrimination B. Restrict placement of billboards C. Limit creation of monopolies D. Require labels on products"

"B Restrict placement of billboards. Local zoning laws affect businesses in a variety of ways, such as restricting the placement of billboards. Local communities have the right to regulate where businesses can locate, the physical appearance of the building, and the type of signage that can be used. Communities can also decide if billboards are allowed and where they can be placed. Businesses that want to use billboards to advertise must follow the zoning laws of the community. Zoning laws do not require labels on products, prohibit price discrimination, or limit the creation of monopolies. SOURCE: BL:001 SOURCE: Scenic America. (n.d.). Legal issues and billboards. Retrieved September 6, 2017, from http://www.scenic.org/billboards-a-sign-control/legal-issues-and-billboards"

"The goal of many governmental agencies is to protect the A. barriers to trade. B. rights of business. C. target market. D. monetary policy."

"B Rights of business. Many governmental agencies are responsible for enforcing rules and regulations that are intended to protect the rights of businesses. Some of these agencies help to keep the marketplace competitive and protect businesses' trade secrets and formulas from being stolen. The agencies often develop a strong relationship with businesses in the process of protecting their rights. Governmental agencies do not protect the barriers to trade, the target market, or the monetary policy. SOURCE: BL:072 SOURCE: Holt, M. (2010, June 11). Five areas of government regulation of business. Retrieved September 12, 2017, from http://smallbusiness.chron.com/five-areas-government-regulation- business-701.htmlHo"

"Aviation, taxation, and commerce are categories of __________ law. A. judicial B. legislative C. administrative D. executive"

"C Administrative. Administrative law deals with the rules and regulations that have been established by governmental agencies. The legislative branch of the government (i.e., U.S. Congress and Canadian Parliament at the Federal level) establishes these agencies, which have the authority to enact and enforce regulations for various administrative functions, including aviation, taxation, and commerce. For example, in the United States, the Federal Aviation Administration (FAA) regulates air-transportation functions (i.e., airspace, aircraft safety); the Internal Revenue Service (IRS) handles issues related to personal and business taxes; and the Federal Commerce Commission (FCC) handles issues related to business and commerce. The legislative branch of government introduces and passes statutes. The judicial branch of government (court systems) interprets the law. The executive branch of the government guides government policy, and in some countries, has the power to veto legislation. SOURCE: BL:074 SOURCE: Beatty, J.F., & Samuelson, S.S. (2008). Essentials of business law (3rd ed.) [pp. 88-90]. Mason, OH: Thomson/South-Western."

"Brix Beauty Salon used a celebrity's name and photograph in a recent newspaper advertisement, even though the celebrity had not given Brix permission to use her name and likeness. What tort did Brix Beauty Salon commit? A. Defamation B. Wrongful interference C. Appropriation D. Conversion"

"C Appropriation. Torts are civil wrongdoings that cause harm or injury to another party. Appropriation, wrongful interference, defamation, and conversion are four kinds of torts. Appropriation, which Brix Beauty Salon committed, involves a business or person who uses—without permission—another person's name, likeness, and other unique characteristics for the benefit or gain of the user. Brix Beauty Salon used the celebrity's name and picture to attract customers to the salon. Unfortunately, Brix had not obtained permission to use the celebrity's name or likeness. As a result, the celebrity could sue Brix for appropriation. Wrongful interference consists of predatory behavior undertaken by a business to draw either customers or employees away from a competitor. Defamation involves making false, malicious statements about a person or organization. Conversion occurs when personal property is taken from the owner and given to someone else to use. SOURCE: BL:069 SOURCE: Miller, R.L., & Jentz, G.A. (2006). Business law today: Standard edition (7th ed.) [p. 107]. Mason, OH: Thomson Learning."

"Consumers of hospitality products have the right to expect businesses to provide goods and services that A. furnish several amenities. B. meet each individual's standards. C. are safe and clean. D. maintain international requirements."

"C Are safe and clean. Hospitality products differ a great deal and include such items as a meal in a restaurant or a sleeping room at a lodging facility. The guests have a right to expect that the facility provides clean linens and disinfected bathrooms. Guests expect that the locks on the doors are adequate to keep them safe from intruders or that measures have been taken to keep guests from tripping over loose carpet. Guests have the right to expect that the food that they purchase is safe and free from bacteria. Since each individual has different standards, it is not realistic to expect hospitality businesses to meet everyone's standards. For example, a hotel restaurant cannot create every menu entree to make each guest happy. The restaurant must consider several factors including the target market and costs associated with the food. Amenities are the ""extras"" that a hospitality business provides—the extras that guests do not usually expect. If guests do not expect certain amenities, they do not have rights to amenities. Each country and/or local government has different regulations that hospitality businesses must follow. SOURCE: BL:135 SOURCE: Rajaram, A. (2014, July 15). 10 basic things a hotel must offer guests. Retrieved September 12, 2018, from http://www.cntraveler.com/stories/2014-07-15/10-basic-things-a-hotel-must- offer-guests"

"Which of the following is a tax-deductible gift: A. Stocks B. Vacation home C. Charitable donation D. Inherited items"

"C Charitable donation. Gifts are money, financial products, or property given to an individual or organization. Some gifts, such as charitable donations, are tax deductible. This means that the donor pays a reduced amount of tax or is exempt from paying the tax, depending on the type and value of the gift. Vacation homes, stocks, and inherited items are taxable gifts. SOURCE: BL:134 SOURCE: Internal Revenue Service. (2018, August 20). Frequently asked questions on gift taxes. Retrieved September 13, 2018, from https://www.irs.gov/businesses/small-businesses-self- employed/frequently-asked-questions-on-gift-taxes"

"An individual or business can minimize capital losses on investment property by A. obtaining a long-term loan. B. liquidating remaining assets. C. claiming the loss as a tax deduction. D. renegotiating property insurance premiums."

"C Claiming the loss as a tax deduction. The difference between the cost of an investment and the selling price of that same investment is either a capital gain or capital loss. The federal government taxes the capital gains on investments. If an investment suffers a loss in value in relation to its purchase price, the government allows the owner to claim the loss as a tax deduction. Liquidating remaining assets, obtaining a loan, and renegotiating lower insurance premiums may provide the investor with needed cash or savings, but these actions do not change or minimize the monetary loss on the investment property. SOURCE: BL:134 SOURCE: Internal Revenue Service. (2011, February 18). 10 facts about capital gains and losses. Retrieved November 10, 2015, from http://www.irs.gov/uac/Ten-Important-Facts-About- Capital-Gains-and-Losses"

"Many nations have developed environmental regulations in order to encourage A. moral conduct. B. ethical behavior. C. conservation. D. industrialization. "

"C Conservation. Many nations have developed environmental regulations to conserve their natural resources by requiring businesses to control pollution, dispose of hazardous waste properly, and use nonrenewable resources wisely. These regulations set pollution standards that businesses must meet, establish rules for disposing of waste, encourage recycling, and monitor illegal dumping. Nations realize that natural resources are limited and must be conserved or renewed in order to be available for future generations. Nations did not develop environmental regulations to encourage ethical behavior or moral conduct, although some environmental regulations deal with ethical and moral issues. Industrialization is the changeover from producing goods by hand labor to the use of machines and the organization of such production into industries. SOURCE: BL:073 SOURCE: HG.org Legal Resources. (n.d.). Environment law—Environmental and natural resources law. Retrieved September 15, 2017, from http://www.hg.org/environ.html"

"A primary reason that financial institutions should comply with government regulations is to A. stabilize tax rates. B. ensure solvency. C. control risk. D. monitor changes."

"C Control risk. Failure to comply with regulations may result in penalties, fines, or imprisonment for employees who knowingly violate laws. Also, noncompliance may damage a financial institution's reputation, which often reduces its investors' and customers' trust in the company, and ultimately affects its bottom line in a negative way. Therefore, it is important for financial institutions to take steps to ensure that they are complying with regulations. Compliance is one way that financial institutions can control or lower their level of risk. Businesses control their risk levels by monitoring regulatory changes, such as tax-rate increases. Compliance can reduce the risk of insolvency, but cannot ensure solvency. SOURCE: BL:148 (CC:003) SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 41-42). South-Western Cengage Learning."

"Which of the following types of business organizations reduces or limits the risk of its stockholders: A. Franchise B. Sole proprietorship C. Corporation D. Partnership"

"C Corporation. A corporation, which is owned by its stockholders, limits the losses or risks to the amount each individual owner has invested in the corporation. The other types of business organizations are not owned by stockholders. A partnership usually divides the risk among two or three partners. In a sole proprietorship, the owner generally assumes all of the risk. A franchise is a contractual agreement between a parent company and a franchisee to distribute goods and services. SOURCE: BL:003 SOURCE: LAP-BL-001—Own It Your Way (Types of Business Ownership)"

"One benefit of using technology in compliance is that technology is typically more __________ than maintaining manual compliance processes. A. time-consuming B. costly C. efficient D. error-prone"

"C Efficient. Technology can make compliance processes more efficient and effective. Manual compliance processes can be more costly, more time-consuming, and more error-prone. SOURCE: BL:149 SOURCE: PricewaterhouseCoopers. (2011). Integrating technology into your compliance program to improve effectiveness and efficiency. Retrieved September 15, 2017, from http://www.financial-tracking.com/docs/pwc_integrating-technology-into-your-complianceprogram.pdf"

"Which of the following statements is true regarding joint ventures: A. Large corporations are the only business structures that can benefit from joint ventures. B. Joint ventures are used only when it is necessary to raise a lot of capital. C. Joint venture arrangements are usually short-term relationships. D. An independent attorney must always be consulted before signing a joint venture agreement."

"C Joint venture arrangements are usually short-term relationships. A joint venture is an arrangement that involves two or more businesses entering into a relationship by combining complementary resources such as technology, skills, capital, or distribution channels for the benefit of all parties. The relationship is usually short-term and involves the execution of a single project or transaction. A joint-venture arrangement can be used by virtually any type and size of business. Although it is a good idea to have an attorney draw up or review a contractual agreement between both parties, it is not usually required in the United States. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)"

"The nature of an agent's work and the level of an agent's control are factors that determine if a __________ relationship exists. A. principal-collaborator B. tutor-student C. master-servant D. controller-associate "

"C Master-servant. In legal terms, the master-servant relationship refers to the amount of control that a principal (e.g., employer or client) has over an agent (e.g., employee or attorney). Determining if a master-servant relationship exists is an important consideration when addressing a business's legal issues and disputes, especially in cases that involve liability questions. Factors that determine if a master-servant relationship exists include the nature of the agent's work, the level of the agent's control (e.g., decision making), and the agent's level of supervision. Tutor-student, principal-collaborator, and controller-associate are not terms that are widely used to describe agency relationships in law. SOURCE: BL:072 SOURCE: Beatty, J.F., & Samuelson, S.S. (2008). Essentials of business law (3rd ed.) [p. 642]. Mason, OH: Thomson/South-Western."

"Which of the following is an example of a voluntary debtor-creditor relationship: A. Requiring specific information B. Receiving a monetary gift C. Obtaining a loan from a bank D. Owing punitive damages"

"C Obtaining a loan from a bank. The debtor is the individual or business that owes money to another individual or business, which is the creditor. A business that obtains a loan from a bank is entering into a voluntary debtor-creditor relationship. It is voluntary because the business (debtor) is seeking to obtain funds from the bank (creditor) by going through a loan application process. A monetary gift is given without expectations of repayment. A monetary gift and a request for information are not examples of debtor-creditor relationships. In tort cases, the court can order one party to pay punitive damages to the other party. This is an example of an involuntary debtor-creditor relationship. SOURCE: BL:071 SOURCE: BizFilings. (2012, May 24). Understanding the debtor-creditor relationship. Retrieved September 6, 2017, from https://www.bizfilings.com/toolkit/research-topics/running-your- business/understanding-the-debtorcreditor-relationship"

"A basic principle of procedural due process involves __________ before taking action. A. awarding damages B. obtaining witnesses C. providing notice D. creating evidence"

"C Providing notice. Due process is the concept that the government must respect all of the legal rights that are owed to individuals and businesses according to the law of the land. Legal procedure refers to the methods and processes that are used to protect an individual's or business's legal rights. In many societies, these rights include the right to be notified of accusation or lawsuit (providing notice), the right to obtain legal counsel, the right to be heard in court, the right to confront the accuser, etc. Obtaining witnesses is a pretrial activity. Awarding damages is a possible remedy or outcome of civil litigation. Due process involves presenting evidence, not creating it. SOURCE: BL:070 SOURCE: Farlex, Inc. (2016). Due process of law. Retrieved August 24, 2016, from http://legal- dictionary.thefreedictionary.com/due+process+of+law"

"As a primary source of law, federal statutes are enacted by A. administrative agencies. B. the U.S. Supreme Court. C. the U.S. Congress. D. the House of Representatives."

"C The U.S. Congress. The U.S. Congress, which includes the Senate and the House of Representatives, is a primary source of law. It enacts federal statutes (laws). The Supreme Court interprets the laws. The U.S. Congress enacts the formation of administrative agencies. Agencies such as the Food and Drug Administration develop various administrative regulations, which are also primary sources of law. SOURCE: BL:067 SOURCE: Encyclopaedia Britannica. (2016). Congress of the United States. Retrieved September 26, 2016, from https://www.britannica.com/topic/Congress-of-the-United-States"

"What type of technology do businesses use to inspect financial transactions and ensure that they are in compliance with government regulations? A. Domain computing B. Cyber mapping C. Virtual auditors D. Simulation browsers"

"C Virtual auditors. A virtual auditor is a type of compliance technology that uses multiple reasoning processes to help businesses identify errors that affect their compliance with government regulations. Using this technology provides a business with the ability to fix problems quickly and reduce risks associated with noncompliance. Businesses do not use cyber mapping, domain computing, or simulation browsers to inspect financial transactions and ensure that they are in compliance with government regulations. SOURCE: BL:149 SOURCE: Virtual Auditor. (2018). Virtual auditor. Retrieved September 14, 2018, from http://www.virtualauditor.com/"

"Which of the following mutual funds is most likely to be tax inefficient: A. A fund that attempts to match a broad market index B. A fund with a low portfolio turnover rate C. A fund that concentrates on a specialized sector D. A fund with a high portfolio turnover rate"

"D A fund with a high portfolio turnover rate. Regardless of fund type, a fund with a high portfolio rate replaces a high percentage of its investments every year. Every time that the fund sells one item in its portfolio and purchases another, a capital gain or loss is being realized. Because these capital gains or losses occur so frequently, it is difficult for fund investors to successfully time the realizations and manage their overall tax obligations effectively. Specialized sector funds focus on a certain industry, and index funds attempt to match broad market indices. SOURCE: BL:134 SOURCE: Loth, R. (n.d.). Fund I-Q no. 5: Portfolio turnover ratio. Retrieved November 10, 2015, from http://www.investopedia.com/university/quality-mutual-fund/chp7-fund-activity/fund-iq5.asp"

"What type of law is intended to enforce the rules and regulations of governmental agencies: A. Procedural B. Statutory C. Commercial D. Administrative "

"D Administrative. Administrative law deals with the rules and regulations that have been established by governmental agencies. Most governmental agencies have an effect on business in some manner, such as issuing licenses or prohibiting unfair trade practices. Administrative law implements the rules and regulations, which also involves resolving disputes. Statutory, commercial, and procedural are not types of law that enforce the rules and regulations of governmental agencies. SOURCE: BL:074 SOURCE: Cornell University Law School. (2016). Administrative law. Retrieved September 14, 2016, from https://www.law.cornell.edu/wex/administrative_law"

"Consumers of hospitality products have the right to expect businesses to provide goods and services that A. maintain international requirements. B. meet each individual's standards. C. furnish several amenities. D. are safe and clean."

"D Are safe and clean. Hospitality products differ a great deal and include such items as a meal in a restaurant or a sleeping room at a lodging facility. The guests have a right to expect that the facility provides clean linens and disinfected bathrooms. Guests expect that the locks on the doors are adequate to keep them safe from intruders or that measures have been taken to keep guests from tripping over loose carpet. Guests have the right to expect that the food that they purchase is safe and free from bacteria. Since each individual has different standards, it is not realistic to expect hospitality businesses to meet everyone's standards. For example, a hotel restaurant cannot create every menu entree to make each guest happy. The restaurant must consider several factors including the target market and costs associated with the food. Amenities are the ""extras"" that a hospitality business provides—the extras that guests do not usually expect. If guests do not expect certain amenities, they do not have rights to amenities. Each country and/or local government has different regulations that hospitality businesses must follow. SOURCE: BL:135 SOURCE: Rajaram, A. (2014, July 15). 10 basic things a hotel must offer guests. Retrieved October 1, 2015, from http://www.cntraveler.com/stories/2014-07-15/10-basic-things-a-hotel-must-offer- guests"

"When filing a tort against a business, the plaintiff must establish that the defendant A. violated the doctrine of sovereign immunity. B. damaged property intentionally. C. conspired with a competitor. D. breached the duty of care."

"D Breached the duty of care. The duty of care is the basic principle that expects all individuals and businesses to exhibit socially responsible behavior by using caution to prevent harm and by watching out for one another. A tort is a private wrongdoing that potentially harms another person or entity. If a business or one of its employees breaches the duty of care, the business may be held liable for the tort. However, the plaintiff must have grounds or proof that establishes that the business or its employee (defendant) has committed a wrongful act, thereby breaching the duty of care. Intentional damage and conspiring with a competitor (collusion) are types of torts. The doctrine of sovereign immunity is the universally accepted principle that each nation has the right to manage its own government and develop its own laws. SOURCE: BL:069 SOURCE: Gordon, J.M. (n.d.). Breach of duty of care. Retrieved September 10, 2018, from https://thebusinessprofessor.com/knowledge-base/breach-of-duty-of-care/"

"Which of the following reasoning processes does a virtual auditor use to identify financial system transactions that are very similar to each other but are not exactly alike: A. Cross-source reasoning B. Contextual reasoning C. Temporal reasoning D. Comparative reasoning "

"D Comparative reasoning. A virtual auditor, which is a type of compliance technology, uses multiple reasoning processes to continuously review financial transactions and processes to identify errors and/or compliance violations. Comparative reasoning is used to identify financial system transactions that are very similar to each other but not exactly alike. For example, after identifying two close matches, comparative reasoning is used to determine if one transaction was entered multiple times or if the two entries in the system are for two separate transactions. Contextual reasoning is used to consider each financial transaction's circumstances and how they compare to historical patterns in the system. Temporal reasoning involves considering the timing of a financial transaction. Cross-source reasoning is used to compare financial transactions and processes in multiple financial systems. SOURCE: BL:149 SOURCE: Master Control Inc. (2016). Virtual audit. Retrieved September 14, 2016, from http://www.mastercontrol.com/audit-management/virtual.html "

"What type of law focuses on issues regarding the promises that businesses make with their customers, vendors, and other business partners? A. Patent B. Constitutional C. Probate D. Contract"

"D Contract. Contract law is an area of law that governs oral and written agreements—promises—that involve the exchange of goods, services, money, and/or property. Constitutional law is a body of law that addresses issues related to the Constitution and Constitutional rights. Probate is the legal process of validating a will and distributing assets to beneficiaries. A patent protects an owner's invention from use and distribution by unauthorized individuals. SOURCE: BL:001 SOURCE: Thomson Reuters. (2016). Contract law. Retrieved August 24, 2016, from http://smallbusiness.findlaw.com/business-contracts-forms/contract-law.html"

"What form of business ownership is best to use when the business owners have difficulty acquiring enough money to pay for the startup costs and initial operating expenses? A. Partnership B. Sole proprietorship C. Franchise D. Corporation"

"D Corporation. By starting a corporation, the business owners can sell stock to raise the necessary capital to cover business expenses. By owning the majority of the stock themselves, they can still control the business. A sole proprietorship is a business owned by one person. A major disadvantage of a partnership is that the capital available is limited to the partners' resources, so partnership is not the best option for the business owners. A franchise owner buys the right to sell the goods or services of the parent company. Franchises are business ownership options rather than legal business structures. SOURCE: BL:003 SOURCE: LAP-BL-001—Own It Your Way (Types of Business Ownership)"

"David and Ella are in business together and each of them has unlimited liability. David and Ella's business is an example of a A. franchise. B. corporation. C. joint venture. D. general partnership."

"D General partnership. A general partnership is a type of partnership agreement in which all partners are liable for a business's losses. A corporation is a form of business ownership that is owned by stockholders who have purchased units or shares in the company. A joint venture is an arrangement that involves two or more businesses entering into a relationship by combining complementary resources for the benefit of all parties. The joint-venture relationship is usually for a short term or for a single project. A franchise is a contractual agreement between a parent company and a franchisee and allows the franchisee to distribute the parent company's goods and services for a certain amount of money. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)"

"The most significant barriers that many companies face when implementing integrated governance, risk, and compliance (GRC) technology are the perceived A. centralization of business risk and lack of adequate technology solutions. B. high cost and overabundance of adequate technology solutions. C. high cost and overdependence on a single GRC platform. D. high cost and lack of evidence of return on investment."

"D High cost and lack of evidence of return on investment. Although GRC technology can be very beneficial for business, many companies encounter difficulties when implementing the technology. The most significant barriers are the perceived high cost of the technology and a lack of evidence that the technology will provide a sufficient return on investment. Other barriers include a lack of adequate technology solutions, the absence of a common risk management/compliance "language," and poor change management during the implementation process. Benefits of GRC technology include the use of a single GRC platform, increased communication among risk management teams, and centralized risk and compliance oversight. Centralized business risk is neither a barrier nor a benefit of GRC technology. SOURCE: BL:149 (CC:004) SOURCE: Gracyalny, S. (2011, January 11). Integrated GRC: Understanding the benefits and beginning the journey to obtain them. Retrieved November 10, 2015, from http://www.corporatecomplianceinsights.com/integrated-grc-by-scott-gracyalny/"

"Frank is an officer of the MUD corporation who recently sold his shares of MUD stock based on confidential company information. Frank is guilty of illegal A. phishing. B. affinity fraud. C. accounting fraud. D. insider trading."

"D Insider trading. Insider trading occurs when a company's owners, directors, or key management trade its stock. In some cases, insider trading is legal. It is illegal, however, when these individuals trade their company's stock based on information that is not disclosed to the public. Affinity fraud is an investment scam in which the scammer claims to be a member of the group s/he is targeting. Affinity fraud often takes the form of a Ponzi or pyramid scheme. Accounting fraud occurs when a company or organization knowingly publishes incorrect information on its financial statements. Phishing is an online identity theft scam that fools its victims into believing they are submitting sensitive, personal information (such as credit card numbers or bank passwords) to a legitimate website. SOURCE: BL:133 SOURCE: QS LAP 50—Play by the Rules"

"A business that fails to protect its employees from unnecessary risk or health hazards on the job may be sued for A. incompetence. B. misrepresentation. C. libel. D. negligence."

"D Negligence. A business might be sued for negligence if it does not take reasonable precautions to protect workers from risks or health hazards on the job. The basis of negligence is that the problems could have been easily avoided if the business had made some minor adjustments. Consequently, businesses usually try to make the workplace as safe as possible in order to avoid being sued for negligence. Misrepresentation involves making unrealistic claims about products. Libel is making false statements that harm an individual's reputation. Incompetence involves not having the skills or abilities necessary to perform satisfactorily. SOURCE: BL:001 SOURCE: Beatty, J.F., & Samuelson, S.S. (2008). Essentials of business law (3rd ed.) [pp. 143-144]. Mason, OH: Thomson/South-Western."

"Charice creates a new kind of glue using a new chemical formula that she invented. She wants to make sure that none of her competitors use the formula for their products. To protect the formula, Charice should __________ it. A. prototype B. copyright C. trademark D. patent"

"D Patent. Patents protect inventions and prevent others from making, using, or selling that invention. A new chemical formula for glue is a new invention, so Charice should obtain a patent to protect it. Trademarks protect the names of products and prevent other companies from using those names for their own products. Copyrights protect original works, such as music, paintings, literary works, and television. A prototype is an early test or sample of a product, not a form of protection for intellectual property. SOURCE: BL:051 SOURCE: AllLaw (2018). Protecting your intellectual property: How and why. Retrieved September 12, 2018, from http://www.alllaw.com/articles/intellectual_property/article5.asp"

"What do business owners consider when they select a business ownership structure? A. Product versatility, advertising strategies, and personal circumstances B. Product versatility, financial needs, and advertising strategies C. Personal circumstances, type of business, and product mix D. Personal circumstances, financial needs, and the type of business"

"D Personal circumstances, financial needs, and the type of business. Because each business owner's situation is unique, the owner must consider the type of business being operated, the amount of capital that is needed to start the business, and the owner's personal circumstances. For example, an independently wealthy, single person who starts a consulting business has different needs than a chef who has little capital and wants to open a full-service restaurant. Product versatility, advertising strategies, and product mix are not generally considered when determining the appropriate business ownership structure. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)"

"Jane is the owner of a pizza shop associated with a national chain of pizza restaurants. She established her business in a regional supermarket. The pizza shop is referred to as a A. host franchise. B. strategic alliance. C. master licensee. D. piggyback franchise."

"D Piggyback franchise. Piggyback franchising is a form of ownership in which a retail franchise operates within the facilities of another store. The host is the retailer that allows the franchise to operate within its facilities. The host does not necessarily have to be a franchised retailer. A strategic alliance, sometimes called a joint venture, is an arrangement that involves two or more businesses entering into a relationship by combining complementary resources such as technology, skills, capital, or distribution channels, for the benefit of all parties. The relationship is usually short-term or for a single project or transaction. Master licensee refers to a person or firm who helps franchisors find franchisees in a particular region or territory. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)"

"From a legal standpoint, hospitality and tourism customers have the right to expect businesses in this industry to take A. total responsibility for accidents. B. no risks. C. insurance out of each customer. D. reasonable care."

"D Reasonable care. When hospitality and tourism businesses act in a way that a reasonable hospitality and tourism business would have acted, the business exhibits reasonable care. If hospitality and tourism businesses can prove that they acted with reasonable care, they are not fined by the courts. Otherwise, the courts can find them guilty of negligence, and they would be charged a fine. It's not possible for hospitality and tourism businesses to avoid all risks. There is always the chance that something bad can happen. Hospitality and tourism businesses are not insurers of their customers nor do they take out insurance on each customer. Instead, they take out liability insurance that transfers risk to an insurance company. Hospitality and tourism businesses act so that they limit their responsibility for accidents. SOURCE: BL:135 SOURCE: Jefferies, J.P., & Brown, B. (2010). Understanding hospitality law (5th ed.) [pp. 139-141]. Lansing, MI: American Hotel & Lodging Educational Institute."

"Which of the following is an example of a preventive internal control: A. Physical inventories B. Data reconciliations C. Variance analyses D. Segregation of duties"

"D Segregation of duties. Several types of internal controls are used in compliance. Preventive controls such as the segregation of duties attempt to prevent unwanted events (noncompliance) from occurring. Detective controls, on the other hand, are used to identify and document noncompliance. Data reconciliations, variance analyses, and physical inventories are all detective internal controls. Corrective controls are used after noncompliance has been identified. They may include disciplinary action or additional training. SOURCE: BL:148 SOURCE: Bradford, C. (2017, November 21). Examples of internal controls. Retrieved September 13, 2018, from https://smallbusiness.chron.com/examples-internal-controls-57039.html"

"After only her seventh month in business, Martha realized that her new business venture was paying off, and she would be taking home a $1,000 profit for the month. Finally, she could reap the financial rewards of being the boss. This is an advantage of what type of business ownership? A. Merger B. Partnership C. Corporation D. Sole proprietorship "

"D Sole proprietorship. This is a form of business ownership in which the business is owned by only one person, and that person receives any profits made by the business. A merger is the absorption of one company by another rather than a type of business ownership. A partnership is owned by two or more people, and profits would be split between them. A corporation is owned by people who own stock in the business, and they split the profits. SOURCE: BL:003 SOURCE: LAP-BL-001—Own It Your Way (Types of Business Ownership)"

"Which of the following statements is true of corporations: A. They have limited life spans. B. They cannot sue or be sued. C. Owners are liable for the corporation's actions. D. They function independently of their owners."

"D They function independently of their owners. The U.S. Supreme Court defines a corporation as an "artificial being, invisible, intangible, and existing only in contemplation of the law." A corporation functions independently of its owners and has legal rights, duties, and powers. A corporation is able to sue and be sued. Since the corporation is considered separate from its owners, the owners are not liable for its actions. Corporations have unlimited life spans. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)"

"Which of the following statements about the impact of law on business is accurate: A. Businesses are governed by law at the local, national, and international levels. B. Businesses are not governed by criminal law because it only applies to individuals. C. Businesses should focus on corporate laws enacted and enforced by their local government. D. Businesses should focus on ethical rather than legal issues required by national law."

A Businesses are governed by law at the local, national and international levels. Businesses have to be aware of many laws that affect the individuals they conduct business with as well as the communities they conduct business in. Businesses do have to concern themselves with criminal law; they can be held accountable for criminal acts committed by employees while conducting business. Corporate laws are just one type of law that businesses need to be concerned with; there are many others. Companies should concern themselves with ethical behavior as well as legal issues. SOURCE: BL:161 SOURCE: Samuelson, B. (2012). Essentials of business law (3rd ed.) [pp. 9-13]. Mason, OH: Thomson Higher Education.

"The person who files a lawsuit is the A. plaintiff. B. defendant. C. lawyer. D. judge."

A Plaintiff. The plaintiff is the person in a case who makes a claim against another person or organization and starts the litigation process. The defendant is the person who is accused of breaking the law. The lawyer is the person who represents the plaintiff and/or defendant. The judge is the person who rules on a case. SOURCE: BL:160 SOURCE: Stoel Rives, LLP. (2012, January 24). How does a lawsuit work? Basic steps in the civil litigation process. Retrieved September 19, 2018, from https://www.stoel.com/how-does-alawsuit-work-basic-steps-in

"""To form my business, I used all of my savings and borrowed from the bank, and I'm personally liable for all of the debts."" This is an example of which of the following forms of business ownership: A. Sole proprietorship B. Partnership C. Corporation D. Cooperative"

A Sole proprietorship. A sole proprietorship is a form of business ownership in which the business is owned by one person. Sole proprietors finance their own businesses, run them, and are personally liable for all losses. A partnership is a form of business ownership in which the business is owned by two or more persons. A corporation is owned by stockholders, and a cooperative is owned by its members. SOURCE: BL:003 SOURCE: LAP-BL-001—Own It Your Way (Types of Business Ownership)

"Jon sues his former employer for harassment. In what situation would the employer be likely to offer Jon a settlement? A. The employer does not think it will be able to win the case. B. The employer knows it will be able to win the case. C. The employer wants the case to go to court. D. Jon does not think he will be able to win the case."

A The employer does not think it will be able to win the case. A party may offer a settlement if it believes it has little chance to win a case. In this example, Jon's employer does not believe it will win, so it may offer a settlement. A settlement is a way to avoid the case going to court. Jon may or may not think he will win the case, but this does not influence his former employer's actions. SOURCE: BL:159 SOURCE: FindLaw. (2017). Resolution before trial: Settlement. Retrieved September 13, 2017, from http://injury.findlaw.com/accident-injury-law/resolution-before-trial-settlement.html

"Why might parties choose to use mediation to solve a dispute? A. To avoid going to court B. To spend more money C. To do less work D. To get a less personal result"

A To avoid going to court. Parties may choose mediation if they want to avoid taking their case to court. Mediation often costs less money and results in a more personalized result. Mediation often means doing more work to resolve the dispute. SOURCE: BL:161 SOURCE: Dysart, K. (1995-2016). Why to choose mediation over litigation. Retrieved September 19, 2018, from http://www.hg.org/article.asp?id=18286

"A primary responsibility of administrative law is to A. establish congressional/parliamentary committees. B. enforce agency regulations. C. interpret constitutional laws. D. overturn lower courts' decisions."

B Enforce agency regulations. Administrative law deals with the rules and regulations that have been established by governmental agencies. Government and independent agencies have the authority to enact and enforce regulations for various administrative functions, including aviation, taxation, and commerce. The legislative branch of government establishes congressional/parliamentary committees. The judicial branch of government interprets constitutional law and in some instances may overturn a lower court's judicial decision. SOURCE: BL:074 SOURCE: Beatty, J.F., & Samuelson, S.S. (2008). Essentials of business law (3rd ed.) [pp. 88-90]. Mason, OH: Thomson/South-Western.

"The Tafoya Company has discovered that the Bremen Company illegally used Tafoya's trademark. To pursue a legal case for financial compensation, what should Tafoya's legal counsel do first? A. Conduct an examination of discovery to interview all parties involved in the illegal use of the Tafoya trademark. B. File a formal complaint to the court alleging the Bremen Company's illegal use of the Tafoya trademark. C. Issue a summons requiring the Bremen Company to respond to allegations of misusing the trademark. D. Request that a pretrial conference date be set to clarify all the legal issues that will be discussed during the trial."

B File a formal complaint to the court alleging the Bremen Company's illegal use of the Tafoya trademark. The first step in a legal case is filing a formal complaint. All other processes occur after the complaint has been filed. A pretrial cannot be established until the case has been created through the filing of a complaint, a response from the defense, and the completion of the discovery process, including interrogatories and examinations. SOURCE: BL:160 SOURCE: SmallBiz.ca. (2016, September 19). The litigation process—step by step. Retrieved September 19, 2016, from http://www.smallbiz.ca/2009/04/08/the-litigation-process-step-bystep/

"What effect do some environmental laws have on businesses? A. Require more employees B. Increase operating costs C. Control exterior landscapes D. Limit equipment purchases"

B Increase operating costs. Environmental laws are intended to conserve and protect the natural environment. Many of these laws have an impact on the way businesses operate by requiring them to decrease pollution or control waste. As a result, businesses often need to spend money to comply with the rules and regulations, which leads to an increase in operating costs. For example, a business might need to purchase pollution-control devices. Environmental laws do not require businesses to hire more employees or develop exterior landscapes. The laws do not limit equipment purchases. In fact, businesses may need to buy more equipment to comply with the laws. SOURCE: BL:073 SOURCE: U.S. Chamber of Commerce. (2015). Increasing environmental regulation. Retrieved September 23, 2015, from https://www.uschamber.com/regulations/increasingenvironmental-regulations

"How can government laws and regulations result in economic risk? A. They can make businesses less safe. B. They can reduce a business's profits. C. They can protect consumers. D. They can result in environmental problems."

B They can reduce a business's profits. Although government regulations are designed to protect the economy, the environment, and the consumer, they can sometimes result in economic risk. Laws or regulations that require businesses to pay for environmental clean-ups or special licenses can reduce a business's profits. And, if a government agency recalls a product, it can cost a company a huge amount of money. Government laws and regulations are typically designed to make businesses safer, to protect customers, and to protect the environment. SOURCE: BL:001 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2009). Marketing essentials (3rd ed.) [p. 719]. Woodland Hills, CA: Glencoe/McGraw-Hill.

"Which of the following is a reason that someone might want to settle a legal case: A. To avoid a judge's approval B. To avoid a costly trial C. To damage someone's reputation D. To have a lengthy trial"

B To avoid a costly trial. Many parties opt for settlements because they wish to avoid costly, lengthy trials. Trials can often damage a company's or person's reputation. Some parties settle because they wish to minimize damage to their reputations. A judge still must approve settlements. SOURCE: BL:159 SOURCE: Ellis-Christensen, T. (2015, September 2). What is a legal settlement? Retrieved September 14, 2015, from http://www.wisegeek.com/what-is-a-legal-settlement.htm

"A group of individuals organized by a charter and permitted to form a business that functions as a legal entity is known as a A. licensing arrangement. B. partnership. C. corporation. D. sole proprietorship."

C Corporation. Corporations can be complex to form, but they provide protection for their owners because each owner's liability is limited to the amount of his/her investment. A partnership is a business owned by two or more people. A sole proprietorship is a type of business ownership in which only one person owns and manages the business. A licensing arrangement is a business structure that requires the authorization or permission from an owner to another entity to use trademarked, copyrighted (e.g., logo, name), or patented material for a specific activity, during a specific time period, for the profit of both parties. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)

"Limited liability is a characteristic of what form of business ownership? A. Sole proprietorship B. Partnership C. Corporation D. Joint proprietorship"

C Corporation. Stockholders in corporations have limited liability; that is, their losses are limited to the amount of money that they have invested in the business. Partnerships and sole proprietorships have unlimited liability, meaning that the business owners are personally liable for debts incurred by the business. Joint proprietorship is not a form of business ownership. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Business Ownership)

"As the principal in an agency business relationship, Lynn tells Bob to take specific action on her behalf under certain circumstances. What type of authority has Lynn given Bob? A. Temporary B. Provisional C. Express D. Unlimited"

C Express. An agent is a person or business that is authorized to conduct certain business activities with third parties on the behalf of another person or business (principal). When the principal provides the agent with express authority, the principal gives specific directions, often in writing, to the agent who is handling certain business matters for the principal. Provisional, temporary, and unlimited are not widely used terms to describe types of legal authority in agency relationships. SOURCE: BL:072 SOURCE: Tatum, M. (2015, September 10). What is express authority? Retrieved September 23, 2015, from http://www.wisegeek.com/what-is-express-authority.htm

"A debtor-creditor relationship exists when A. a contract is invalidated. B. a sale is paid in full. C. interest is charged. D. stocks are liquidated."

C Interest is charged. When an individual or business charges interest on money that another individual or business borrows, a debtor-creditor relationship exists. An invalid contract and a sale that is paid in full at the time of transaction do not establish a debtor-creditor relationship. In some situations, a debtor may liquidate stocks to pay a creditor; however, this does not always occur. SOURCE: BL:071 SOURCE: Encyclopedia Britannica. (2017). Debtor and creditor. Retrieved September 13, 2017, from https://www.britannica.com/topic/debtor-creditor-relationship

"One of the main functions of the legal procedure is to A. establish laws. B. enact legislation. C. resolve disputes. D. dissolve businesses."

C Resolve disputes. The legal procedure is the process of reviewing disputes or claims and resolving them in a fair manner. Businesses are often involved in disputes with other entities, such as suppliers or competitors. If a business believes it has been wronged by another, the business follows the appropriate legal procedure to resolve the issue. Enacting legislation, establishing laws, and dissolving businesses are not the main functions of the legal procedure. SOURCE: BL:070 SOURCE: Miller, R.L., & Jentz, G.A. (2006). Business law today: Standard edition (7th ed.) [p. 16]. Mason, OH: Thomson Learning.

"The litigation process begins when A. the parties reach a settlement. B. the defendant files an answer with the court. C. the plaintiff files a complaint with the court. D. an appeal is considered."

C The plaintiff files a complaint with the court. The litigation process begins when the plaintiff files a complaint with the court. The defendant cannot file an answer until the plaintiff files a complaint. Settlement and appeals occur later in the process. SOURCE: BL:160 SOURCE: Cornell University Law School Legal Information Institute. (n.d.). Litigation. Retrieved September 13, 2017, from https://www.law.cornell.edu/wex/litigation

"Which of the following words most accurately describes arbitration: A. Temporary B. Nonconsensual C. Biased D. Confidential"

D Confidential. Arbitration is private and not open to the media, so parties may choose arbitration if they want to keep information confidential. Arbitration is consensual. Both parties must sign an agreement assenting to arbitration. Arbitration is neutral, not biased. Arbitration is final and binding, not temporary. SOURCE: BL:161 SOURCE: Ellis, J. (2015, August 14). What is an arbitration? Retrieved September 14, 2015, from http://www.wisegeek.com/what-is-an-arbitration.htm

"Marsha wants to invest her savings in a business. However, she wants to protect all of her personal assets. Which type of business ownership would be most appropriate for Marsha? A. Sole proprietorship B. Franchise C. Partnership D. Corporation"

D Corporation. A corporation is a form of ownership owned by stockholders who have purchased stock. The liability of each owner is limited to the amount invested. A franchise is an agreement between a parent company and a franchisee to distribute goods and services. A partnership is a form of business ownership owned by two or more persons. A sole proprietorship is a form of business ownership in which the business is owned by one person. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Business Ownership)

"Frederic used to own the only pizza place in town—until a new place opened up. Even though Frederic's never been to the new pizza place, he tells everyone he meets that the new place uses inferior ingredients and has been investigated by the health department. He even leaves negative reviews of the pizza place online. Which business tort do Frederic's actions fall under? A. Wrongful interference B. Unfair competition C. Copyright infringement D. Disparagement"

D Disparagement. Frederic is making false statements about the quality of the new pizza place's food and the cleanliness of the restaurant. He is also leaving false negative reviews of the pizza place online. This constitutes disparagement. This is not an example of unfair competition or wrongful interference. Frederic is not infringing on the new pizza place's copyright. SOURCE: BL:069 SOURCE: LaMance, K. (2018, February 2). Business torts. Retrieved September 19, 2018, from https://www.legalmatch.com/law-library/article/business-torts.html

"A business owned by two or more persons who have unlimited liability is called a A. sole proprietorship. B. corporation. C. cooperative. D. general partnership."

D General partnership. The purpose of forming a partnership generally is to combine the capital, experience, and abilities of two or more people. A business owned by one person is called a sole proprietorship. A corporation is a form of business ownership in which a group of individuals is organized by a charter granted by the state. Corporation owners, or stockholders, have limited liability. A cooperative supplies goods and services to its user-owners. SOURCE: BL:003 SOURCE: BL LAP 1—Own It Your Way (Types of Business Ownership)

"Which of the following is an important factor that affects the legal procedure: A. Larceny B. Freedom C. Misdemeanor D. Jurisdiction"

D Jurisdiction. Jurisdiction involves whether a specific court has the authority to hear a case. Not all courts are able to hear all types of cases. For example, depending on the business dispute, a legal procedure might take place in a state court or a federal court. Also, a court in one state might, or might not, have jurisdiction over a business that is incorporated in another state. Freedom is not a factor that affects the legal procedure. Misdemeanor and larceny are types of crimes. SOURCE: BL:070 SOURCE: Cornell University Law School. (2016). Jurisdiction. Retrieved September 15, 2016, from https://www.law.cornell.edu/wex/jurisdiction

"To cross the street, you must use a crosswalk and wait until the appropriate traffic signal appears. This is an example of a A. jurisdiction. B. penalty. C. regulation. D. law."

D Law. The law is commonly understood as a set of rules that, if violated, results in punishment or penalty. In the United States, laws are the products of written statutes passed by a governing body, such as the United States Congress or state legislatures. Pedestrians must follow traffic laws when crossing the street. Penalties are negative consequences that occur when a law has been broken. Regulations are standards and rules that dictate how laws will be enforced. Jurisdiction is the authority to decide how the law applies and to enforce the law. SOURCE: BL:163 SOURCE: LAP-BL-163—Laying Down the Law (Complying With the Spirit and Intent of Laws and Regulations)

"When entering into a contract with another business, an agent is the party that represents the A. consultant. B. defendant. C. opposition. D. principal."

D Principal. In the legal system, an agent is a person who acts on the behalf of his/her client. The client is called the principal. A defendant is a person who is charged with a tort or crime. Opposition refers to the other party involved in a contract or dispute. A consultant is an advisor. SOURCE: BL:072 SOURCE: HG.org. (1996-2018). Agency law - Agent law. Retrieved September 19, 2018, from https://www.hg.org/agency-law.html