Business Law - CH 14

Identify the advantages of a partnership as a form of business organization. (Check all that apply.)

A partnership may operate in more than one state without a license to do business. Partnerships generally are subject to less regulation than are corporations. Partnerships are not a tax-paying entity.

Joel, a manager at a retail store, buys new stock from a wholesale dealer and uses an oral consent from his employer to charge the expenses to his company's account with the dealer. Identify the form of contractual authority held by Joel in this scenario.

Actual Authority

In the context of an employer's tort liability from the actions of agents, identify the true statements about respondeat superior cases. (Check all that apply.)

An employer who must pay for an employee's tort under respondeat superior may legally sue the employee for reimbursement. Frolic and detour is a valid defense to the strict liability of respondeat superior.

Identify a guideline that must be followed when selecting a name for a partnership.

Any word that would imply the existence of a corporation must not be used in the name.

Match the types of business organizations (in the left column) with their examples (in the right column).

Closely held organizations Family-operated and family-owned businesses Publicly held organizations Businesses whose stock is traded on a public exchange

Match the types of business organizations (in the left column) with their descriptions (in the right column).

Closely held organizations They are owned by only a few persons. Publicly held organizations They may be owned by hundreds of persons.

Match the terms related to the continuity of a partnership (in the left column) with their descriptions (in the right column).

Dissolution matches Choice It means the legal form of an organization does not exist anymore. Termination matches Choice It involves the liquidating or winding up of a business.

Which of the following is true of the partners in a general partnership?

Each partner has an equal voice in the firm's affairs unless the agreement provides to the contrary.

Identify the techniques used by corporations to avoid the double taxation of corporate income.

Electing to file under Subchapter S of the Internal Revenue Code Providing expense accounts for employees to purchase travel, food, and entertainment

True or false: A dissolution destroys the business of a partnership.

False

True or false: Benefit corporations are known to focus on profit maximization.

False

True or false: In the context of an employer's contractual liability arising from an agent's acts, oral instructions given by the employer to an employee cannot create actual authority.

False

True or false: Simply alleging that a person is the sole owner of a corporation that is engaged in wrongful activity will result in a piercing of the corporate veil.

False

Identify the disadvantages of the corporate form of organization. (Check all that apply.)

Franchise taxes and license fees are assessed against corporations. The cost of forming and maintaining a corporation is significant. Corporations are subject to more governmental regulation at all levels than are other forms of business.

Identify the most significant creation-related issues that a businessperson faces when establishing a business organization. (Check all that apply.)

How long it will take to build a particular organization How much paperwork is involved

Identify a true statement about corporations.

If it wishes to conduct business in states other than the state of incorporation, it must be licensed in these foreign states.

Which of the following is true of a corporation?

If it wishes to conduct business in states other than the state of incorporation, it must be licensed in these foreign states.

In the context of an employer's contractual liability arising from an agent's acts, match the forms of contractual authority (in the left column) with their features (in the right column). Instructions

Implied authority matches Choice It arises from the position of authority held by an agent and by the history of actual authority situations. Apparent authority matches Choice It may arise in a situation where a principal terminates an agent's authority but fails to inform third parties about the termination.

In the context of the creation of corporations, identify the true statements about a corporate name. (Check all that apply.)In the context of the creation of corporations, identify the true statements about a corporate name. (Check all that apply.)

It is an asset and an aspect of goodwill. It typically includes one of the following words or end with an abbreviation of them: "corporation," "company," "incorporated," "limited."

Identify the true statements about a limited liability company. (Check all that apply.)

It is created through filings like those used when creating a corporation. Its owners have more flexibility than those of an S corporation.

Identify a true statement about a derivative suit brought by a minority shareholder in a closely held corporation.

It may seek to collect damages for the corporation.

Identify the true statements about a non-profit organization. (More than one option may be correct.)

It must return any profits made to the organization to be used for future operations. It is not created for the personal benefit of owners or members.

Identify the true statements about the ratification of an unauthorized contract. (Check all that apply.)

It requires the voluntary consent of the principal to honor the contract. It legally binds the principal to the contract.

What are the advantages of the corporate form of organization? (Check all that apply.)

Many investors may be conveniently brought together. Ownership may be divided into many unequal shares. Shareholders may be employees entitled to such benefits as workers' compensation.

Identify the groups present in the corporate form of organization. (Check all that apply.)

Officers Shareholders Directors

occurs when a principal voluntarily decides to honor an agreement, which otherwise would not be binding due to an agent's lack of authority.

Ratification

Organizations that are subject to election made possible through the language of Subchapter S of the Internal Revenue Code are known as

S corporations

In the context of agency law, identify the true statements about operating an organization through agents.

The actions of agents can have significant consequences to the business organization. The legal concepts concerned with the actions of agents are referred to as agency law.

Identify a true statement about the three interacting parties involved in the application of agency law.

The actions undertaken by agents implicate contract, tort, or criminal law.

What are the factors that should be considered when selecting the best organizational form for a particular business activity? (Check all that apply.)

The control of decisions The continuity of the organization The cost of creating the organization

Identify a true statement about a limited partnership.

The limited partners have no right to participate in management.

In the context of the creation of a corporation, identify the information contained in the articles of incorporation. (Check all that apply.)

The proposed corporation's period of duration The number of authorized shares in the organization The proposed name of the corporation

Identify a true statement about limited partners.

They may assign their interests to others without dissolving the limited partnership.

In the context of an employer's contractual liability arising from an agent's acts, match the types of partnerships (in the left column) with their features (in the left column). Instructions

Trading partnership matches Choice A partner has the implied authority to borrow money in the usual course of business and to pledge the credit of the firm. Nontrading partnership matches Choice A partner requires actual authority to borrow money in the usual course of money and to pledge the credit of the firm.

True or false: The personal liability of the owners should be taken into account when selecting the best form of organization for one's business.

True

Identify a situation that leads to double taxation on corporate income.

When a corporation is dissolved and its assets are distributed as capital gains to shareholders

Any change in the ownership of an organization that changes the legal existence of the organization is known as _____.

a dissolution

In the context of taxation of corporations, a situation of double taxation occurs when _____.

a dividend received by shareholders is taxed again after being taxed at the corporate level

If a corporate entity is disregarded by its corporate officers, directors, and stockholders themselves, so that there is such a unity of ownership and interest that separateness of the corporation has ceased to exist, the - theory will be followed and the corporate veil will be pierced.

alter ego

The formal application for a corporate charter is called the

articles of incorporation

A formal agreement explicitly stated among the parties entering into a partnership and drafted into a formal document is known as the

articles of partnership

The use of sole proprietorship as a business organization is very limited because it _____.

cannot be created by multiple owners

A benefit corporation is a business organization that _____.

combines aspects of profit and non-profit organizations

An issue of major importance to owners of a business organization is ____ , so much so their own egos often insist on it.

control

Many individuals prefer the corporate form of organization because _____

control may be held by those with a minority of the investment

Many individuals prefer the corporate form of organization because _____.

control may be held by those with a minority of the investment

As a form of business, a corporation may not be always beneficial because _____.

corporate income may be subject to double taxation

In the context of the different forms of business organizations, an artificial, intangible entity created under the authority of a state's law is known as a(n)

corporation

A partnership is a preferable form of business organization because _____.

costs of formation are not significant

In the context of the significant factors one should consider when selecting the best organizational form for a business activity, _____ refers to the legal steps necessary to form a particular business organization.

creation

To avoid the double taxation of corporate income, it is advisable for a corporation to _____.

deduct reasonable salaries paid to corporate officials in computing the taxable business income

If the majority in a closely held organization is oppressing the rights of the minority shareholders or acting illegally, a minority shareholder may bring a lawsuit on behalf of the corporation. This lawsuit is known as a(n)

derivative suit

A partnership is a form of business organization that _____.

does not require permission from each state in which it does business

Non-profit organizations differ from corporations in that non-profits are

exempted from paying tax on income

True or false: An individual and a corporation cannot agree to create a business in the form of a partnership.

false

A partnership is advantageous as a form of business organization because it _____.

guarantees each partner an equal voice in management unless there is a contrary agreement

A feature of the partners in a general partnership is that they _____.

have unlimited liability for their organization's debts

A partner in a trading partnership need not have actual authority to buy and sell commodities, rather they have authority to do so.

implied

The authority of an agent bestowed informally upon them by the position they hold in the company and engaging in the normal course of business for that position would be considered ____ authority.

implied

A corporation is created by a state issuing a charter upon the application of individuals known as

incorporators

A feature of a partnership is that it _____.

is easily formed when compared to other forms of business organizations with the exception of a sole proprietorship

A characteristic of sole proprietorship is that it _____.

is the easiest business organization to create

A feature of a limited liability company is that _____.

it is treated as a nontaxable entity for federal income tax purposes

In the context of the factors that need to be considered when selecting the best organizational form for a business activity, the meaning of the word "continuity" becomes associated with the stability of the organization when one questions the _____.

manner in which the existence of the organization relate to its owners

An agreement between two or more persons to share a common interest in a commercial endeavor and to share profits and losses is known as a(n)

partnership

Any time an employee is liable for tortious acts in the scope of employment, the employer is also liable. This is because of the tort doctrine of _____.

respondeat superior

A feature of the shareholders of S corporations is that they are _____.

responsible for accounting on their individual income tax returns for their share of their organization's profits or losses

The members of the board of directors of a corporation are elected by the _____.

shareholders

The factor of control in a business organization concerns _____.

who is managing the organization