LEGAL ENV OF BUS - CH 14 STUDY

Identify the disadvantages of partnership as a form of business organization.

- A partnership is dissolved any time a partner ceases to be a partner, regardless of whether the reason is withdrawal or death. - Only a limited number of people can be partners for practical reasons.

In the context of the creation of a limited partnership, identify the true statements about a limited partnership certificate.

- It contains the name of the partnership and the character of the business. - It must be recorded in the county where the partnership has its principal place of business.

What are the advantages of the corporate form of organization?

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

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

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

In the context of the creation of a corporation, identify the information contained in the articles of incorporation.

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

Implied authority

Choice It arises from the position of authority held by an agent and by the history of actual authority situations.

Identify the disadvantages of the corporate form of organization.

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

Identify the most significant creation-related issues that a businessperson faces when establishing a business organization.

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

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 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."

Apparent authority

It may arise in a situation where a principal terminates an agent's authority but fails to inform third parties about the termination.

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 the ratification of an unauthorized contract

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

Identify the groups present in the corporate form of organization.

Officers Shareholders Directors

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

S Corporations

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.

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

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

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

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

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 limited partner in a limited partnership retains the benefit of limited personal liability when he or she _____.

disapproves an amendment to the partnership's certificate

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

dissolution

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

A crucial issue with the continuity factor of an organization is the _____.

method by which the business organization can be dissolved

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

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

shareholders

In the context of a corporation's liabilities, the corporate veil is said to be pierced when _____.

the corporate entity is disregarded because courts find that the corporate organization is being misused

Termination

the legal form of an organization does not exist anymore

The factor of control in a business organization concerns _____.

who is managing the organization

Identify a true statement about the continuity of a partnership.

A change in the partners at any time results in the dissolution of the organization.

Trading partnership

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

A partner requires actual authority to borrow money in the usual course of money and to pledge the credit of the firm.

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

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.

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.

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

False

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

False

True or false: Consulting with or advising a general partner makes limited partners lose the benefit of limited personal liability in a limited partnership.

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: Partnerships, limited partnerships, or corporations can be shareholders in an S corporation.

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

A shareholder needs to vote their shares in person at any stockholder's meeting for those votes to count.

False - appointed proxy can vote their shares

A partnership can survive a death of one of its partners if there are more than two original partners.

False - partnership terminates with death of a partner

Identify a true statement about a limited partnership.

The limited partners have no right to participate in management.

Dissolution

The liquidating or winding up of a business

Which of the following is true of a sole proprietorship?

The proprietorship's income subject to taxation is attributed to the proprietor.

Identify a true statement about corporations.

They have higher costs of formation than partnerships.

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

cannot be created by multiple owners

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

does not get dissolved anytime a partner ceases to be a partner

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

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 characteristic of a sole proprietor is that he or she is _____.

in total control of his or her business's goals

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

incorporators

An agent appointed by a shareholder for the purpose of voting the shares in a publicly held corporation is known as a(n)

proxy

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

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