B Law Ch 35

To terminate a franchise, a franchisor must have:

-documented the warnings given to the franchisee for violations of the franchise agreement -good cause

An S corporation cannot have more than ______ shareholders.

100

How many states have adopted the latest version of the Uniform Limited Liability Company Act (ULLCA)?

17

How many states in the United States recognize the limited liability company (LLC) as a legitimate form of business ownership?

50

What form of business organization is a voluntary association between two or more persons who co-own a business for profit?

A partnership

Which of the following is correct regarding the partnership agreement?

A written partnership agreement is not required to form a partnership.

Which of the following is not a disadvantage of operating a business as a sole proprietorship?

Double taxation of profits

Which of the following is correct regarding a limited liability partnership (LLP)?

Each partner in an LLP is responsible for his or her own negligence and the negligence of those that he or she supervises.

If a limited partner dies, the limited partnership is usually dissolved.

False

Like the S corporation, all owners of a limited liability company (LLC) must be citizens and residents of the United States.

False

Technically, a corporation must be dissolved when one or more of its shareholders die.

False

If a limited partner dies, the limited partnership is usually dissolved.

False. If a limited partner dies, the limited partnership is usually unaffected. If a general partner dies, however, the limited partner is usually dissolved.

In determining whether diversity of citizenship exists for federal jurisdiction over a case involving a limited liability company (LLC), an LLC is considered a resident of the state in which it is incorporated and the state that is its primary place of business.

False. In determining whether diversity of citizenship jurisdiction exists in a case filed in federal court, a corporation is considered a resident of the state in which it is incorporated and the state that is its primary place of business. However, this rule does not apply to limited liability companies (LLCs), as their citizenship is determined by the residences of their members.

Like the S corporation, all owners of a limited liability company (LLC) must be citizens and residents of the United States.

False. In our global environment, an increasingly important advantage of limited liability companies (LLCs) is that members need not be citizens or permanent residents of the United States. Other organizational forms, such as the subchapter S corporation, are available only when all the owners are U.S. citizens.

Since the Uniform Limited Liability Company Act (ULLCA) has been adopted by all 50 states, it is not necessary for the creator of a limited liability company to check specific requirements in the state in which he or she wishes to create it.

False. Since the Uniform Limited Liability Company Act (ULLCA) has not been uniformly adopted, it is always necessary for the creator of a limited liability company (LLC) to check the specific requirements in the state in which he or she wishes to create it.

Since the Uniform Limited Liability Company Act (ULLCA) has been adopted in all 50 states, managers need not check the laws regarding limited liability companies in each state to ensure that the liabilities, as well as rights and duties, of a company established in one state continue to apply when conducting business outside that state.

False. The Uniform Limited Liability Company Act (ULLCA) has not been accepted by many states. Until a uniform system has been adopted, managers should check the laws regarding limited liability companies in each state to ensure that the liabilities, as well as rights and duties, of a company established in one state continue to apply when conducting business outside that state.

Which of the following is not an advantage of operating a business as a sole proprietorship?

Immunity from personal liability

Which of the following is an accurate statement regarding the legal identity of a partnership?

In most cases, a partnership is not considered a legal entity separate from its owners.

Which of the following is false regarding a limited liability partnership (LLP)?

In most states, the LLP is considered a separate legal entity.

Which of the following is correct regarding an S corporation?

It is a corporation under federal tax law but is taxed like a partnership as long as it follows certain regulations.

Which of the following is not an advantage of operating a business as a partnership?

Limited liability of partners

Which of the following is correct regarding partner liability for partnership debts?

Partners have unlimited personal liability for partnership debts.

Which of the following is a disadvantage of operating a business as a sole proprietorship?

Personal liability for business debts

In which form of business organization is the owner in sole control of management and profits?

Sole proprietorship

Which of the following is not a type of partnership?

The S-corporation

Which of the following is not a type of partnership?

The conglomerate

Which specialized form of business organization exists because of an arrangement between the owner of a trade name or trademark and the person who sells goods or services under the trade name or trademark?

The franchise

Which of the following is false regarding the franchise agreement?

The franchisor can establish the price at which the franchisee sells the goods.

Which of the following is an advantage of a franchise for the franchisor?

The franchisor takes a low risk in starting the franchise.

Which of the following forms of business organizations is an agreement between at least one general partner and at least one limited partner?

The limited partnership

In which of the following forms of business organizations are owners personally liable for business debts?

The partnership

Which of the following is correct regarding the operation of a limited liability company (LLC)?

To obtain limited liability, a member does not have to relinquish his or her right to participate in management.

The ______ governs voluntary associations between two or more people who co-own a business for profit in most states in the absence of an express agreement.

Uniform Partnership Act

Which of the following is not typically addressed in a franchise agreement?

Whether the agreement constitutes a general partnership or a limited partnership

In a ______, such as McDonald's and Burger King, the franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.

chain-style business operation

In a ______, the franchisor manufactures a product and licenses a dealer to sell it in an exclusive territory.

distributorship

For purposes of jurisdiction, an limited liability company (LLC) is considered a citizen of:

every state in which its members reside

A ______ is a business organization that exists because of an arrangement between the owner of a trade name or trademark and the person who sells goods or services under the trade name or trademark.

franchise

A ______ can become liable for franchise obligations if it exerts too much control over the business operations of the franchise.

franchisor

In a ______, the partners divide the profits and the management responsibilities.

general partnership

In a(n) ______, the partners share unlimited personal liability for the firm's debts.

general partnership

The ______ is a relationship between two or more persons or corporations that is created for a specific business undertaking.

joint venture

The ______ liability company is an unincorporated form of business organization that combines the most advantageous features of partnerships and corporations.

limited

The ______ combines the tax advantages and management flexibility of a partnership with the limited liability of a corporation.

limited liability company

In a ______, all the partners assume liability for one partner's professional malpractice, but only to the extent of the partnership's assets.

limited liability partnership

If the franchisee does not meet the requirements in the franchise agreement, the franchisor can terminate it, but must give sufficient

notice

A limited liability company (LLC) is formed by filing articles of ______ in the state in which its members want to establish their LLC.

organization

In a sole proprietorship, profits are taxed as:

personal income

If you want to open a lawn-mowing business on your own and want to be in complete control of the management and profits of the business, you should most likely create a(n):

sole proprietorship

The most frequently cited advantage of the limited liability company (LLC) is that for tax purposes, the Internal Revenue Service generally treats the LLC like a Blank______ or a(n) Blank______.

sole proprietorship; partnership

The most frequently cited advantage of the limited liability company (LLC) is that for tax purposes, the Internal Revenue Service generally treats the LLC like a ______ or a(n) ______.

sole proprietorship; partnership

A corporation must be created according to:

state law only

A corporation is a legal entity formed by selling ______ to investors, who then become owners of the company.

stock

Corporate income is:

subject to double taxation