Blaw ch 26
Regarding the management of an LLP, which of the following are true? (Check all that apply)
No partner can join the LLP without unanimous consent An agreement can alter management responsibilities
Which of the following is not a factor courts will consider when determining whether to pierce the corporate veil?
Overcapitalization
If a franchisor mandate sets prices and prohibits sales to customers outside an assigned sales territory, this could violate which of the following laws?
The Sherman Act
Violations of federal franchise rules can include a(n) ______. (Check all that apply)
FTC lawsuit $10,000-per-day fine
The ______ has issued rules designed to give prospective franchisees more information about termination, cancellation and renewals of franchise.
Federal Trade Commission
The ______ has issued rules designed to give prospective franchisees more information about termination, cancellation and renewals of franchise. Multiple choice question.
Federal Trade Commission
Which of the following has become the most common arrangement in the United States for providing food, hotel, gasoline, and real estate brokerage services?
Franchising
Which of the following is correct regarding taxation of sole proprietorships?
They are not required to pay corporate franchise taxes.
If a member withdraws from an LLC, they can receive
a return on capital investment made the value of her interest
A franchisor can conduct business as ______. (Check all that apply)
a sole proprietorship corporation partnership
If a transferee under and LLC does not become a member they are entitled to ___________________
all of the transferee's share of profits
If a corporation wants to operate in a state other than its home state of incorporation, usually the corporation must ______.
appoint a local representative for service pay annual privilege or franchise taxes file articles of incorporation
The purpose of a franchise is to ______.
become an outlet for a national or international chain
State statutes generally require that LLCs ______. (Check all that apply)
can be easily dissolved are set up for a limited duration
Shareholders in ______ are often restricted in the sale of their stock making investments in these business organizations less liquid and marketable.
close corporations
Most franchise contracts are typically ______.
contracts of adhesion
Typically, a franchisor is a ______.
corporation
State laws regarding franchises generally address ______. (Check all that apply)
deceptive advertising the franchisor's power to terminate the franchise
Shareholders of a corporation pay taxes on ______.
dividends from the corporation
Shareholders in an S corporation ______. (Check all that apply)
do not pay corporate tax directly report their share of the corporation's losses or earnings on tax return
If a general partner sells their interest, the purchaser ______.
does not become a partner unless all other general partners agree cannot force liquidation of the business
In an effort to maintain the value of its trademark, the franchisor may exert considerable control over the franchisee. This control may be enough control for a court to determine that the franchisee is the franchisor's ______.
employee agent
A tax-free transaction is possible when shares of a corporation are ______.
exchanged for another corporation
Salaries and wages paid to employees of a sole proprietorships are considered ______.
expenses and deductible on taxes
Shareholder-emplyees may be paid salaries that are taxable as personal income to the shareholder but are deductible as ______.
expenses for the corporation
Many inexperienced people have been ruined financially by believing ______ claims of the ______ of franchises.
extravagant; wealth-building potential
From a franchisee's standpoint the most important things a franchisor can offer is ______. (Check all that apply)
financing advertising business training
Many state laws have been enacted to help with ______.
franchisee-franchisor business relationships
One of the most common ways to do business in the United States is through ______.
franchising
Although many franchisees have been successful, there are still issues associated with franchising including ______. (Check all that apply)
franchisors not giving the assistance to run the franchise as promised franchisors misrepresenting their opportunities
LLPs are taxed as ______.
general partnerships
Franchisors must disclose to potential franchisees ______. (Check all that apply)
how many francises were terminated why a franchise was terminated
The wealth-increasing potential of an investment in a business is greatly affected by ______.
income tax laws
The wealth-increasing potential of an investment in a business is greatly affected by ______. Multiple choice question.
income tax laws
Franchise contracts usually declare that the franchisee is a(n) ______.
independent contractor
If a new partner joins the LLP without unanimous consent of the LLP partners, the new partner ______.
is not considered a partner in the LLP
Unless the partners otherwise agree, a partner ______. (Check all that apply)
is not entitled to wages is not considered an employee
When a corporation is involved in a type of business that has wide swings in income from year to year, it can reduce sharholder tax burden by ______.
keeping the dividend rate constant
In the recent years, ______ have begun joining the accounting profession and switching from general partnerships and professional corporations to limited liability partnerships.
law firms
Facing the growing cost of ______, accountants sought a new business formation known as the limited liability partnership.
lawsuits
In order to have an LLP, partners need ______. (Check all that apply)
maintain appropriate professional liability insurance to file an LLP form
Some state automobile franchise laws require ______.
manufacturers to only use independent dealerships
Generally, state statutes allow LLCs to transfer the interests in an LLC based on
member's consent
In order to have a general partnership
no express agreement is needed the parties intend to have a partnership agreement
Sole proprietorships or general partnerships require ______ in order to be formed
no formalities
Sole proprietorships or general partnerships require ______ in order to be formed.
no formalities
Generally, in an LLC, a member has ______ for the wrongdoing of other members.
no liability
Day-to-day operating management in a corporation is generally conducted by ______.
one or more officers
A franchisor usually maintains a high degree of control over ______.
operations to standardized quality
Franchising's biggest growth has come ______.
over the past quarter century
A _________ is a voluntary association that carries on a business for profit
partnership
Partnerships in general are not taxable entities; instead, income is passed ______.
pro rata to partners
Franchisors take advantage of setting up franchises because they can ______. (Check all that apply)
reduce competition gain control over the distribution of their product
By controlling the number of locations of outlets of their franchise, a franchisor can ______. (Check all that apply)
reduce competition among franchisees encourage the franchisee not to carry competitive products
Federal rules require franchiors to explain ______ of franchise agreements. (Check all that apply)
renewals terminations cancellations
Under an LLP, no income taxes are paid, but partners must ______.
report
Generally, ______ does not affect the ownership of property in a corporation because corporate existence is not affected by the event. (Check all that apply)
retirement death bankruptcy
One of the most important advantages a franchisee receives is the ______.
right to use a trademark owned by the franchisor
Automobile manufactures are challenging state franchising laws in order to ______. (Check all that apply)
sell directly to customers sell online
Limited liability partnerships developed from accounting firms looking to ______.
shield partners' personal assets from malpractice claims
If an LLC is not set up so that it can be easily dissolved, it loses its ability to have ______ under federal tax laws.
single tax treatment
Due to unfair terminations and extravagant claims of wealth-building potential, ______ now generally regulate(s) the franchise relationship. (Check all that apply)
state governments the federal government
In the context of the management of a corporation, generally policy control is with ______.
the board of directors
The legal powers an LLC has include
the right develop contracts and incur debts in its own name the right to buy an sell property in its own name
In a sole proprietorship, agents and employees may be hired and ______ is(are) responsible for all liabilities along with all profits and losses.
the sole proprietor
If considerable control has been exerted over the franchisee through control of operations and use of trademark, the courts can determine that this control is sufficient enough to hold the franchisor liable for ______.
torts committed by the franchisee's employees
If a franchisor builds and equips a business and leases it to the franchisee this is called a ______.
turnkey operation
If a partner in an LLP commits malpractice, they will have ______ liability.
unlimited personal
State laws regarding franchisor-franchisee relationships ______.
vary widely
State laws regarding franchisor-franchisee relationships ______. Multiple choice question.
vary widely
Shareholders who are not directors of a corporation have ______ of day-to-day operations.
very limited control
In many instances shareholders in a small corporation may be induced to ______ waive their limited liability.
voluntarily
Which of the following is a taxable entity?
A corporation
Which of the following is not a primary factor in deciding what type of business organization to choose?
If the federal government will approve of the choice
In order to form a corporation or a limited partnership, ______.
In order to form a corporation or a limited partnership, ______.
In a general partnership, each partner is considered a(n) ______ with a right to share in the profits of the business.
owner
In a general partnership, each partner is considered a(n) ______ with a right to share in the profits of the business. Multiple choice question.
owner
The success of a sole proprietorship usually depends upon the ______.
owner
If losses are anticipated in the early years of a business and the owners have other income, ______ will save taxes during that period.
partnerships sole proprietors
Partners in a general partnership may not only lose their investment, they may also have to ______.
pay for partnership debts from personal asset
Courts can sometimes strip corporate shareholders of their limited liability to prevent unfairness. This is known as ______.
piercing the corporate veil
In order to limit liability, it is wise to consult a ______ before choosing a particular form of business organization. (Choose all that apply)
public accountant lawyer
Corporations are divided between ______. (Check all that apply)
publicly-held corporations close corporations
Changes in ______ may shift the tax advantages between a partnership and corporations in certain circumstances.
rates of taxation
If losses are anticipated in the early years of a partnership and the partners have other income, the owners can ______ their tax liability on their other income by ______.
reduce; the amount of the partnership losses
A corporation is treated as an entity that is ______.
separate and distinct from its owners
Publicly-offered partnership interests are generally designed to ______.
serve as tax shelters
Employees of a publicly held corporation often times become
shareholders
Under a _________ the proprietor is free within the law to run the organization as they see fit
sole proprietorship
Under a _________ the proprietor is free within the law to run the organization as they see fit.
sole proprietorship
Successful continuation of a ______ is less likely than in a ______.
sole proprietorship; partnership
A minority shareholder in a close corporation has little power and may be ___________ by the majority on issues such as reduction or elimination of dividends
"frozen out"
When naming an LLC, the name must include _____________ or some other indication of the limited liability feature for the public
"limited liability company"
Like a corporations, courts will ___________ between an LLC and its members if it is found that the LLC was created with the intent to defraud creditors
"pierce the corporate veil"
For an S corporation to keep its tax status, ______. (Check all that apply)
its shareholders must all be individuals or estates the can be no more than 100 shareholders its shareholders must consent in writing to have the corporation taxed as a partnership
Statutes that grant limited liability companies' power often grant ______. (Check all that apply)
limited liability of corporations tax benefits of partnerships
Without power to terminate the corporation in a close corporation, the minority share holder is ________ to the investment they made
locked in
Legally, an limited liability company is a
a separate entity apart from its owner
A trade name in a sole proprietorship must be registered with __
a state or local official
If a sole proprietorship or partnership is sold, this is usually ______.
a taxable transaction
If dissolution is caused by death, retirement, bankruptcy or dissolution by a member, the remaining members can avoid liquidation by ______.
agreeing to continue the business operations
If a transferee under and LLC does not become a member they are entitled to ___________________
all transfer
General partners usually take ____________ in management of day-to-day operations and can delegate their authority to one or more partners
an active role
Employees of the sole proprietor's business ______.
are the personal employees of the owner
Limited liability companies must file ___________ with the secretary of state before they can do business within the state
articles of organization
If someone is a shareholder they are often given ownership rights but does not include an automatic right to
be an employee
If a corporation wants to transact business in a state other than the state in which it is incorporated, it must ______.
become qualified in the state
Limited liability and the tendency of investors to relate corporate securities to ______ companies make corporations appear safer for financing.
blue chip"
Unlike limited partnerships, investors in limited liability companies ______.
can share in management
If a corporation or limited partnership plans to terminate the business formation, it needs to ______.
cancel its certificate
When a corporation is acquired by another corporation, shareholders do not have to pay ____
capital gains tax
When a corporation is acquired by another corporation, shareholders do not have to pay ______.
capital gains tax
Generally it is easier to preserve good will in a corporation as owners change due to __________ of the business.
continuity
Generally it is easier to preserve good will in a corporation as owners change due to __________ of the business. Multiple choice question.
continuity
Generally it is easier to preserve good will in a _____ as owners change due to continuity of the business.
corporation
When the maximum corporate tax rate was less than the maximum individual rate, a shareholder's interest in the retained earnings was not taxed until the ______.
corporation was dissolved stock was sold
Banks who lend money to corporations often require one or more of the shareholders to ______.
cosign corporate notes
Because partners seldom give up their right to participate in management, decisions of the corporation can be
deadlocked delayed by consultations
Generally a corporation is not affected by the ___________ of a shareholder if they are no longer a part of the corporation
death insolvency
One of the major advantages of a publicly held corporation is the ______
ease of selling one's investment
One of the major advantages of a publicly held corporation is the ______.
ease of selling one's investment
Limited partners generally do not ______.
engage in the day-to-day business of the partnership
Each partner is personally liable for any losses suffered by the partnership ______. (Check all that apply)
even if the losses are not attributed to the partner even if the losses exceed the individual partner's contributions
In 1988, for the first time in history, the maximum corporate tax rate ______.
exceeded the maximum individual tax rate
Ownership of a family or other close corporation can be shifted gradually by __________ to those who will succeed the present managers
gift sale
If a partner terminates the partnership in violation of their agreement, that partner _____________ for damages
has full liability
Limited partners who do not participate in management and shareholders in a corporation may lose their investment if the business fails, but ______. (Check all that apply
have no liability to creditors of the business have no liability to victims of torts
Costs of ______ can be provided to shareholder-employees and deducted by the corporation with no immediate taxation to the employees if the other employees receive these benefits. (Check all that apply)
health insurance pension plans
A publicly held corporation sells shares to people
ho generally are interested as investors
In a partnership, if a partner dies, becomes insolvent, or wishes to retire, a(n) ____________ made in advance of these events is needed to keep the business operating
special agreement
For larger business, the corporate form is easiest for financing because ______.
stock can be used as collateral
A corporation can ______. (Check all that apply)
sue and be sued in its own name hold, acquire and convey property
Gradual sale or gifting of shares of a family or other close corporation may minimize _________ at death that would otherwise result from the selling of the business
tax consequences
Primary factors in determining what type of organization a person might chose when deciding on a business organization often include ______. (Choose all that apply)
the amount of personal liability a person would have the amount and availability of tax breaks the right to control the day-to-day affairs
A limited partnership combines ______ and ______.
the capital-raising advantages of a corporation the informalities of a partnership
Generally, because management is left to a chief executive officers under this business organization there are generally less conflicts
the corporation
The business organization that offers the easiest management style is
the sole proprietorship
In a corporation, the loss of a shareholder is limited to ______.
their personal investment
For smaller corporations, the continuity factor makes it easier for a bank to loan money because shareholders can put up ______ as collateral for the loan
their stock
For smaller corporations, the continuity factor makes it easier for a bank to loan money because shareholders can put up ______ as collateral for the loan.
their stock
If a general partnership or a sole proprietorship wants to operate in a state other than its home state of incorporation, usually ______.
there are no specific formal requirements
Limited partnership interests can be sold without the potential negative effects of a general partnership, but ______.
there is seldom a market to sell their interest
Limited partnership interests can be sold without the potential negative effects of a general partnership, but ______. Multiple choice question.
there is seldom a market to sell their interest
Many states allow for professional LLCs that have ______ liability for their own malpractice.
unlimited
In a limited liability company, the number of members allowed is ______.
unrestricted
