Business Exam

What are the fiduciary duties of an agent to her principal? Choose 3 answers. a) obedience b) indemnification c) accounting d) loyalty

a, c, d

Which of the following are advantages of operating as a sole proprietorship? Choose 2 answers. a) The business may conduct an initial stock offering once it has made a profit in four consecutive quarters. b) The owner is not personally liable for business debts if the business is officially registered. c) Forming a sole proprietorship is simple and relatively inexpensive. d) Sole proprietorships are not taxed.

c, d

Who can terminate an agency relationship?

Either the agent or the principal may terminate.

Roland and Alfreeda enter into a written agency agreement in which Alfreeda will represent Roland as his agent to obtain acting jobs for Roland. No termination provisions are included in the written agreement. If Roland wishes to terminate his agreement with Alfreeda:

Roland must do so in writing because the agency agreement is in writing.

Roy owns an engine repair shop, Roy's Custom Repair. Roy's customer Floyd is in the shop one day and trips over a tool lying on the ground. Floyd hits his head on the concrete floor and sustains massive injuries. Floyd sues Roy's Custom Repair for his injuries. If Floyd's lawsuit is successful, Floyd can recover from:

Roy's Custom Repair and Roy personally.

What is required to form an agency relationship?

The agent and principal must agree to enter the relationship.

How does a principal become liable to third parties on contracts?

The principal's agent has the authority to bind the principal in a contract with a third party.

Grover is a sales representative for Avon Products Inc., a company that sells beauty and gift products door-to-door. Ruby, Grover's manager, assigns Grover a certain territory in which to work. The territory that Grover is assigned has historically had one of the highest sales records in the state. Ruby is concerned that Grover is not adequately working the territory, so she allows Regina to also sell in that same territory. Does Grover have any grounds on which to file a lawsuit against Ruby?

Yes, Ruby has violated a principal's duty of cooperation and may be liable to Grover for Grover's lost profits.

Is a principal liable for the tortious actions of the principal's agent?

Yes, but the agent must reimburse the principal.

Is a principal under a duty to compensate an agent who works on the principal's behalf?

Yes, if the contract requires compensation.

A sole proprietorship is similar to a partnership in: (Choose 2 answers.) a) how taxes are paid directly by the owner, not the company. b) liability for debt. c) the ability to have an owner/member who does not participate in the business. d) the minimum number of owners.

a, b

How may an agency relationship be formed? Choose 3 answers. a) implied by the conduct of the agent b) implied by the conduct of the principal c) by express written agreement between agent and principal d) by express oral agreement between agent and principal

b, c, d

Who is liable to third parties for damage caused by an agent's tortious conduct if the principal had directed the agent to take that action?

both the agent and the principal

A sole proprietorship has flexibility in decisions regarding: (Choose 2 answers.) a) how much stock is sold. b) how the business is taxed. c) when to schedule vacation. d) pricing of services or goods sold.

c, d

Which of the following is a disadvantage of operating as a sole proprietorship? a) Sole proprietorships are taxed at a higher rate than corporations. b) A sole proprietorship may only be run as a non-profit organization. c) Forming a sole proprietorship requires extensive paperwork to be completed by a lawyer and filed with the appropriate state office. d) The owner of a sole proprietorship is personally liable for all business debts.

d

If harm is done by an agent, and it is discovered that this agent has been convicted of the same harm before at a previous job, what might a principal be liable for?

negligent hiring

Tala operates Sunshine Event Planning as a sole proprietorship. Lately, Tala has become dissatisfied with her employee Leon. Leon continually refuses to follow directions, calls in late to work, and generally is not performing up to Tala's standards. Before Tala can fire Leon, she must obtain approval from:

no one.

The simplest form of business to establish is a:

sole proprietorship.

A sole proprietorship differs from a limited liability company (LLC) in:

the documentation required for formation.

A sole proprietorship differs from a partnership in:

the number of owners.

What is the combination of factors that sets sole proprietorships apart from all other business entities?

ease of formation, along with receiving all of the profit

Heather is an artist and has several watercolors she would like to sell. Heather orally asks Rylee to sell the paintings for her and directs Rylee that each painting should be sold for at least $100. Rylee schedules a showing in her art gallery to display Heather's paintings. On the day of the showing, a customer offers to buy one of the paintings for $100, and Rylee accepts. When Heather finds out the price the painting sold for, she tries to get the painting back from the customer. Heather claims that she and Rylee did not have a written agency agreement, and, therefore, an agency relationship did not exist between them. Is Heather correct?

No, most agency agreements do not have to be in writing to be effective.

When is an agent liable on a contract that the agent entered into in the business of the agent's principal? Choose 3 answers. a) when the agent is acting without authority b) if the agent entered into the contract in a personal capacity c) when the principal is not satisfied with the terms of the contract d) when the principal is undisclosed

a, b, d

Evelyn decides to open a business selling her one-of-a-kind cupcakes. Evelyn will be the sole owner of the business, although she will have a couple of employees. Evelyn plans to operate the business under the name "Cupcake Dreams." To legally operate her business, Evelyn will need to:

register her business name.

Isaiah wants to build a new shopping complex. He is afraid that once news gets out about his plans, the price of the land where he wants to build the shopping complex will increase in price. Isaiah, therefore, hires Landon to purchase the parcels of land for him and to keep the fact that Landon is working for Isaiah a secret. Landon enters into a written contract for the sale of the land with Miriam and does not tell Miriam that Landon is an agent for anyone else on the deal. Isaiah refuses to buy the property from Miriam. Is Landon obligated to perform the contract with Miriam?

Yes, he is because there was an undisclosed principal who failed to perform.

Myra owns a tanning salon called Bronze Beauties as a sole proprietorship. Myra has six employees who work at the salon. Myra contracts COVID-19, and, after battling the disease for six weeks, Myra dies, leaving behind a spouse and three children. Upon Myra's death, the Bronze Beauties tanning salon:

is automatically dissolved.

Johnson lives near Dollywood, a popular theme park in Tennessee. Johnson decides to begin a new money-making venture selling screen printed t-shirts from a booth just down the road from the theme park to take advantage of the traffic that flows by on its way to the park. Johnson's t-shirts, however, will not be Dollywood-themed t-shirts; they will be Johnson's own creations. Johnson's daughter Susan helps him in his new venture by manning the booth from time to time, but Johnson has total control over everything about the business—from ordering the t-shirts, paying the bills, pricing the t-shirts, paying the taxes on his sales, and receiving all the profits from the venture. Even though Johnson put no thought into what kind of business venture he was creating when he started his business, Johnson has effectively created a:

sole proprietorship.

Marlo is about to be transferred overseas and wants to sell her house. Julianna, who is not a real estate agent, offers to sell the house for Marlo for free. Marlo jumps at the chance to get such a valuable service for free! Because Julianna offered to sell the house for free, Julianna owes Marlo:

no duty to sell the house, but if Julianna does attempt to sell the house, she owes Marlo the duty to use reasonable diligence and skill in performing the task.

A sole proprietorship differs from a corporation in:

how stock is sold.