Business Law Chapter 21

8. Which of the following is false regarding a limited liability partnership? A. A limited liability partnership is considered a separate legal entity. B. Limited liability partnerships are fairly new. C. The business name must include "Limited Liability Partnership" or an abbreviation in the name. D. The parties must file a form with the secretary of the state to create a limited liability partnership. E. Each partner pays taxes on his or her share of the income of the business.

A. A limited liability partnership is considered a separate legal entity.

13. In which of the following is there generally unlimited transferability of ownership interest? A. Corporations B. General partnerships C. Limited partnerships D. All the above E. Corporations and general partnerships, but not limited partnerships

A. Corporations

22. In a limited partnership which of the following assume unlimited personal liability for the debts of the partnership? A. General partners B. Limited partners C. Special partners D. All the above E. General and special partners, but not limited partners

A. General partners

21. Under the Uniform Limited Liability Company Act, unless the operating agreement specifies otherwise, LLCs are ______ managed. A. Member B. Manager C. Operationally D. Provisionally E. Administratively

A. Member

18. Which of the following establishes how a franchise agreement will be terminated? A. The franchise agreement B. The Franchise Termination Act C. The Franchisor-Franchisee Protection Act D. The Franchisee Protection Act E. The Franchise Wrap-Up Act

A. The franchise agreement

14. Which of the following is a relationship between two or more persons or corporations created for a specific business undertaking? A. A business trust B. A joint venture C. A syndicate D. A franchise E. An enterprise

B. A joint venture

16. Which of the following is a business that exists because of an arrangement between the owner of a trade name or trademark and a person who sells goods or services under the trade name or trademark? A. Joint venture B. Franchise C. Joint partnership D. Consensual seller E. Approved arrangement

B. Franchise

23. In a limited partnership which of the following assume no liability for the partnership beyond the capital they have invested? A. General partners B. Limited partners C. Special partners D. All the above E. General and special partners, but not limited partners

B. Limited partners

24. In a limited partnership which of the following have no part in the management of the business? A. General partners B. Limited partners C. Special partners D. All the above E. General and special partners, but not limited partners

B. Limited partners

3. Which of the following is a voluntary association between two or more persons who co-own a business for a profit? A. Co-owned business B. Partnership C. Joint proprietorship D. Joint corporation E. Joint entity

B. Partnership

1. Which of the following is a person who decides to go into business on his or her own without any type of formality creating? A. Individual entity B. Sole proprietorship C. Single entity D. Sole entrepreneurship E. Single entrepreneurship

B. Sole proprietorship

11. Which of the following is a way that a corporation can avoid double taxation? A. By forming a C corporation. B. By forming a D corporation. C. By forming an S corporation. D. By forming an F corporation. E. There is not a double tax problem with corporations.

C. By forming an S corporation.

4. Which of the following governs partnerships in many states in the absence of an express agreement? A. The Joint Partnership Act B. The Uniform Joint Agreement Act C. The Uniform Partnership Act D. The Associated Partnership Act E. The Joint Agreement Act

C. The Uniform Partnership Act

17. Which of the following is false regarding franchises? A. The franchisee often receives help from the franchisor in starting the franchise. B. The franchisor has the legal authority to ensure that the franchisee maintains the quality of goods and services associated with the franchise. C. The franchisor is not liable for torts of the franchisee's employees regardless of the amount of control exerted by the franchisor. D. A franchise is a contractual relationship between the franchisor and the franchisee. E. The Federal Trade Commission has a franchise rule requiring franchisors to present prospective franchisees with material facts necessary for the franchisee to make an informed decision about entering a franchise relationship.

C. The franchisor is not liable for torts of the franchisee's employees regardless of the amount of control exerted by the franchisor.

15. Which of the following is true regarding joint ventures? A. Generally, joint ventures are taxed like corporations. B. If one of the members of a joint venture dies, the joint venture is automatically terminated. C. Members of a joint venture are agents of the other members. D. A joint venture may be formed without drawing up a formal agreement. E. Courts frequently apply sole proprietorship law to joint ventures.

D. A joint venture may be formed without drawing up a formal agreement.

6. Which of the following is a type of partnership? A. Limited partnerships B. General partnerships C. Limited liability partnerships D. All the above E. Limited partnerships and general partnerships, but not limited liability partnerships

D. All the above

20. How is a limited liability company formed? A. By filing Articles of Statement with the Internal Revenue Service. B. By filing a Limited Liability Company form with the Securities and Exchange Commission. C. By filing a Certificate of Authority with the county in which the LLC is established. D. By filing Articles of Organization in the state in which the LLC is established. E. By filing a Statement of Operation in the state in which the LLC is established.

D. By filing Articles of Organization in the state in which the LLC is established.

12. Which of the following is true regarding S corporations? A. They are considered partnerships yet taxed like corporations as long as they follow regulations. B. They cannot have more than 80 shareholders. C. Shareholders do not report profit on their personal income tax forms. D. They are formed under federal law. E. Income of the corporation is not taxed when it is distributed to shareholders.

D. They are formed under federal law.

19. Which of the following would likely be formed by farmers who want to pool certain crops together to ensure that they get a high market price for their crops? A. A business trust B. A syndicate C. A joint venture D. A joint stock company E. A cooperative

E. A cooperative

2. Which of the following is false regarding a sole proprietorship? A. A sole proprietorship requires few legal formalities. B. A sole proprietor has complete control of the management of the business. C. The sole proprietor keeps all the profits from the business. D. Profits are taxed as the personal income of the sole proprietor. E. A sole proprietor is not personally liable for obligations of the business.

E. A sole proprietor is not personally liable for obligations of the business.

5. Which of the following is false regarding a partnership? A. It is easy to create. B. Income of the business is personal income. C. Business losses can be deducted from taxes. D. Each partner is considered an agent of the partnership. E. In most cases partners do not have personal liability for losses.

E. In most cases partners do not have personal liability for losses.

7. In which of the following may investors share in profits without risking personal assets? A. Limited partnerships only B. General partnerships only C. Limited liability partnerships only D. All the above E. Limited partnerships and limited liability partnerships, but not general partnerships.

E. Limited partnerships and limited liability partnerships, but not general partnerships.

9. Which of the following is responsible for managing the business of a corporation? A. Investors B. Shareholders C. Officers D. Administrators E. Members of the board of directors

E. Members of the board of directors

10. Which of the following is true regarding corporations other than S corporations? A. A corporation is not a separate legal entity. B. A corporation may not be sued. C. A corporation is created according to federal law. D. Shareholders may typically be held liable for debts of the corporation. E. The corporation must pay taxes on profits, and shareholders must pay taxes on dividends they receive from the corporation.

E. The corporation must pay taxes on profits, and shareholders must pay taxes on dividends they receive from the corporation.