Ch. 21 BL

Which of the following is an accurate statement about limited liability partnerships (LLPs)?

In an LLP, the partners' liability for any partner's malpractice is limited to the extent of the partnership's assets.

Under the Uniform Limited Liability Company Act (ULLCA) and most state limited liability company (LLC) statutes, a member's voluntary withdrawal from the LLC, referred to as ______, ______ the LLC.

dissociation; does not terminate

shareholders

investor-owners

disadvantages of corporations:

1. corporate income taxed twice 2. formalities required for establishing in maintain corporate form

advantages of partnership:

1. creation is easy 2. income of business is personal income 3. business losses can be deducted from taxes

advantages of sole proprietorship:

1. creation is easy 2. proprietor is in total control of management 3. proprietor keeps all profits

According to most states, in which of the following situations does a partnership by estoppel exist?

A third party is aware of a misrepresentation of partnership and consents to the misrepresentation.

what is a difference between partnerships and joint ventures in the eyes of the law?

If one of the members of a joint venture dies, the joint venture is not automatically terminated.

Which of the following has a franchise rule requiring franchisors to present prospective franchisees with the material facts necessary for the franchisees to make an informed decision about entering a franchise relationship?

The Federal Trade Commission (FTC)

business trust

a business organization governed by a group of trustees, who operate the trust for the beneficiaries

joint stock company

a partnership agreement in which company members hold transferable shares whereas all the goods of the company are held in the names of the partners

general partnership

consist of an agreement that the partners will divide the profits (usually equal) and management responsibilities and share unlimited personal liability for the partnership's debts

Partners must, in good faith, work for the benefit of their partnership and refrain from taking any kind of action that would undermine the partnership. This is known as the partners' _____

fiduciary duty

According to the Federal Trade Commission's (FTC's) ______, franchisors must present prospective franchisees with the material facts necessary for the franchisees to make an informed decision about entering into a franchise relationship.

franchise rule

A franchise is a contractual relationship between the ______ and the _____

franchisor; franchisee

The Petroleum Marketing Practices Act of 1979 outlines the reasons for which a franchisor may terminate a(n) ______ franchise

gas station

Once a partnership is ______, the partners begin the process of winding up.

liquidated

In a member-managed limited liability company (LLC), all members participate in management, with decisions in the ordinary course of business activities made by a ______ vote. Multiple choice question. minority

majority

When members form a limited liability company (LLC), they typically draft a(n) ______ agreement, which is the foundational contract among the entity's owners.

operating

If a person started doing business without thinking about the form of the business, he or she would be a(n) _____

sole proprietorship

what is a consequence or result of a corporation's status as a separate legal entity?

- The corporation must pay taxes on its profits. - The corporation can be held liable for its debts. - The corporation is not dissolved when its shareholders die.

Which of the following events does result in the dissolution of a limited liability company (LLC) under the Uniform Limited Liability Company Act (ULLCA)?

- The issuance of a court order for dissolution - Any event the operating agreement specifies will cause dissolution - The consent of all the members

the duties of partners to one another:

- duty of obedience - duty of care - fiduciary duty to the other partners

what is typically included in the articles of partnership:

- the division of management duties - the duration of partnership - what capital contributions will be made by each partner

The articles of partnership usually include what information?

- the event on which the partnership agreement would expire - the partner's names - the division of management duties

advantages of a franchisor starting a franchise:

1. low risk in starting a franchise 2. increased income for franchises

Parties not named in a partnership agreement can be considered partners through a partnership by estoppel. Identify a true statement about such a party who is considered a partner.

In many states, the party can be held liable for the costs of the damages to the customer.

______ defines the ______ of a partnership as the change in the relation of the partners caused by any partner's ceasing to be associated with the carrying on of the business.

The Uniform Partnership Act (UPA); dissolution

limited liability partnership

all the partners assume liability for any partner's professional malpractice to the extent of the partnership's assets

limited partnership

an agreement between at least one general partner and one limited partner.

limited liability company

an incorporated form of business organization that many people see as combing the most advantageous features of partnerships and corporations

syndicate

an investigate group that comes together for the explicit purpose of financing a specific large project

cooperative

an organization formed by individuals to market products.

A ______ is a business organization in which members usually pool their resources to gain some kind of competitive advantage in the market.

cooperate

A joint stock company is a mixture of a(n) ______ and a ______.

corporation; partnership

The ______ of a partnership is considered complete when any partner stops fulfilling the role of a partner to the business by choice or default.

dissolution

In a manager-managed limited liability company (LLC), the members select a group of managers to manage the affairs of the company. The managers may be selected from ___

either the members or nonmembers

In a(n) ______-managed limited liability company (LLC), all members participate in management.

member

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

organization

Syndicates are usually considered a type of joint venture; thus, they are almost always governed by ______ law.

partnership

Parties not named in a partnership agreement can be considered partners through a(n) ____

partnership by estoppel

A limited liability company (LLC) combines the tax advantages and management flexibility of a ______ with the limited liability of a(n) ______

partnership; corporation

According to __________, a partnership is a voluntary association between two or more persons who co-own a business for profit.

the Uniform Partnership Act (UPA)

dissolution

Section 29 of the UPA defines this as "the change in the relation of the partner's caused by any partner's ceasing to be associated with the carrying on, as distinguished from the winding up"

Which of the following applies to a franchise relationship?

The Uniform Commercial Code (UCC)

sole proprietorship

a business organization in which you, as the sole proprietorship, are in sole control of the management and profits

what are specialized forms of business organization?

- A syndicate - A joint stock company - A joint venture

what is typically included in a limited liability company's (LLC's) operating agreement?

- How the profits and losses will be allocated - How and when the LLC may be dissolved - How the company is to be managed

what are reasons for the rapid acceptance of limited liability companies (LLCs)?

- LLCs are not required to hold an annual meeting and draft meeting minutes. - LLCs offer their members flexibility in terms of alternative ways to structure the management. - LLCs provide the best parts of other forms of business organization.

what are correct statements about a franchise agreement?

- The agreement determines what percentage of the income from the sales of the goods will go to the franchisor. - The agreement usually determines where the franchise will be located. - The agreement usually states that the franchisee is to pay a large sum to the franchisor for use of the trade name or trademark.

disadvantages of partnership:

1. each partner has personal liability for all losses, including those of another partner (in most cases)

disadvantages of a franchisor starting a franchise:

1. has little control over the franchise 2. can become liable for the franchise if it exerts too much control

advantages of a franchisee starting a franchise:

1. help from the franchisor in starting the franchise 2. instant recognition due to the franchisor's strong trademark or trade name 3. benefits from the franchisor's worldwide advertising

advantages of corporations:

1. limited liability for shareholders 2. ease of raising capital 3. profits taxed as income to the shareholders, not the partners

disadvantages of a franchisee starting a franchise:

1. must meet the franchisor's standard or risk losing the franchise 2. has little to no creative control over the business

disadvantages of sole proprietorship:

1. proprietor has personal liability for all losses 2. funding is limited to personal funds and loans

An S corporation cannot have more than ______ shareholders.

100

According to most states, identify a situation in which a partnership by estoppel exists.

A non-partner has represented himself or herself as a partner, and a third party reasonably relies on this information to his or her detriment.

what is true about the termination of franchises?

When determining whether a franchise was wrongfully terminated, the courts usually rely heavily on the written franchise agreement.

S corporation

a business organization formed under federal tax law that is considered a corporation yet is taxed like a partnership as long as it follows certain regulations

Which of the following is perhaps the most dominant form of business organization?

a corporation

corporation

a legit entity formed by issuing stock to investors, who are owners of the corporation

franchisee

a person who sells goods or services under a trade name or trademark based on a franchise agreement

joint venture

a relationship between 2 or more persons or corporations created for a specific business undertaking

articles of partnership

a written agreement that creates a partnership

A franchise agreement is a ______ whereby the ______ grants permission to the ______ to use the grantor's name, trademark, or copyright in the operation of a business and the associated sale of goods in return for payment.

contract; franchisor; franchisee

A car dealership is an example of a _____

distributorship

A ______ is a franchise in which the franchisor manufactures a product and licenses a dealer to sell the product in a(n) ______ territory

distributorship; exclusive

In a(n) ______, the franchisor provides the franchisee with a formula or necessary ingredient to manufacture a product. The franchisee then manufactures the product and sells it according to the franchisor's standards.

manufacturing arrangement

Limited liability companies (LLCs) typically want to do business in states other than the state in which they are formed, and they usually need to register in every additional state in which they want to operate, a process typically referred to as _____

qualification

Corporate ______ elect a board of directors, which is responsible for managing a business.

shareholders

winding-up of a partnership

the activity of completing unfinished partnership business, collecting partnership assets, taking inventory, and collecting and paying debts.

chain-style business operation

the franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.

if a general partner dies...

the limited partnership is usually dissolved

if a limited partner dies...

the limited partnership is usually unaffected

A franchisor is the owner of a ______ or ______ in a franchise.

trade name; trademark

A partnership is a ______ association between two or more persons who co-own a business for _____

voluntarily; profit