biz law exam
35. _____ is a defense which bars the plaintiff from recovery because the plaintiff voluntarily and knowingly assumed known perils. a. Assumption of risk b. Contributory negligence c. Comparative negligence d. Joint and several liability e. The Good Samaritan statute
a. Assumption of risk
7. _____ is any unconsented touching, even if physical injuries are not present. a. Battery b. Misappropriation c. Assault d. Nuisance e. Libel
a. Battery
21. Which of the following is true about shareholders? a. If a company that is unable to pay its debts seeks protection from creditors in a bankruptcy court, its shareholders lose the value of their stock. b. In a closely held corporation, the body of shareholders tends to be large. c. Shareholders' personal assets such as their own homes or bank accounts are reachable to creditors. d. Shareholders of a corporation enjoy unlimited liability. e. Shareholders should be human beings and not corporate entities, such as partnerships or corporations.
a. If a company that is unable to pay its debts seeks protection from creditors in a bankruptcy court, its shareholders lose the value of their stock.
1. Which of the following statements is true about limited liability? a. It is any type of investment where the investor's maximum possible losses is the amount invested. b. It is full liability for the debt and other obligations of a legal entity. c. It is an undesirable situation where if the debts of the business exceed its ability to pay, creditors may reach the personal assets of the business owners. d. With limited liability, all it takes is one successful personal injury lawsuit, not covered by insurance, to destroy years of hard work by an individual business owner. e. With limited liability, every partner in the partnership is jointly and severally liable for the partnership's debts and obligations.
a. It is any type of investment where the investor's maximum possible losses is the amount invested.
9. Which of the following statements is true regarding intentional infliction of emotional distress (IIED)? a. It is extreme conduct (measured objectively) that intentionally causes severe emotional distress to another. b. In a sense, IIED can be thought of as an assault to emotions. c. All states require the plaintiff demonstrate some physical manifestation of the psychological harm to win any recovery. d. IIED is meant to protect against both mild and extreme behaviors. e. It occurs when some form of physical touching is present in a battery.
a. It is extreme conduct (measured objectively) that intentionally causes severe emotional distress to another.
14. To which of the following would the attractive nuisance doctrine most likely apply? a. Piles of sand b. A meter reader c. A utility repair technician d. Rescuing someone in distress e. Giving your roommate permission to borrow your car for a day
a. Piles of sand
21. _____ provides strong protection for sensationalist "news" organizations that cover celebrity gossip, and courts have held that public figures must show actual malice before they can win a defamation lawsuit. a. The First Amendment b. The Fourth Amendment c. The Fifth Amendment d. The Sixth Amendment e. The Eighth Amendment
a. The First Amendment
40. Identify the correct statement about strict liability torts. a. They require neither intent nor carelessness. b. They require some level of carelessness or neglect. c. They require some level of intent to be committed. d. They can be applied to any number of circumstances. e. They are defined as liability with fault.
a. They require neither intent nor carelessness.
1. Punitive damages are: a. money damages awarded to punish the defendant for gross and wanton negligence and to deter future wrongdoing. b. money damages whose amount the parties designate during the formation of a contract for the injured party to collect as recompense upon a specific breach. c. money damages to recompense for economic losses, or losses stemming from injuries. d. very small damages awarded to show that the loss suffered was technical rather than actual. e. pre-established damages for cases where calculating a correct sum is deemed difficult.
a. money damages awarded to punish the defendant for gross and wanton negligence and to deter future wrongdoing.
31. An act from which an injury results as a natural and direct consequence is called: a. proximate causation. b. malpractice. c. res ipsa loquitur. d. independent sufficient cause. e. concurrent actual cause.
a. proximate causation.
16. The tort of conversion is the civil equivalent to the crime of: a. theft. b. infraction. c. misdemeanor. d. felony. e. forfeiture.
a. theft.
27. Negligence is distinguished from intentional torts in that: a. there is a lack of intent to cause harm. b. the tortfeasor knows with substantial certainty that certain consequences will result from the act. c. it involves assault and battery. d. it involves conscious wrongdoing. e. there is neither intent nor carelessness.
a. there is a lack of intent to cause harm.
18. _____ is the act of wrongfully hurting a living person's good reputation. a. Misappropriation b. Defamation c. Misrepresentation d. Puffery e. Nuisance
b. Defamation
12. _____ takes place when someone intentionally confines or restrains another person's movement or activities without justification. a. Tortious interference b. False imprisonment c. Invasion of privacy d. Intimidation e. Brainwashing
b. False imprisonment
45. In 1994, President Clinton signed the _____ Act into law, imposing an 18-year statute of repose on product liability claims brought against general aviation aircraft manufacturers such as Cessna and Piper. a. Federal Aviation b. General Aviation Revitalization c. Airport and Airway Improvement d. Civil Aeronautics e. Airways Modernization
b. General Aviation Revitalization
36. Which of the following statements is true about the open and obvious doctrine? a. It is an absolute defense that reduces the plaintiff's recovery by the amount of the plaintiff's own negligence. b. It is used to defend against suits by persons injured while on someone else's property. c. Most states circumvent the usefulness of the open and obvious doctrine. d. It cannot be used in premises liability cases. e. It is available, in some cases, to a defendant who caused a dangerous situation.
b. It is used to defend against suits by persons injured while on someone else's property.
24. _____ refers to promotional statements expressing subjective views. a. A direct lie b. Puffery c. Tortious interference d. Injurious falsehood e. Deception
b. Puffery
17. _____ are capital raised by a corporation through issuance of shares entitling owners to an ownership interest. a. Assets b. Stocks c. Bonds d. Debentures e. Options
b. Stocks
42. Strict liability torts exist because: a. there is intent to cause harm. b. businesses that engage in covered activities profit from those activities. c. people displaying the most extreme of behaviors often get away with mild penalties. d. publication of false information about a person's product leads to a sharp drop in product sales. e. persons are negligently and improperly identified as being responsible for a violation of the law.
b. businesses that engage in covered activities profit from those activities.
28. To prove negligence, plaintiffs have to demonstrate four elements are present. The first element is that the plaintiff has to: a. prove that the defendant's actions were the proximate cause of the plaintiff's injury. b. demonstrate that the defendant owed it a duty of care. c. demonstrate that the defendant breached a duty of care. d. prove that the defendant's conduct caused the injury. e. demonstrate legally recognizable injuries.
b. demonstrate that the defendant owed it a duty of care.
2. Tort law: a. is enforced because it protects our expectation that our promises are enforced. b. is a reflection of American societal values. c. is generally the result of legislative debate or committee reports. d. generally does not allow for the award of punitive damages. e. is the result of elected legislatures prohibiting behavior that the community finds offensive.
b. is a reflection of American societal values.
8. In the United States, _____ income typically suffers the highest rate of taxation. a. discretionary b. personal c. disposable d. national e. domestic
b. personal
4. If a tortfeasor is engaged in certain activities and someone is injured or killed, then under _____ the tortfeasor is held liable no matter how careful or careless he or she may have been. a. intentional tort b. strict liability c. the tort of negligence d. injurious falsehood e. misrepresentation
b. strict liability
22. In most states, _____ takes place when someone publishes false information about another person's product. a. tortious interference b. trade disparagement c. proximate causation d. innocent misrepresentation e. negligent misrepresentation
b. trade disparagement
34. Punitive damages are awarded: a. for medical injuries. b. when the defendant acted with willful and wanton negligence. c. for loss of a car. d. when there are economic injuries such as loss of property. e. for pain and suffering.
b. when the defendant acted with willful and wanton negligence
41. Which of the following laws establish strict liability for taverns, bars, and restaurants for serving alcohol to minor or visibly intoxicated persons who then cause death or injury to others? a. National Minimum Drinking Age Act b. Wine and Spirits Fair Dealing Act c. Dram shop acts d. Ultrahazardous activity acts e. Cops in shops acts
c. Dram shop acts
23. Which of the following statements is true of fraud? a. It can arise only in a few limited circumstances. b. It is the use of another person's name, likeness, or other identifying characteristic without permission. c. It requires the tortfeasor to misrepresent facts, with reckless disregard for the truth. d. It is a completed assault. e. It requires an innocent misrepresentation.
c. It requires the tortfeasor to misrepresent facts, with reckless disregard for the truth.
20. _____ is the written form of defamation. a. Malice b. Injurious falsehood c. Libel d. Slander e. Puffery
c. Libel
32. Which of the following is a civil tort involving numerous plaintiffs against one or few defendants? a. Abuse of process b. Economic tort c. Mass tort d. Malicious prosecution e. Tortious interference
c. Mass tort
10. An advertisement using images of a celebrity to endorse their product without the celebrity's permission or knowledge would be guilty of: a. Fraud b. Injurious falsehood c. Misappropriation d. Intrusion e. Fictionalization
c. Misappropriation
37. In a state that follows the _____, a plaintiff's own negligence, no matter how minor, bars the plaintiff from any recovery. a. statute of limitations b. right of self-defense c. contributory negligence rule d. comparative negligence rule e. defense of others
c. contributory negligence rule
15. The tort of _____ takes place when someone takes another person's property permanently. a. trespass b. invasion of privacy c. conversion d. nuisance e. misappropriation
c. conversion
30. Negligence committed by certain professionals is known as: a. defamation. b. injurious falsehood. c. malpractice. d. negligent entrustment. e. vicarious liability.
c. malpractice.
25. An advertisement that promises "the best food in town" is an example of _____ since it is opinion. a. deception b. misrepresentation c. puffery d. tortious interference e. injurious falsehood
c. puffery
43. Which of the following can be a defense to strict product liability? a. Comparative negligence b. Contributory negligence c. Joint and several liability d. Assumption of risk e. Open and obvious negligence
d. Assumption of risk
33. Which of the following statements is true about compensatory and punitive damages? a. Punitive damages seek to compensate the plaintiff for his/her injuries. b. There are clear guidelines and available standards for compensatory damages to be awarded for pain and suffering. c. Compensatory damages refer to money awarded to the plaintiff when the defendant acts wantonly, to punish the defendant, and to deter future wrongdoing. d. Compensatory damages can be awarded for past, present, and future losses. e. With regard to punitive damages, the jury is awarded a sum of money to compensate the plaintiff.
d. Compensatory damages can be awarded for past, present, and future losses.
11. Which of the following is an example of invasion of privacy? a. Specific events in a public figure's life that has shaped them into the person that they are b. A newspaper item dealing with an accident c. The background of a candidate for public office d. Hacking into a person's computer e. A stranger cutting in line in front of you
d. Hacking into a person's computer
3. Identify the doctrine that holds employers liable for tortious acts committed by employees while acting within the scope of their employment. a. Stare decisis b. Strict liability c. Res ipsa loquitur d. Respondeat superior e. Voir dire
d. Respondeat superior
19. The oral form of defamation is considered: a. libel. b. puffery. c. malice. d. slander. e. misrepresentation.
d. slander.
6. Which of the following is true about the tort of assault? a. In assault, the contact or touching does not have to be in person. b. It is a completed battery. c. Physical injuries are required for assault. d. It is any unconsented touching, even if physical injuries are not present. e. A sense of apprehension is enough for assault.
e. A sense of apprehension is enough for assault.
38. Identify the rule under which the jury is asked to determine to what extent the plaintiff is at fault, and the plaintiff's total recovery is then reduced by that percentage. a. Contributory negligence b. Defense of others c. Statute of limitations d. The right of self-defense e. Comparative negligence
e. Comparative negligence
39. A bystander who aids victims of an auto accident are shielded from negligence liability by: a. torts b. contributory negligence c. strict liability d. affirmative defense e. Good Samaritan Law
e. Good Samaritan Law
8. Which of the following is an example of the tort of battery? a. Attempting to throw a baseball at another person b. Holding a gun to a person's head without firing c. Throwing something at one person that causes a nearby person to be placed in apprehension d. Moving one's fist toward another person without actually hitting e. Picking up a chair and hitting another person with it
e. Picking up a chair and hitting another person with it
13. Which of the following is NOT true about the shopkeeper's privilege? a. Businesses confronted with potential thieves are permitted to detain suspects until police arrive at the establishment. b. The detention must be done in reasonable conditions. c. The business owner has the right to detain a suspected shoplifter for a reasonable period of time. d. The grounds and manner of the detention must be reasonable or the store may be liable for false imprisonment. e. Store employees are allowed to use excessive force in detaining the suspect if the suspect resists detention.
e. Store employees are allowed to use excessive force in detaining the suspect if the suspect resists detention.
29. Which of the following statements is NOT true about the duty of care? a. The general rule in our society is that people are free to act any way they want to, as long as they do not infringe on the freedoms of others. b. If a risk of harm is foreseeable, then the duty of care exists. c. If a business knows about, or should know about, a high likelihood of crime occurring, then that business must take steps to protect its customers. d. The concept of duty is broad and extends beyond those in immediate physical proximity. e. The general rules surrounding when a duty exists cannot be modified in special situations.
e. The general rules surrounding when a duty exists cannot be modified in special situations.
26. _____ is the intentional damage of another person's valid contractual relationship. a. Trade disparagement b. Malicious prosecution c. Breach of fiduciary duty d. Abuse of process e. Tortious interference
e. Tortious interference
44. To demonstrate that a product is unreasonably dangerous, plaintiffs have two theories available to them. They might allege that the product was defective either because of a flaw in the manufacturing process, or because of: a. a marketing defect. b. owner abuse that is unforeseeable by the manufacturer. c. malicious destruction that is unanticipated by the producer. d. commercial use. e. a design defect.
e. a design defect.
17. If you gave your roommate permission to borrow your car for a day and he/she stole your car instead, it would be considered: a. trespass. b. fraud. c. misappropriation. d. nuisance. e. conversion.
e. conversion.
17. There is no liability for defamatory remarks left on a Facebook wall.
false
19. The tort of tortious interference is similar across all states.
false
21. The definition of negligence is kept deliberately narrow so as to avoid litigation that cannot be resolved in a court of law.
false
27. All states give shareholders the right to sue a third party on behalf of the corporation.
false
27. There are no constitutional limits to the award of punitive damages.
false
28. If a plaintiff unknowingly and involuntarily assumes the risk of participating in a dangerous activity, then the defendant is not liable for injuries incurred.
false
29. Outside board members for a corporation's board of directors can be drawn from other private companies, including competitors.
false
29. Since comparative negligence is a fairly harsh rule, most states follow the contributory negligence rule instead.
false
3. Contract law usually allows for the award of punitive damages, something never permitted in tort law.
false
30. Under the open and obvious doctrine, a homeowner who is automatically negligent for any , injuries sustained by guests, unless he can prove they were uninvited.
false
31. Most states limit Good Samaritan laws to professionals only.
false
32. Negligence torts require both legal intent and a breach of the standard of care.
false
36. Strict liability would apply equally to an individual who sold a car on Craiglist as it would to a local car dealer.
false
39. Since product liability is strict liability, the plaintiff's comparative negligence is a defense.
false
15. Trespass to personal property is the unlawful taking of another's personal property without the owner's permission.
true
16. Defamation can take place against goods or products instead of people.
true
18. Public figures typically have a difficult time winning defamation lawsuits.
true
20. Negligence is about breaching the duty we owe others, as determined by state tort law.
true
22. The first element that has to be demonstrated in order to prove negligence is that the defendant owes a duty to the plaintiff.
true
24. Professional negligence by business professionals such as doctors, accountants, and lawyers is known as malpractice.
true
25. A breach is demonstrated by showing the defendant failed to act according to the relevant standard of care.
true
26. Punitive damages are intended not to compensate the plaintiff but to deter the defendant from ever engaging in similar conduct.
true
33. Strict liability applies in only a few limited circumstances.
true
34. Strict liability applies when restaurants serve alcohol to visibly intoxicated persons.
true
35. In strict product liability, any retailer, wholesaler, or manufacturer that sells an unreasonably dangerous product is strictly liable.
true
37. A product may be defective because of a design defect.
true
38. If consumer misuse of a product is foreseeable, manufacturers must warn against that misuse.
true
40. Product misuse is a defense to strict product liability.
true
41. Many businesses see tort lawsuits as a nuisance at best and ruinous at worst, and would like to see them disappear altogether.
true
42. A statute of repose functions like a statute of limitations and bars plaintiffs from filing tort claims after a certain period of time has lapsed.
true
t/f Franchises operate under a license agreement.
true
t/f In effect, there is no creation cost or time in a sole proprietorship, since there is nothing to create.
true
33. The only difference between an S corporation and any other corporation is in tax treatment.
true
34. Limited liability company (LLC) members can be real persons or they can be other LLCs.
true
38. Limited liability partnerships (LLPs) allow the partnership to pass through income for tax purposes.
true
4. Often, the same conduct can be both a crime and a tort.
true
t/f The U.S. Supreme Court has recognized First Amendment protections for corporations.
true
23. By definition, crimes are intentional and therefore foreseeable.
false
23. The number of shareholders tends to be large in a closely held corporation.
false
14. Soot, noise, or odor cannot become the basis for trespass.
false
19. _____ refers to a legal document that creates a corporation when filed and approved by the relevant state authority. a. Articles of incorporation b. A charter c. Articles of organization d. Writ of certiorari e. Articles of partnership
a. Articles of incorporation
43. _____ is an order that requires all collection activities for pre-petition debts that the debtor owes to stop immediately, once a debtor files a bankruptcy petition. a. Automatic stay b. Discharge order c. Business judgment rule d. Restitution e. Probation
a. Automatic stay
32. Which of the following is a legal assumption that prevents juries from second-guessing decisions made by directors, unless they are proven to act with bad faith? a. Business judgment rule b. Conjecture c. Exclusionary rule d. Corporation by estoppel e. "Value of consideration" rule
a. Business judgment rule
34. Identify the incorrect statement about corporate officers. a. Corporate officers can be removed by the board but only with cause. b. Corporate officers are appointed by the board of directors. c. Corporate officers are involved in implementing the board's strategy into action. d. As officers of the company, they have legal authority to sign contracts on behalf of the corporation. e. Corporate officers are employees of the company and work full-time for the company.
a. Corporate officers can be removed by the board but only with cause.
28. Identify the incorrect statement about a shareholder derivative lawsuit. a. It is a lawsuit brought by a shareholder on behalf of a corporation against a third party. b. A shareholder alleges in the lawsuit that the people charged with acting in the corporation's best interests are failing to do so. c. Very few state laws give shareholders a right to sue a third party in a shareholder derivative lawsuit. d. These lawsuits are very controversial because they are typically litigated by plaintiffs' lawyers working on contingency fees. e. Executives disfavor these lawsuits because oftentimes, shareholders sue the directors themselves for failing to act in the company's best interest.
a. It is a lawsuit brought by a shareholder on behalf of a
25. _____ rights are rights given to existing shareholders in a corporation to purchase any newly issued stock to maintain same proportion of their existing holdings. a. Preemptive b. Tag-along c. Drag-along d. Tender e. Squeeze-out
a. Preemptive
9. Which of the following is an undesirable situation associated with sole proprietorships? a. Unlimited liability b. Dilution of stock c. Lack of flexibility d. Double taxation e. Lack of continuity
a. Unlimited liability
13. The value of a withdrawing partners share of a general partnership would be determine via: a. a buy/sell agreement b. Angel Investors c. Private placement d. Initial Public Offering (IPO) e. Creditors
a. a buy/sell agreement
14. A(n) _____ is considered a disregarded entity for tax purposes. a. foreign corporation b. C corporation c. general partnership d. sole proprietorship e. domestic corporation
a. foreign corporation
11. A(n) _____ is an association of two or more persons in an unincorporated entity to do business and share profits and losses. a. general partnership b. corporation c. limited partnership d. S corporation e. limited liability partnership
a. general partnership
33. A true statement about D&O insurance is that: a. it usually insures a business for losses caused by competitors. b. it is extremely cost prohibitive and should be avoided unless required by contractual needs. c. it is business liability insurance for professionals. d. it is usually paid by the board members. e. it protects board members of corporations from liability arising from their actions.
a. it usually insures a business for losses caused by competitors.
4. One of the disadvantages associated with sole proprietorships is that: a. raising working capital is difficult. b. acquiring total ownership of the business's finances is not easy. c. creating a sole proprietorship is a complicated process. d. obtaining licenses and permits is difficult. e. making autonomous business decisions is difficult.
a. raising working capital is difficult.
38. Double taxation takes place when: a. shareholders are forced to pay a dividend tax b. corporations pay a federal, state and local tax rate double that of individuals c. corporations are forced to pay taxes twice in one calendar year d. past tax payments are credited to current tax bills e. shareholders pay a fee to the government for selling their stock prior to an agreed-upon date.
a. shareholders are forced to pay a dividend tax
31. _____ is a debt obligation issued by corporations to raise money without selling stock. a. Corporate stock b. Corporate bond c. Dividend d. Equity securities e. Net worth
b. Corporate bond
15. The tax return that provides information to the taxing authority about a general partnership is called a (n): a. 501(c)(3) b. Information return c. Disregarded entity d. Buy/Sell agreement e. Initial Public Offering (IPO)
b. Information return
24. Identify the correct statement about an arm's-length transaction. a. It is a transaction involving a party that is controlled by another entity and does not act on its own behalf. b. It is a transaction made by parties as if they were unrelated, in a free market system, each acting in its own best interest. c. It is a transactions in which one party sets aside independent interest so as to focus on the wishes of the controlling party. d. An arm's-length transaction should involve at least one interested party that is concerned about the probable consequences of the transaction. e. A transaction involving subsidiaries would not be considered an arm's-length transaction because the parties are acting independently.
b. It is a transaction made by parties as if they were unrelated, in a free market system, each acting in its own best interest.
6. Venture capital firms identify promising start-ups and fund them in a(n) _____ offering until the start-up has developed its technology to a commercially feasible stage. a. initial public b. private placement c. merger and acquisition d. secondary e. follow-on
b. private placement
37. S Corporations are limited to what number of shareholders? a. 10 b. 250 c. 100 d. 1,000 e. 50
c. 100
26. _____ results when a corporation issues additional shares, resulting in a reduction of percentage of the corporation owned by shareholders. a. Preemption b. Novation c. Dilution d. Accretion e. Restitution
c. Dilution
36. _____ is a corporation that, after meeting certain eligibility criteria, can elect to be treated like a partnership for tax purposes, thus avoiding paying corporate income tax. a. Quasi corporation b. C corporation c. S corporation d. Series LLC e. A conglomerate
c. S corporation
2. What is the most common form of doing business in the United States? a. General partnership b. Corporation c. Sole proprietorship d. Limited liability company e. Limited liability partnership
c. Sole proprietorship
7. Affluent individuals (or groups of individuals) who provide capital to start-up and early-stage businesses are known as: a. debtors. b. business consultants. c. angel investors. d. institutional investors. e. sole proprietors.
c. angel investors.
41. Limited liability partnerships: a. contain the same level of tax liability as that of corporations. b. do not retain limited liability for all partners. c. are especially popular with accountants and lawyers. d. are designed for professionals who do business as owners. e. cannot avoid the problem of double taxation.
c. are especially popular with accountants and lawyers.
42. A person or entity to whom a debt is owed is known as a(n): a. debtor. b. affiliate. c. creditor. d. limited partner. e. shareholder.
c. creditor.
16. A true statement about a corporation is that: a. it has to be discontinued once there is a change in ownership. b. it is difficult to manage. c. it must be formed in compliance with corporate law. d. it can be incorporated only where the principal place of business is located. e. it cannot have just one owner.
c. it must be formed in compliance with corporate law.
20. Under older common law, shareholders could sue a company that conducted business beyond the scope of its articles. These actions are called: a. respondeat superior. b. actus reus. c. ultra vires. d. mens rea. e. res ipsa loquitur.
c. ultra vires.
30. _____ is a portion of a corporation's net income designated by the board of directors and returned to shareholders on a per share basis. a. Compensation b. Retained earnings c. Share d. Dividend e. Corporate bond
d. Dividend
44. Which of the following statements is true about chapter 7 bankruptcy? a. All debtors qualify for chapter 7 under the BAPCPA. b. The court cannot liquidate the non-exempt assets of a debtor who files for chapter 7 bankruptcy. c. The liquidation that occurs in a chapter 7 bankruptcy is used to re-commence the business after the bankruptcy is over. d. Only individuals, rather than partnerships, may receive a discharge under chapter 7 bankruptcy. e. Corporations that satisfy the means test established by the BAPCPA may file for chapter 7 bankruptcy.
d. Only individuals, rather than partnerships, may receive a discharge under chapter 7 bankruptcy.
10. Which of the following is a disadvantage of sole proprietorships? a. It is difficult to create a sole proprietorship. b. There is a lack of flexibility. c. They have limited liability for business debts. d. They have to pay ordinary income tax on their business profits. e. Autonomy comes with limited ownership of the business's finances.
d. They have to pay ordinary income tax on their business profits.
5. Venture capital firms combine funds from institutional investors and _____ to identify promising start-ups. a. personal investors b. sweat equity investors c. turbo capitalists d. angel investors e. venture capitalists
d. angel investors
35. An Employer Identification Number (EIN): a. serves the purpose of identifying sole-proprietorships to revenue authorities. b. is used by the governments of many countries for official paperwork. c. is a means of disbursing Social Security benefits. d. is a unique nine-digit number issued by the IRS to business entities for purposes of identification. e. has become a de facto national identification number.
d. is a unique nine-digit number issued by the IRS to business entities for purposes of identification.
40. A(n) _____ agreement refers to an agreement (usually written) among LLC members governing the LLC's management, rights, and duties. a. license b. noncompete c. buy/sell d. operating e. binding
d. operating
23. A company wholly owned or controlled by another company is known as a(n): a. affiliate. b. corporation. c. limited liability company. d. subsidiary. e. closely held corporation.
d. subsidiary.
18. Many companies choose to incorporate in the tiny state of Delaware because: a. disputes heard in Delaware courts are seldom predictable, making it easy to manipulate business operations. b. shareholders are given a right to sue a third party on behalf of the corporation. c. the courts operate with the most experienced and knowledgeable juries. d. the chancery courts in Delaware have developed a reputation for fairly and quickly applying a very well-developed body of corporate law. e. disputes heard in Delaware courts are not usually transparent, providing the opportunity to make quick profits.
d. the chancery courts in Delaware have developed a reputation for fairly and quickly applying a very well-developed body of corporate law.
12. _____ is a voluntary contract in which two or more persons decide to conduct business together and share profits and losses. a. Operating agreement b. Noncompete agreement c. A committee charter d. Articles of incorporation e. Articles of partnership
e. Articles of partnership
3. Which of the following is a major advantage of sole proprietorships? a. If sole proprietors seek funding from banks, down payment requirements typically are low. b. Banks don't require any form of personal collateral to guarantee loans to sole proprietors. c. A range of options are available for raising working capital for sole proprietors. d. It is always possible to bring in others to the business in a sole proprietorship. e. Autonomy in a sole proprietorship comes with total ownership of the business's finances.
e. Autonomy in a sole proprietorship comes with total ownership of the business's finances.
27. The rules and regulations adopted by a corporation for its own internal governance are known as: a. articles of partnership. b. charters. c. covenants. d. policies. e. bylaws.
e. bylaws.
22. A corporation whose stock is held by only a small number of shareholders is a(n): a. partnership. b. publicly traded corporation. c. mutual benefit nonprofit corporation. d. sole proprietorship. e. closely held corporation.
e. closely held corporation.
29. The board of directors is responsible for all of the following EXCEPT: a. declaring and paying a corporate dividend to shareholders. b. authorizing major new decisions such as a new plant or factory or entry into a new foreign market. c. determining employee compensation, especially bonus and incentive plans. d. appointing and removing corporate officers. e. electing new directors to replace directors who resign.
e. electing new directors to replace directors who resign.
45. Creditors who are paid because of important public policy reasons, even though they do not have secured collateral, are known as: a. trustees. b. angel investors. c. secured creditors. d. unsecured creditors. e. priority creditors.
e. priority creditors
1. In tort law, only people that you are a third-party beneficiary to can probably sue you for breach of contract.
false
13. The right of a business owner to use extreme force in detaining a suspected shoplifter for a reasonable period of time is known as the shopkeeper's privilege.
false
2. Compensatory damages apply to contract law and tort law, but they are much more difficult to calculate in contract law.
false
25. Corporate law is very inflexible in the United States and can lead to complicated solutions to business problems.
false
30. Shareholders in derivative litigation cannot overcome the business judgment rule.
false
35. A limited liability company (LLC) cannot choose how it wishes to be taxed.
false
36. Starting an LLC is often more difficult than starting a corporation.
false
37. LLCs are the right form for taking a company public and selling stock.
false
40. If a partner files a personal bankruptcy, it will have no bearing on the partnerships in which he happens to be a partner.
false
41. When a debtor is in bankruptcy, the creditors must choose which type of bankruptcy to file.
false
5. Pleading "no contest" to a criminal charge forces the defendant to waive their rights to defend a civil tort suit.
false
Articles of incorporation are similar across all states and typically include a common set of questions.
false
t./f The Delaware chancery courts operate without a jury.
false
t/f A corporation has no constitutional rights.
false
t/f Choosing a business organization is a "one size fits all" exercise.
false
t/f Corporations earned First Amendment protections by proving their ability to exercise independent judgement, and the ability to tell right from wrong.
false
t/f Entities that receive "501(C)(3) status are prohibited from engaging in business outside the borders of the United States.
false
t/f In a publicly traded company, the identity of the shareholders cannot change.
false
t/f Not every partner in a general partnership is liable for the partnership's debts and obligations.
false
t/f Once a choice of business organization is made, it is impossible to change to another selection.
false
t/f The physical embodiment of what we call a corporation is known as its articles of incorporation.
false
t/f There are no limits on the tax planning opportunities for general partners.
false
10. Exploiting a known sensitivity in a child, the elderly, or pregnant women can constitute intentional infliction of emotional distress.
true
11. Misappropriation takes place when a person uses someone else's name, likeness, or other identifying characteristic without permission.
true
12. The tort of false imprisonment requires an actual and present confinement.
true
22. Unlike sole proprietorships, corporations can be complicated to manage.
true
24. Shareholders can be human beings or corporate entities, such as partnerships or corporations.
true
26. Not all shareholders in a corporation are necessarily equal.
true
28. The duty of loyalty, one of the fiduciary duties of board members, includes a duty not to take corporate opportunities for their own purposes and a duty not to self-deal.
true
31. Corporate officers are involved in everyday decision making for the company and implementing the board's strategy into action.
true
32. The infrequent meetings held by Boards necessitate the use of committees to deal with specific issues.
true
39. A corporation that files for chapter 7 bankruptcy and then re-commences business after the bankruptcy is over, will find that its pre-petition debts will be revived by law.
true
42. A chapter 7 bankruptcy is a liquidation bankruptcy, often called a fresh start bankruptcy.
true
43. In most cases, the debtor in a chapter 7 bankruptcy does not go to court and never has to see the judge.
true
6. Intent is transferable from one potential victim to another.
true
7. The norms that society protects make up the basis for tort law.
true
8. Defense of others is a reasonable and proportionate force used to defend another person from harm or injury.
true
9. When physical touching is absent, courts sometimes permit the tort of intentional infliction of emotional distress to be claimed.
true
t/f A corporation is a legal entity chartered by the state, with a separate and distinct existence from its owners.
true
t/f A nonprofit that is a "501(c)(3)" organization does not have to pay taxes.
true
t/f Banks approach loans to sole proprietors exactly as they would a loan to any individual.
true
t/f Incorporation allows more flexibility in carrying out business operations than a sole proprietorship.
true
t/f Limited partners are generally prohibited from participating in day-to-day management of the business.
true
t/f Many sole proprietors resort to running their personal credit cards to the maximum limit, or transferring balances between credit cards, in the early stage of their business.
true
t/f Most corporations incorporate where their principal place of business is located, but not all do.
true
