Business Law Final
Why is it important to monitor the employment practices of foreign suppliers?
Because many corporate watch groups will discover and publicize the unethical behavior of your company's foreign suppliers.
One view of duty-based ethics focuses on the principle of rights.
Consumers of a firm's products and services a firm's suppliers a firm's owners (shareholders) a firm's employees
Investors dissatisfied with profit-maximization theory look beyond profits to consider the triple bottom line.
Corporate profits the impact of profits on people the impact of profits on the planet
Highlight the three classifications of franchises.
Distributorship Chain-style business operations Manufacturing arrangements
Distribution of assets of a limited partnership—order of prioritiesed creditors.
1. Outside creditors and partner creditors 2. Partners and former partners entitled to distributions of partnership assets 3. Unless otherwise agreed, return of capital contributions and distribution of profit to partners
Limited liability company
A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership
Which of the following philosophers is most associated with general guiding principles for moral behavior?
Immanuel Kant
Olivia makes a statement on her Twitter account that casts a negative light on her employer. Her manager fires her for violating her company's social media policy. Olivia claims that federal law prohibits her from being fired. Does she have a valid argument?
Yes, because federal labor law protects employees' right to engage in "concerted activities."
Upper management wants to fire Gary because he is nonproductive. Using the utilitarian approach to business ethics, management would probably NOT consider
Gary's fundamental rights.
Highlight the two requirements that state statutes and case law governing franchises tend to emphasize the most:
Good faith Fair dealing
Members
The term used to designate a person who has an ownership interest in a limited liability company.
Patrick, the human resources manager at Acme Company, must decide how to cut personnel costs. This decision will harm employees who are laid off or fired. Patrick must balance the interests of employees who have been loyal to the firm for a long time against the interests of
Acme's shareholders
Franchise
Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright, under specified conditions or limitations, in the selling of goods and services
Pass-through entity
Any entity that does not have its income taxed at the level of that entity; examples are partnerships, S corporations, and limited liability companies.
To determine whether a franchisor has acted in good faith when terminating a franchise agreement, what do the courts attempt to do?
Attempt to balance the rights of both parties.
Highlight two common examples of distributorship-type franchising arrangements.
Automobile dealerships Peer distributorships
The family limited liability partnership (FLLP), is most often used in
agriculture
Under the common law, a partnership was treated only as .
an aggregate of its members
Federal and state laws attempt to protect franchisees from the ________and unfair termination of their franchises.
arbitrary
Celia has convinced Maria to start a new business as a partnership rather than as a sole proprietorship. Celia wants to avoid:
bearing the burden of all losses and liabilities
Rubina convinced Mariah to start a business with her in a partnership rather than a sole proprietorship. The disadvantage of a sole proprietorship that Rubina wants to avoid is
bearing the burden of all losses and liabilities.
Anna and Jennifer start a new business as a partnership, and agree from the beginning that if one of the partners wants to leave the partnership at a later date, that the other partner will purchase the leaving partner's ownership interest at book and amortized over a five-year term. This type of agreement is referred to as a
buy-sell agreement.
Individuals should evaluate their actions in light of the consequences that would follow if everyone in society acted in the same way. This is called the
categorical imperative
Chance, Justina, and Rich have been operating a chain of self-service laundries as a general partnership for three years. At the beginning of the fourth year, Justina declares bankruptcy. Under the version of the Uniform Partnership Act (UPA) that is in effect in most states, Justina's bankruptcy will
cause Justina's dissociation from the partnership.
Bonni wants to go into business for herself and knows she can start a corporation over the Internet. Instead she chooses to invest in a new local Taco Bell restaurant, which is an example of
chain-style business operation franchise
Regan owns and manages The Coffee Shoppe. She likes to experiment with different management styles and life philosophies. She recently studied Kantian ethics and asks her employees to begin following Kant's categorical imperative at work. This means that the employees should
consider their actions in light of the consequences if everyone in society acted the same way.
Most franchise relationships are governed primarily by
contract law
A _________ analysis involves assessing the negative and positive affects of alternative actions.
cost-benefit
Every person has certain duties to others, including humans and the planet. _________ ethics is rooted in this principle.
duty-based
One basic difference between partnership and agency law is that:
each partner has an ownership interest in the firm.
Roy, Andy and Tim are partners in a general partnership, and have all been sued individually based on a breach of contract relating to the partnership. The judge dismisses the lawsuit on the basis that the plaintiff should have filed a lawsuit only against the partnership under the UPA as an
entity.
An action is morally correct when it creates the least amount of harm for the _____people.
fewest
In order to form a valid limited partnership (LP), the partnership must:
file a certificate of limited partnership
One of the great benefits of LLCs, and one that helps promote investment, is the fact that:
foreign investors are allowed to become LLC members
When a limited partnership becomes a limited liability limited partnership (LLLP), a change is made in the liability of .
general partners
In an LLC, a member is someone who:
has an ownership interest in an LLC and limited liability for LLC debts
Ted is the owner and chief executive officer of a business. He recently began an advertising campaign to promote a new product that is regulated by state law. The law is somewhat unclear. Before launching the campaign, he researched the relevant law and consulted with his attorney in an effort to comply with the law. Nevertheless, the attorney general of his state has filed a lawsuit against him for deceptive advertising. Ted's best defense is that
he acted in good faith
When a group of members joint to form an LLC, the name of the organization must:
include the words "limited liability company" or the letters LLC.
Tina designed a new type of handbag that has proven to be very popular. She begins manufacturing these handbags on a large scale and considers her options for setting up a business to market the bags nationwide. She opts for a distributorship franchise under which she will
license distributors to sell her handbags.
In a limited partnership, the liability of a limited partner is:
limited to the capital contribution
Highlight the two options for management of an LLC.
member-managed manager-managed
Compliance with the law is sometimes called the
moral minimum
When a franchise agreement contains no set time for winding up a franchisee's business, a franchisee:
must be given a reasonable time to wind up the business
The upper-level management of Nationwide Sales Corporation wants to fire Andy because he is a nonproductive employee. Using a utilitarian approach to business ethics, management would probably consider
the costs and benefits of retaining a nonproductive employee.
Which of the following is NOT typically a part of the contents of an LLC's articles of organization filed with the central state agency?
the hours of operation of the business
What happens if a limited partner in a limited partnership participates in management?
the limited partner becomes just as liable as a general partner to any creditor
Xavier consults with his attorney about the management of his LLC. He has chosen the manager-managed LLC form of management in which:
the managers may be members, nonmembers, or a combination of both.
Typically, state law determines the duration of a franchise.
False
Information return
A tax return submitted by a partnership that only reports the income earned by the business.
Which of the following does NOT represent a major difference between an agency relationship and a partnership?
An agent is liable for the acts of the principle, but partners are not liable for the act of the partnership.
Partnership
An agreement by two or more persons to carry on, as co-owners, a business for profit.
Business ethics are consistent only with short-run profit maximization.
False
Chain-style franchises are common in manufacturing.
False
In all cases, joint ownership of property creates a partnership.
False
Managers who set unrealistic production or sales goals decrease the probability that employees will act unethically.
False
Religious ethical principles allow managers to make decisions with few possible negative consequences.
False
The Uniform Limited Liability Company Act (ULLCA) has now been adopted by almost all of the states.
False
Business ethics does NOT focus on:
How businesses are treated under international law.
Choose the correct order for the following lists of steps involved in a systematic approach to implementing ethical concerns in business.
Inquiry Discussion Decision Justification Evaluation
Typically, managers in a manager-managed LLC owe fiduciary duties to the
LLC and its members
You are starting a new company. You want your employees to act ethically. What will you NOT do?
Let employees know that only short-run profits matter.
Lisa owns and manages a small auto-parts store. She hesitates to discuss business ethics with her employees because she wants them to spend more time with the customers and she also doesn't think she should tell them how to behave. Is Lisa going to create an ethical workplace? Why or why not?
Lisa is unlikely to create an ethical workplace because the attitude of top management influences employee ethics.
Marshall owns and operates a construction firm. He uses inexpensive and low-grade building products and accepts inferior carpentry work from his subcontractors. Nevertheless, Marshall complies with all the city building codes as well as all state and federal laws. Has he fulfilled all of his ethical obligations?
No, because legal compliance is regarded as the moral minimum.
Franchisor
One licensing another (the franchisee) to use his or her trademark, trade name, or copyright in the sales of goods and services
Franchisee
One receiving a license to use another's (the franchisor's) trademark, trade name, or copyright in the sale of goods and services
Under the Foreign Corrupt Practices Act, some payments to minor foreign government officials are allowed to accelerate the performance of administrative services.
True
What is the simplest form of business?
Sole proprietorship
What is the most common termination statement in a typical franchise agreement?
That the franchise can be terminated "for cause" with grounds for termination
When making decisions, a business should evaluate the following.
The LEGAL implications of each decision. The PUBLIC relations impact The safety risks for CONSUMERS and employees. The FINANCIAL implications.
Highlight the act that requires companies to set up confidential systems so that "red flags" can be raised about suspected illegal and unethical business practices.
The Sarbanes-Oxley Act
Articles of organization
The document filed with a designated state official by which a limited liability company is formed
A partner's profit from the partnership is taxed as individual income to the individual partners.
True
Even when a contract contains a notice-and-cure provision, a franchisee's breach of the duty of honesty and fidelity may be enough to allow the franchisor to terminate the franchise.
True
LLCs are legal entitles apart from their owners and as such can sue or be sued, enter into contracts, and hold title to property.
True
Since the late 1970s, the Foreign Corrupt Practices Act has prohibited U.S. businesspersons from bribing foreign officials to secure beneficial contracts.
True
The application of the principle of rights, or rights theory, often involves conflicting rights.
True
The sharing of both profits and losses creates a legal inference that a partnership exists.
True
________ is a philosophical theory developed by two British philosophers, Bentham and Mill.
Utilitarianism
A limited liability company (LLC) combines the tax characteristics of:
a partnership with the liability of a corporation.
Three Essential Elements to Determine Whether a Partnership Exists:
a. A SHARING of profits or losses b. A joint OWNERSHIP of the business c. An EQUAL right to be involved in the management of business
A Partnership Probably Does Not Exist if Shared Profits Were Received as Payment of Any of the Following:
a. A debt by INSTALLMENTS or interest on a loan b. Wages of an employee or for the SERVICES of an independent contractor c. RENT to a landlord d. An annuity to a SURVIVING spouse or representative of a deceased partner e. A SALE of the goodwill [ The valuable reputation of a business viewed as an intangible asset.] of a business or property
The Factors an Entrepreneur Must Consider When Selecting an Organizational Form:
a. EASE of creation b. the LIABILITY of the owners c. tax CONSIDERATIONS d. the ABILITY to raise capital
Operating Agreements Typically Contain Provisions Relating to the Following Areas:
a. Management and how future MANAGERS will be chosen or removed. b. How PROFITS will be divided c. How membership INTERESTS may be transferred d.Whether the DISSOCIATION of a member, such as by death or departure, will trigger dissolution of the LLC e. Whether FORMAL members' meetings will be held. f. How voting RIGHTS will be apportioned.
Disclosure Requirements for Franchisor Under the FTC's Franchise Rule
a. Written or electronically recorded disclosures treating the range of goods and services included in the value and estimated PROFITABILITY of the franchise. b. To prevent deception, all representations made to prospective franchisees must have a REASONABLE basis at the time they are made. c. If a franchisor provides projected earnings, the franchisor must indicate whether they are based ACTUAL data or hypothetical examples. d. If actual data are used to make earnings projections, the franchisor must disclose the PERCENTAGE of its existing franchises that have achieved this result e. Franchisors must EXPLAIN termination, cancellation, and renewal provisions of the franchise contract.
Most franchise litigation involves claims for wrongful _______.
termination
When there is no expressed partnership agreement what governs the operation of partnership?
the Uniform Partnership Act
Bribery is acceptable in certain foreign countries. Indeed, U.S. Development, Inc., has found that the only way it can ensure delivery on certain contracts in these countries is to bribe the officials. This is
permitted by U.S. law if the payment is made to a minor official to speed up administrative procedures.
One of the reasons state governments and the federal government have passed statutes regulating franchises is to:
protect perspective franchisees from dishonest franchisors and franchise termination without good cause.
Pressler wants to be his own boss and wants to start a business. He has to decide which form of business organization to adopt and will likely consider all of the following EXCEPT:
publicity and public relations
The application of morals and ethics to a situation is usually called ethical ___________.
reasoning
Typically the franchisee _________little for the business on termination.
receives
Collette is a sole proprietor of a 3-D printing shop. She has considered changing her business organizational structure but cannot find an alternative that would give her the main advantage she enjoys as a sole owner, which is .
receives all the profits
Marsha is a sole proprietor of a small quilting shop. She has considered changing her business structure, but she cannot find an alternative structure that would give her the main advantage she enjoys as a sole owner. The major advantage is that she
receives all the profits.
Outcome-based ethics looks at the impact of decisions on key ____________.
stakeholders
Marsden wants to start a new company with different partners to explore oil-drilling opportunities in several states. When discussing the LLC form, Marsden's attorney mentions that one of the biggest disadvantages of the LLC form is that:
there is no uniform law governinng LLCs in the United States
A major premise of the _________approach to ethics is "the greatest good for the greatest number."
utilitarian
Ethics can be defined as the study of
what constitutes right and wrong behavior
Pick which one oversight action franchisors rarely, if ever, undertake:
when employees can take their breaks
Whenever an action affects the majority adversely, it is morally ______________.
wrong
You have to decide how to reduce labor costs by firing some of your workers, who will certainly be harmed. You must balance the interests of employees who have been loyal to the firm for a long time against the interests of
your firm's shareholders