Business Law Test 3
A franchise contract cannot give exclusive territorial rights to a certain geographic area to a franchise, due to antitrust laws.
False
A limited liability company is a citizen only of the state in which it was formed.
False
A partner can be held liable for a partnership obligation only if he or she participated in, or knew about, whatever it was that gave rise to the obligation
False
A person who cannot legally enter into a certain contract directly can do so indirectly through an agent
False
An agent can represent two principals in the same transaction as long as neither is aware of the dual capacity
False
An independent contractor is, by definition, an employee because the person's physical conduct is controlled, or subject to control, by the employer
False
In a limited partnership, a general partner assumes no liability for partnership debts beyond the amount of capital contributed.
False
The operating agreement of a limited liability company cannot provide for the calculation of a buyout price on a member's dissociation because the event has not yet occurred.
False
To form a limited liability company, articles of organization must be filed with an attorney's office.
False
To maintain the quality of a product or service, a franchisor can exercise any degree of control over a franchisee's operations without risking potential liability
False
To pierce the corporate veil means to reveal the identity of its true owner.
False
When an agent's acts create the appearance of an agency that does not in fact exist, the principal is estopped to deny the agency relationship.
False
When the owner of a sole proprietorship dies, the business does not dissolve - it is automatically transferred to family members or other heirs
False
A truck driver who drives a company truck on a regular basis is most likely an employee
True
An agency relationship can arise by ratification, which involves a determination of intent expressed by words or conduct.
True
As in a partnership, a limited liability company may pay no taxes—profits can be passed through to the members, who pay personal taxes on the profits.
True
Because state corporate laws differ, persons wishing to incorporate may look for the state that offers the most advantageous tax or other provisions.
True
By using agents, a principal can conduct multiple business operations simultaneously in various locations.
True
In a sole proprietorship, the proprietor bears the burden of any liabilities incurred by the business enterprise.
True
To eliminate costly negotiations or litigation, partners may agree on how the firm's assets will be valued or divided if the partnership dissolves.
True
To make informed decisions and supervise corporate officers and employees, the directors need an unrestricted right to inspect corporate books and records.
True
Choosing a business organizational form that limits its owners' liability can affect the firm's ability to raise outside capital
True
In many instances, agency law governs the relationship among partners
True
One of the essential elements of a partnership is an equal right to be involved in the management of the business
True
Shareholders' assumption of personal liability, as guarantors, for the obligations of. a corporation can enable the firms to obtain credit.
True
Stocks, or equity securities, represent the purchase of ownership in a business corporation.
True
The board of directors hires the corporation's officers, but normally can remove them only for cause.
True
The proprietor pays only personal income taxes on a sole proprietorships profits
True
Under the principles of agency law, any sale of goods by a salesperson in a store to a customer can be binding on the owner of the store
True
When a member of a limited liability company guarantees payment of a loan to the firm, the member is personally liable for the obligation.
True