Chapter 17 Quiz

The Franchise Rule requires a franchisor to provide potential earnings figures to its prospective franchisees. a. True b. False

False

Dissociation terminates some of the rights of the dissociated partner, requires the firm to buy his or her interest, and alters the parties' liability to third parties. a. True b. False

True

Every act of a partner concerning partnership business binds the firm. a. True b. False

True

The members of a limited liability company have considerable flexibility in managing the business of the firm. a. True b. False

true

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. a. True b. False

False

In many instances, agency law governs the relationships among partners. a. True b. False

true

In a limited partnership, a general partner assumes no liability for partnership debts beyond the amount of capital contributed. a. True b. False

False

In most states, in a dispute on a partnership matter, a third party cannot sue an individual partner but must file an action against the entire firm. a. True b. False

Fasle

Limited legal liability can be an advantage for a small business wishing to raise capital. a. True b. False

True

A limited liability partnership allows professionals to avoid personal liability for the malpractice of other partners. a. True b. False

a. True

Because a franchisor's termination of a franchise can adversely affect a franchisee, much franchise litigation involves claims of wrongful termination. a. True b. False

true

The proprietor pays only personal income taxes on a sole proprietorship's profits. a. True b. False

true

To protect a franchisor's reputation, a franchise contract may provide a degree of control over the franchisee's operation to the franchisor. a. True b. False

true

Choosing a business organizational form that limits its owners' liability may lead to greater profits for the firm. a. True b. False

true - If the liability of the owners of the firm will be limited to the extent of their capital, then they will try to rise capital through inside of the firm rather tan outside. So, it will affect their ability to raise outside capital

To prevent deception, all representations by a franchisor to a prospective franchisee must have a reasonable basis at the time they are made. a. True b. False

true - this is known as the reasonable basis for any representations and in order to prevent deception, the representations made at the time needs to have a reasonable basis accordingly.