CLAW T/F Exam 3

false

A corporation cannot be formed for purposes other than making a profit.

false

A corporation does not have perpetual existence in most states unless the articles of incorporation state otherwise.​

false

A corporation is not liable for the misconduct of its agents, officers, or employees.​

true

A court will pierce the corporate veil of a corporation when the corporate privilege is abused for personal benefit.​

false

A de jure corporation is one that is formed for a single purpose.​

true

A director must abstain from voting on a proposed transaction in which he or she has a personal interest.​

true

A franchise agreement may allow the franchisee to cure a breach of the franchise agreement within a certain time so as to avoid termination.

false

A franchisee is generally economically independent of the franchisor's integrated business system.

false

A franchisor can mandate retail prices for the goods that a franchisee sells.

true

A limited liability company can be taxed as a corporation.

false

A limited liability company is a citizen of the state in which its main investor resides.

true

A limited liability limited partnership is a type of limited partnership.

true

A limited liability partnership must be formed in compliance with state statutes.

true

A limited partnership can be dissolved by court decree.

true

A majority of the states treat a partnership as an entity for most purposes.

true

A partner always has the power to dissociate from the partnership.

true

A partner has a duty to devote time, skill and energy on behalf of the partnership business.

true

A partner may not have the right to dissociate from the partnership.

false

A partner's devoting time, energy, and skill to partnership business is a compensable service.

false

A partnership is forced to terminate every time a partner dissociates from the firm.

false

A sole proprietorship offers less flexibility than does a partnership or a corporation.

false

A suit against a business or its employees may never lead to unlimited personal liability for the owner of a sole proprietorship.

true

A vacancy on the board of directors can be filled by the board itself.​

false

All forms of business organizations are treated as legal entities separate from their owners.​

false

Any business—except a sole proprietorship—must comply with business registration and licensing requirements.

false

As a general rule, shareholders are responsible for the daily management of a corporation.

false

Corporate directors and officers are insurers of business success.

false

Corporate officers are selected and removed by shareholders.​

true

Corporate officers can normally be removed by the board of directors without cause.​

false

Courts can never "pierce the corporate veil" of a limited liability company to expose shareholders to personal liability.

false

Cumulative voting refers to the accumulation of proposals presented annually for a shareholders' vote.

true

Directors can delegate work to corporate officers and employees.​

false

Every limited liability company is a citizen of every state.

false

Every shareholder is entitled to examine specified corporate records, but only in person, not through an agent.​

true

Express powers of a corporation can be found in state corporation statutes, as well as other documents.

true

For shareholders to act during a shareholders' meeting, a quorum must be present.

true

For two years after a partner dissociates from a continuing partnership, the partnership may be bound by the acts of the dissociated partner.

false

Foreign investors cannot participate in a limited liability company.

true

Franchise agreements typically limit the franchisee's ability to sell the franchise to another party.

false

Generally, a dissociated member of a limited liability company (LLC) has the right to buy his or her interest in the LLC from the other members.

true

Generally, each state limits the liability of partners in a limited liability partnership in some way.

false

Generally, if a member dissociates from a limited liability company (LLC), the other members cannot continue to carry on the LLC's business.

false

Generally, there are no restrictions on the dissociation by any partner from a limited partnership.

false

If a corporation has S corporation status, it must pay income taxes at the corporate level.​

false

If a dispute arises and the applicable limited liability company statute does not cover the issue, a court will most likely dismiss the case.

false

If no fixed duration of the partnership is specified, the partnership is a partnership at will, which means that it cannot be dissolved.

true

In a general partnership, the acts of one partner in the ordinary course of business can subject the other partners to personal liability.

false

In a general partnership, the senior partner manages the partnership.

false

In a limited liability company, the management may consist of members or nonmembers, but not both.

false

In a limited liability limited partnership, a general partner has the same liability as a limited partner in a limited partnership.

true

In a limited partnership, a general partner's dissociation from the firm normally will lead to dissolution unless all partners agree to continue the business

false

In a limited partnership, every partner has full responsibility for the partnership and for all its debts.

true

In a limited partnership, limited partners do not have the same rights as general partners to participate in management.

true

In certain instances of fraud, a court may "pierce the corporate veil" to hold the shareholders individually liable.​

true

In choosing a form of business organization for a new enterprise, one factor to be considered is the ability to raise capital.

false

In corporate law, acts of a corporation that are beyond its express or implied powers are de facto acts.

false

In many states, an operating agreement is required for a limited liability company to exist.

true

In many states, close corporations have more flexibility in determining their rules of operation.​

false

In most states, a limited liability company can have only a limited number of members.

false

In most states, a limited liability company must have at least two members.

false

In most states, an individual can be an officer or a director of a corporation, but not both at the same time.​

true

In most states, each director present at a board meeting has one vote.

true

In some situations, a majority shareholder owes a fiduciary duty to minority shareholders.​

true

In winding up a general partnership, creditors are paid before partners receive their capital contributions.

true

Limited legal liability generally is necessary for small businesses that wish to raise outside capital.

false

Limited liability companies cannot enter into contracts or hold title to property.

true

Members of a limited liability company (LLC) can stipulate in their operating agreement how managers will be chosen or removed.

true

Members of a limited liability company can stipulate in their operating agreement provisions relating to dissolution.

true

Most franchise contracts provide that notice of termination must be given.

false

Most states apply to a limited liability company (LLC) formed in another state the law of the state where the LLC currently does business.

false

Most states treat a partnership as an aggregate for most purposes.

false

Normally, a member who dissociates from a limited liability company (LLC) has the right to force the LLC to dissolve.

false

Not all directors have a right to access a corporation's books and records, facilities, and premises.​

true

On dissolution, the creditors of the individual partners can make claims on the partnership's assets.

true

One factor that frequently causes the courts to pierce the corporate veil is that a corporation was set up never to make a profit.

true

Shareholders must approve fundamental changes affecting a corporation.​

true

Some states have passed laws prohibiting the withdrawal of limited partners from a limited partnership.

false

Some states require the termination of a franchise when there is no "good cause" for it to continue.

true

State deceptive trade practices acts may apply to actions by franchisors.

true

State regulation of franchising is often aimed at protecting franchisees from unfair practices.

false

Stocks represent the borrowing of funds by firms.

true

The articles of incorporation can exclude or limit shareholders' voting rights.​

true

The board of directors makes corporate policy decisions.​

false

The death of a LIMITED partner dissolves a limited partnership.

false

The executive officers represent the ultimate authority in every corporation.​

true

The federal government regulates franchising in part through the Franchise Rule.

true

The franchise agreement may specify whether the premises for the business must be leased or purchased outright.

false

The intent to associate is irrelevant in terms of the elements of a partnership.

false

The law considers all new businesses to be sole proprietorships regardless of the number of owners.

false

The laws governing franchising are primarily designed to protect franchisors from dishonest franchisees.

false

The members of a limited liability company have unlimited liability for any loss or injury caused by the wrongful acts or omissions of the firm.

false

The owners of a limited liability company are liable for the obligations of the firm to the full limit.

true

The true ownership of a corporation is represented by common stock.​

false

To form a limited liability company, articles of organization must be filed with the federal Small Business Administration.

true

Typically, the articles of organization of a limited liability company (LLC) include information on how the LLC will be managed.

false

Typically, the franchisee determines the territory to be served by the franchise.

false

Under most limited liability company statutes, if the members do not specify how profits will be split, they are divided in proportion to the members' capital investment.

False

When a limited liability company is dissolved, any member, including those who wrongfully dissociated, may participate in the winding up process.

true

When deciding which form of business organization to choose, businesspersons normally take into account tax considerations.

true

When lending capital to a small business, a bank may require a personal guaranty of its repayment from the owner.

false

With preemptive rights, shareholders can preempt the decisions of directors and officers with respect to corporate policy.​

true

With respect to taxes, a partnership is a pass-through entity.

true

Withdrawal from a partnership before the end of its express term constitutes a breach of the partnership agreement.

true

limited liability company operating agreements can provide whether formal members' meetings will be held.

true

the articles of incorporation serve as a primary source of authority for a corporation's business functions.