Blaw ch 26

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Regarding the management of an LLP, which of the following are true? (Check all that apply)

No partner can join the LLP without unanimous consent An agreement can alter management responsibilities

Which of the following is not a factor courts will consider when determining whether to pierce the corporate veil?

Overcapitalization

If a franchisor mandate sets prices and prohibits sales to customers outside an assigned sales territory, this could violate which of the following laws?

The Sherman Act

Violations of federal franchise rules can include a(n) ______. (Check all that apply)

FTC lawsuit $10,000-per-day fine

The ______ has issued rules designed to give prospective franchisees more information about termination, cancellation and renewals of franchise.

Federal Trade Commission

The ______ has issued rules designed to give prospective franchisees more information about termination, cancellation and renewals of franchise. Multiple choice question.

Federal Trade Commission

Which of the following has become the most common arrangement in the United States for providing food, hotel, gasoline, and real estate brokerage services?

Franchising

Which of the following is correct regarding taxation of sole proprietorships?

They are not required to pay corporate franchise taxes.

If a member withdraws from an LLC, they can receive

a return on capital investment made the value of her interest

A franchisor can conduct business as ______. (Check all that apply)

a sole proprietorship corporation partnership

If a transferee under and LLC does not become a member they are entitled to ___________________

all of the transferee's share of profits

If a corporation wants to operate in a state other than its home state of incorporation, usually the corporation must ______.

appoint a local representative for service pay annual privilege or franchise taxes file articles of incorporation

The purpose of a franchise is to ______.

become an outlet for a national or international chain

State statutes generally require that LLCs ______. (Check all that apply)

can be easily dissolved are set up for a limited duration

Shareholders in ______ are often restricted in the sale of their stock making investments in these business organizations less liquid and marketable.

close corporations

Most franchise contracts are typically ______.

contracts of adhesion

Typically, a franchisor is a ______.

corporation

State laws regarding franchises generally address ______. (Check all that apply)

deceptive advertising the franchisor's power to terminate the franchise

Shareholders of a corporation pay taxes on ______.

dividends from the corporation

Shareholders in an S corporation ______. (Check all that apply)

do not pay corporate tax directly report their share of the corporation's losses or earnings on tax return

If a general partner sells their interest, the purchaser ______.

does not become a partner unless all other general partners agree cannot force liquidation of the business

In an effort to maintain the value of its trademark, the franchisor may exert considerable control over the franchisee. This control may be enough control for a court to determine that the franchisee is the franchisor's ______.

employee agent

A tax-free transaction is possible when shares of a corporation are ______.

exchanged for another corporation

Salaries and wages paid to employees of a sole proprietorships are considered ______.

expenses and deductible on taxes

Shareholder-emplyees may be paid salaries that are taxable as personal income to the shareholder but are deductible as ______.

expenses for the corporation

Many inexperienced people have been ruined financially by believing ______ claims of the ______ of franchises.

extravagant; wealth-building potential

From a franchisee's standpoint the most important things a franchisor can offer is ______. (Check all that apply)

financing advertising business training

Many state laws have been enacted to help with ______.

franchisee-franchisor business relationships

One of the most common ways to do business in the United States is through ______.

franchising

Although many franchisees have been successful, there are still issues associated with franchising including ______. (Check all that apply)

franchisors not giving the assistance to run the franchise as promised franchisors misrepresenting their opportunities

LLPs are taxed as ______.

general partnerships

Franchisors must disclose to potential franchisees ______. (Check all that apply)

how many francises were terminated why a franchise was terminated

The wealth-increasing potential of an investment in a business is greatly affected by ______.

income tax laws

The wealth-increasing potential of an investment in a business is greatly affected by ______. Multiple choice question.

income tax laws

Franchise contracts usually declare that the franchisee is a(n) ______.

independent contractor

If a new partner joins the LLP without unanimous consent of the LLP partners, the new partner ______.

is not considered a partner in the LLP

Unless the partners otherwise agree, a partner ______. (Check all that apply)

is not entitled to wages is not considered an employee

When a corporation is involved in a type of business that has wide swings in income from year to year, it can reduce sharholder tax burden by ______.

keeping the dividend rate constant

In the recent years, ______ have begun joining the accounting profession and switching from general partnerships and professional corporations to limited liability partnerships.

law firms

Facing the growing cost of ______, accountants sought a new business formation known as the limited liability partnership.

lawsuits

In order to have an LLP, partners need ______. (Check all that apply)

maintain appropriate professional liability insurance to file an LLP form

Some state automobile franchise laws require ______.

manufacturers to only use independent dealerships

Generally, state statutes allow LLCs to transfer the interests in an LLC based on

member's consent

In order to have a general partnership

no express agreement is needed the parties intend to have a partnership agreement

Sole proprietorships or general partnerships require ______ in order to be formed

no formalities

Sole proprietorships or general partnerships require ______ in order to be formed.

no formalities

Generally, in an LLC, a member has ______ for the wrongdoing of other members.

no liability

Day-to-day operating management in a corporation is generally conducted by ______.

one or more officers

A franchisor usually maintains a high degree of control over ______.

operations to standardized quality

Franchising's biggest growth has come ______.

over the past quarter century

A _________ is a voluntary association that carries on a business for profit

partnership

Partnerships in general are not taxable entities; instead, income is passed ______.

pro rata to partners

Franchisors take advantage of setting up franchises because they can ______. (Check all that apply)

reduce competition gain control over the distribution of their product

By controlling the number of locations of outlets of their franchise, a franchisor can ______. (Check all that apply)

reduce competition among franchisees encourage the franchisee not to carry competitive products

Federal rules require franchiors to explain ______ of franchise agreements. (Check all that apply)

renewals terminations cancellations

Under an LLP, no income taxes are paid, but partners must ______.

report

Generally, ______ does not affect the ownership of property in a corporation because corporate existence is not affected by the event. (Check all that apply)

retirement death bankruptcy

One of the most important advantages a franchisee receives is the ______.

right to use a trademark owned by the franchisor

Automobile manufactures are challenging state franchising laws in order to ______. (Check all that apply)

sell directly to customers sell online

Limited liability partnerships developed from accounting firms looking to ______.

shield partners' personal assets from malpractice claims

If an LLC is not set up so that it can be easily dissolved, it loses its ability to have ______ under federal tax laws.

single tax treatment

Due to unfair terminations and extravagant claims of wealth-building potential, ______ now generally regulate(s) the franchise relationship. (Check all that apply)

state governments the federal government

In the context of the management of a corporation, generally policy control is with ______.

the board of directors

The legal powers an LLC has include

the right develop contracts and incur debts in its own name the right to buy an sell property in its own name

In a sole proprietorship, agents and employees may be hired and ______ is(are) responsible for all liabilities along with all profits and losses.

the sole proprietor

If considerable control has been exerted over the franchisee through control of operations and use of trademark, the courts can determine that this control is sufficient enough to hold the franchisor liable for ______.

torts committed by the franchisee's employees

If a franchisor builds and equips a business and leases it to the franchisee this is called a ______.

turnkey operation

If a partner in an LLP commits malpractice, they will have ______ liability.

unlimited personal

State laws regarding franchisor-franchisee relationships ______.

vary widely

State laws regarding franchisor-franchisee relationships ______. Multiple choice question.

vary widely

Shareholders who are not directors of a corporation have ______ of day-to-day operations.

very limited control

In many instances shareholders in a small corporation may be induced to ______ waive their limited liability.

voluntarily

Which of the following is a taxable entity?

A corporation

Which of the following is not a primary factor in deciding what type of business organization to choose?

If the federal government will approve of the choice

In order to form a corporation or a limited partnership, ______.

In order to form a corporation or a limited partnership, ______.

In a general partnership, each partner is considered a(n) ______ with a right to share in the profits of the business.

owner

In a general partnership, each partner is considered a(n) ______ with a right to share in the profits of the business. Multiple choice question.

owner

The success of a sole proprietorship usually depends upon the ______.

owner

If losses are anticipated in the early years of a business and the owners have other income, ______ will save taxes during that period.

partnerships sole proprietors

Partners in a general partnership may not only lose their investment, they may also have to ______.

pay for partnership debts from personal asset

Courts can sometimes strip corporate shareholders of their limited liability to prevent unfairness. This is known as ______.

piercing the corporate veil

In order to limit liability, it is wise to consult a ______ before choosing a particular form of business organization. (Choose all that apply)

public accountant lawyer

Corporations are divided between ______. (Check all that apply)

publicly-held corporations close corporations

Changes in ______ may shift the tax advantages between a partnership and corporations in certain circumstances.

rates of taxation

If losses are anticipated in the early years of a partnership and the partners have other income, the owners can ______ their tax liability on their other income by ______.

reduce; the amount of the partnership losses

A corporation is treated as an entity that is ______.

separate and distinct from its owners

Publicly-offered partnership interests are generally designed to ______.

serve as tax shelters

Employees of a publicly held corporation often times become

shareholders

Under a _________ the proprietor is free within the law to run the organization as they see fit

sole proprietorship

Under a _________ the proprietor is free within the law to run the organization as they see fit.

sole proprietorship

Successful continuation of a ______ is less likely than in a ______.

sole proprietorship; partnership

A minority shareholder in a close corporation has little power and may be ___________ by the majority on issues such as reduction or elimination of dividends

"frozen out"

When naming an LLC, the name must include _____________ or some other indication of the limited liability feature for the public

"limited liability company"

Like a corporations, courts will ___________ between an LLC and its members if it is found that the LLC was created with the intent to defraud creditors

"pierce the corporate veil"

For an S corporation to keep its tax status, ______. (Check all that apply)

its shareholders must all be individuals or estates the can be no more than 100 shareholders its shareholders must consent in writing to have the corporation taxed as a partnership

Statutes that grant limited liability companies' power often grant ______. (Check all that apply)

limited liability of corporations tax benefits of partnerships

Without power to terminate the corporation in a close corporation, the minority share holder is ________ to the investment they made

locked in

Legally, an limited liability company is a

a separate entity apart from its owner

A trade name in a sole proprietorship must be registered with __

a state or local official

If a sole proprietorship or partnership is sold, this is usually ______.

a taxable transaction

If dissolution is caused by death, retirement, bankruptcy or dissolution by a member, the remaining members can avoid liquidation by ______.

agreeing to continue the business operations

If a transferee under and LLC does not become a member they are entitled to ___________________

all transfer

General partners usually take ____________ in management of day-to-day operations and can delegate their authority to one or more partners

an active role

Employees of the sole proprietor's business ______.

are the personal employees of the owner

Limited liability companies must file ___________ with the secretary of state before they can do business within the state

articles of organization

If someone is a shareholder they are often given ownership rights but does not include an automatic right to

be an employee

If a corporation wants to transact business in a state other than the state in which it is incorporated, it must ______.

become qualified in the state

Limited liability and the tendency of investors to relate corporate securities to ______ companies make corporations appear safer for financing.

blue chip"

Unlike limited partnerships, investors in limited liability companies ______.

can share in management

If a corporation or limited partnership plans to terminate the business formation, it needs to ______.

cancel its certificate

When a corporation is acquired by another corporation, shareholders do not have to pay ____

capital gains tax

When a corporation is acquired by another corporation, shareholders do not have to pay ______.

capital gains tax

Generally it is easier to preserve good will in a corporation as owners change due to __________ of the business.

continuity

Generally it is easier to preserve good will in a corporation as owners change due to __________ of the business. Multiple choice question.

continuity

Generally it is easier to preserve good will in a _____ as owners change due to continuity of the business.

corporation

When the maximum corporate tax rate was less than the maximum individual rate, a shareholder's interest in the retained earnings was not taxed until the ______.

corporation was dissolved stock was sold

Banks who lend money to corporations often require one or more of the shareholders to ______.

cosign corporate notes

Because partners seldom give up their right to participate in management, decisions of the corporation can be

deadlocked delayed by consultations

Generally a corporation is not affected by the ___________ of a shareholder if they are no longer a part of the corporation

death insolvency

One of the major advantages of a publicly held corporation is the ______

ease of selling one's investment

One of the major advantages of a publicly held corporation is the ______.

ease of selling one's investment

Limited partners generally do not ______.

engage in the day-to-day business of the partnership

Each partner is personally liable for any losses suffered by the partnership ______. (Check all that apply)

even if the losses are not attributed to the partner even if the losses exceed the individual partner's contributions

In 1988, for the first time in history, the maximum corporate tax rate ______.

exceeded the maximum individual tax rate

Ownership of a family or other close corporation can be shifted gradually by __________ to those who will succeed the present managers

gift sale

If a partner terminates the partnership in violation of their agreement, that partner _____________ for damages

has full liability

Limited partners who do not participate in management and shareholders in a corporation may lose their investment if the business fails, but ______. (Check all that apply

have no liability to creditors of the business have no liability to victims of torts

Costs of ______ can be provided to shareholder-employees and deducted by the corporation with no immediate taxation to the employees if the other employees receive these benefits. (Check all that apply)

health insurance pension plans

A publicly held corporation sells shares to people

ho generally are interested as investors

In a partnership, if a partner dies, becomes insolvent, or wishes to retire, a(n) ____________ made in advance of these events is needed to keep the business operating

special agreement

For larger business, the corporate form is easiest for financing because ______.

stock can be used as collateral

A corporation can ______. (Check all that apply)

sue and be sued in its own name hold, acquire and convey property

Gradual sale or gifting of shares of a family or other close corporation may minimize _________ at death that would otherwise result from the selling of the business

tax consequences

Primary factors in determining what type of organization a person might chose when deciding on a business organization often include ______. (Choose all that apply)

the amount of personal liability a person would have the amount and availability of tax breaks the right to control the day-to-day affairs

A limited partnership combines ______ and ______.

the capital-raising advantages of a corporation the informalities of a partnership

Generally, because management is left to a chief executive officers under this business organization there are generally less conflicts

the corporation

The business organization that offers the easiest management style is

the sole proprietorship

In a corporation, the loss of a shareholder is limited to ______.

their personal investment

For smaller corporations, the continuity factor makes it easier for a bank to loan money because shareholders can put up ______ as collateral for the loan

their stock

For smaller corporations, the continuity factor makes it easier for a bank to loan money because shareholders can put up ______ as collateral for the loan.

their stock

If a general partnership or a sole proprietorship wants to operate in a state other than its home state of incorporation, usually ______.

there are no specific formal requirements

Limited partnership interests can be sold without the potential negative effects of a general partnership, but ______.

there is seldom a market to sell their interest

Limited partnership interests can be sold without the potential negative effects of a general partnership, but ______. Multiple choice question.

there is seldom a market to sell their interest

Many states allow for professional LLCs that have ______ liability for their own malpractice.

unlimited

In a limited liability company, the number of members allowed is ______.

unrestricted


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