Business Law 2 Test 3_ch27_

Jack and Kyra are partners in Law Firm, LLP, a limited liability partnership. Jack supervises Kyra, who negligently fails to appear in court on behalf of Milo, a client. Liability to Milo rests with a. Jack and Kyra. b. Jack only. c. Kyra only. d. neither Jack nor Kyra.

a. Jack and Kyra.

Kirby is a manager of Jumpstart Fitness LLC, a limited liability company. Jumpstart is formed in a state that imposes fiduciary duties on LLC managers. Kirby owes these duties to a. Jumpstart's members. b. Jumpstart's suppliers. c. Jumpstart's customers. d. none of the choices.

a. Jumpstart's members.

Dreem Land Corporation and EZ Investments Company transfer their property to Financial Managers, Inc., which manages the property and distributes the profits to Dreem and EZ. This form of a business organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

a. a business trust.

Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte and Deli Delite. In most states, a limited partnership will be created when a. a certificate of limited partnership is filed. b. a partnership agreement is executed. c. the business for which the firm is formed actually begins. d. the partners make their capital contributions.

a. a certificate of limited partnership is filed.

Farm2Fork, LLC, is a limited liability company. Rather than distribute its profits to its members, Energy wants to reinvest the profits in its business. For this reason, Energy may prefer to be taxed as a. a corporation. b. a partnership. c. a sole proprietorship. d. a business trust.

a. a corporation.

Events Promotion Corporation licenses trademarks to Fandom Souvenirs, Inc., to use in selling caps, sweatshirts, and similar goods. This is a. a franchise. b. an entrepreneur. c. a principal-agent relationship. d. a sole proprietorship.

a. a franchise.

Worldwide Realtors, Inc., sells a franchise to XL Sales Company. XL is a. a franchisee. b. a franchisor. c. an agent. d. a principal.

a. a franchisee.

Instead of setting up a business to market her own products, Krissy considers entering into a distributorship franchise with Little Breweries Corporation. This involves the transfer of a. a license. b. a trade name. c. the formula to make a certain product. d. the ownership of the business.

a. a license.

Sweet Selections is a general partnership that sells candy, cards and flowers. Sweet Selections has ten partners. Jill and Amy each have a 25 percent interest in the partnership. All the other members have a 10 percent interest. To pass a management decision a. a majority of the partners must agree to the decision. b. both Jill and Amy must agree to the decision. c. Jill or Amy must agree to the decision. d. 30 percent of the partners must agree to the decision.

a. a majority of the partners must agree to the decision.

Tom and Bill are partners in Tough Trucks Towing. James is not a partner. In dealing with Fred, James holds himself out to be a partner in Tough Trucks Towing and Fred contracts to have Tough Trucks Towing tow some vehicles for him. If Tough Trucks fails to tow the vehicles, a court may conclude that a. a partnership by estoppel exists and James is liable to Fred. b. no partnership exists and James is not liable to Fred. c. a partnership by estoppel exists and Fred has all partnership rights. d. no partnership exists, but Tom and Bill are liable to Fred.

a. a partnership by estoppel exists and James is liable to Fred.

Hollister and Gladys do business as partners in Frothy Confections. For federal income tax purposes, Frothy Confections would be treated as a. a pass-through entity. b. a natural person. c. a tax-paying entity. d. a partnership by estoppel.

a. a pass-through entity.

Venture Capital, LP, is a limited partnership. Its limited partners include more than 150 sophisticated investors and investment professionals. A Venture limited partner loses his or her limited liability if he or she a. acts as the firm's manager. b. does not participate in the firm's management. c. invests in Unified Fund, one of Venture's competitors. d. votes on the firm's sale or dissolution.

a. acts as the firm's manager.

Gage buys from Fishing Guide Corporation the exclusive right to sell Fishing Guide rods and reels in a certain area. Their franchise agreement requires Gage to pay certain administrative expenses. Their agreement may also require Gage to pay a percentage of the franchisor's a. advertising costs. b. personal expenses. c. retirement income. d. none of the choices.

a. advertising costs.

CPA Accounting, LLC, is a limited liability company. If the law in CPA's state is like the law in most states, unless the members have agreed otherwise, participants in the firm's management will be considered to include a. all members. b. no member. c. one member. d. two members, including at least one general partner.

a. all members.

Cody is a partner in Delta Accounting Service. Cody can inspect a. all of Delta's books and records. b. Delta's books and records only as the firm's management permits. c. Delta's books and records only for a reasonable purpose. d. Delta's books and records relating to Cody's capital contribution only.

a. all of Delta's books and records.

Pronto Tacos LLC grants a franchise to Omar to open and operate a Pronto Tacos restaurant. Pronto will likely charge Omar a. an initial fee or lump sum price for the franchise license. b. a percentage of Omar's weekly payroll expense. c. an amount of Omar's monthly overhead savings, if any. d. none of the choices.

a. an initial fee or lump sum price for the franchise license.

Flip Gymnastics & Karate, Inc., grants a franchise to Gibby to operate a Flip gym. Flip may require Gibby to pay the franchisor a percentage of his a. annual sales or volume of business. b. weekly payroll expense. c. monthly overhead savings. d. none of the choices.

a. annual sales or volume of business.

Parker and Oscar sign a partnership agreement to do business as "Parker's Plumbing" without specifying a duration. This partnership is terminable a. at any time by either partner. b. only after a reasonable term. c. only if Parker dissociates from the firm. d. only if Oscar dissociates from the firm.

a. at any time by either partner.

Jack buys a Kitchens, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally a. balance the rights of both parties. b. emphasize the right of Kitchens, Inc., to its business operation. c. focus on the right of Jack to be dealt with fairly. d. underscore the interest of consumers in affordability.

a. balance the rights of both parties.

Robert owns Textbooks Plus, a sole proprietorship that sells textbooks. When Robert dies, Textbooks Plus will a. be automatically dissolved. b. pass directly to his oldest child. c. pass directly to the state. d. be evenly divided among all Robert's heirs.

a. be automatically dissolved.

Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional business capital but to maintain control. This can best be accomplished by a. borrowing funds. b. bringing in partners. c. issuing stock. d. selling the business.

a. borrowing funds.

Cecilia's Day Spa, LLC, is a member-managed limited liability company. If the law in Cecilia's state is like the law in most states, unless the members have agreed otherwise, voting rights are apportioned according to a. capital contributions. b. participation in management. c. the number of members. d. transactions with the firm.

a. capital contributions.

Paradise Footwear buys a franchise from Reliant Athletic Shoes Inc. This relationship, like all other franchise relationships, is governed by a. contract law. b. no law. c. the Franchise Disclosure Document, or FDD. d. the rules of the National Collegiate Athletic Association.

a. contract law.

Clu, Dolf, and Elton do business as Fertile Valley Farm. Clu's relationship to the firm ends, but it continues to do business. This is a. dissociation. b. dissolution. c. winding up. d. wrongful.

a. dissociation.

Flip is a member of Great States Trucking LLC. Flip's relationship to Great States ends, but the firm continues to do business. This is a. dissociation. b. dissolution. c. winding up. d. wrongful.

a. dissociation.

Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony a. has a reasonable time, with notice. b. has whatever time A determines, with or without notice. c. is entitled to notice, but nothing more. d. must close immediately.

a. has a reasonable time, with notice.

Guy and Hanna do business as G-H Associates. If G-H is a partnership, it is governed by the Uniform Partnership Act a. in the absence of an express agreement. b. in the absence of an implied agreement. c. only in the presence of an express agreement. d. under all circumstances.

a. in the absence of an express agreement.

Leigh wants to go into the business of construction contracting. Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be a. its greater organizational flexibility. b. its limited liability. c. its perpetual existence. d. the ease of transferring the business to other family members.

a. its greater organizational flexibility.

Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic. Brad, Carlos, and Dora decide to admit Faisal as a new partner in Eastside Physicians. Faisal's liability for partnership debts incurred before his admission is a. limited to his capital contribution to the firm. b. limited to his personal assets. c. nothing. d. unlimited.

a. limited to his capital contribution to the firm.

As the trustee of a business trust, Dwight is required to a. manage the trust and distribute its profits. b. assume liability for the trust's debts. c. draft a written trust agreement. d. none of the choices.

a. manage the trust and distribute its profits.

Edgar, Jon and Phoebe do business as Reliable Movers. Phoebe develops a debilitating illness and can no longer work. Phoebe a. may dissociate from the partnership. b. may not dissociate from the partnership without Edgar and Jon's consent. c. must pay damages to Edgar and Jon for the loss of her work. d. may terminate the partnership.

a. may dissociate from the partnership.

Cluckee Chick'n Corporation provides its prospective franchisees with projected earnings figures based on actual data. Cluckee Chick'n must also disclose a. the number and percentage of franchisees that achieved the figures. b. hypothetical examples of potential earnings. c. an answer to the entrepreneur's question, "How much will I make?" d. none of the choices.

a. the number and percentage of franchisees that achieved the figures.

Ben, who runs a livestock breeding business, owes the Circle C Ranch $40,000. Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid. Because of this agreement, the Circle C is a. Ben's creditor and partner. b. Ben's creditor only. c. Ben's partner only. d. neither Ben's creditor nor his partner.

b. Ben's creditor only.

Corbin, a partner in Doctors Medical Clinic, applies for a loan with Evermore Bank allegedly on Doctors' behalf but without the authorization of the other partners. Evermore knows that Corbin is not authorized to take out the loan. Corbin defaults on the loan. Liability for its unpaid amount is imposed on a. Corbin and Doctors, jointly. b. Corbin only. c. Doctors only. d. Evermore only.

b. Corbin only.

Echo enters into an agreement with Deep Pan Pies, Inc., to operate a franchise in Centre City. Later, Deep grants franchises to others within the city. Echo files a suit to close them. If the court rules in Echo's favor it will most likely be on the ground that a. Deep violated the antitrust laws. b. Deep violated the implied covenant of good faith and fair dealing. c. Echo paid a franchise fee. d. Echo was the first Deep franchisee in Centre City.

b. Deep violated the implied covenant of good faith and fair dealing.

Mit-E Mart LLC was formed in New Jersey. Mit-E Mart's members are Odel, who is a citizen of New Jersey, and Pola, who is a citizen of New York. For federal diversity jurisdictional purposes, Mit-E is a citizen of a. all states. b. New Jersey and New York. c. New Jersey only. d. no state.

b. New Jersey and New York.

Which of the following statements is not correct about the word 'Uniform' in a title such as the 'Uniform Partnership Act'?. a. The Act is written and published by a professional society. b. The Act is uniformly implemented across all states and is federal law. c. The Act must be adopted by each state. d. The Act is implemented differently in each state.

b. The Act is uniformly implemented across all states and is federal law.

Consumers in Delta City form a business organization to provide, without profit, an economic service to its members. This is a. a business trust. b. a cooperative. c. a corporation. d. a joint stock company.

b. a cooperative.

Peyton, Qiana, and River form a syndicate to buy a professional basketball franchise. This syndicate could be set up as a. a joint venture. b. a corporation. c. a sole proprietorship. d. a limited liability company.

b. a corporation.

Mello Coffee Shops, Inc., sells a franchise to Noah's Arch, a café. Mello is a. a franchisee. b. a franchisor. c. an agent. d. a principal.

b. a franchisor.

Exotic Stuff Company and First Pier, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This business organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

b. a joint stock company.

Neverend Music Company and Monotonous Metronome Corporation form a joint stock company. A joint stock company can be formed for, at the most, a. an implied duration of not more than six months. b. a perpetual existence. c. a single activity or transaction. d. a stated duration of not more than one year.

b. a perpetual existence.

Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. Jumbo Juice makes earnings claims to potential investors. For those claims, the franchisor must have a. a hypothetical basis. b. a reasonable basis. c. an actual basis. d. no basis.

b. a reasonable basis.

CheezBurger Heaven, Inc., conducts a chain-style franchise. This involves the transfer to Clive, one of its franchisees, of a. a license. b. a trade name. c. the formula to make a product. d. the ownership of the business.

b. a trade name.

Kelly, Lars, and Mona agree to be partners in Neighborhood Delivery Service (NDS), splitting the profits equally. Kelly contributes 67 percent of the capital. When NDS is dissolved, its liabilities are greater than its assets. The losses are paid by a. all of the partners in proportion to their capital contributions. b. all of the partners in proportion to their shares of the profits. c. Kelly because she contributed most of the capital. d. Lars and Mona because they contributed the least of the capital.

b. all of the partners in proportion to their shares of the profits.

Coco is considering forms of business organization for her concessions business—Coco's Cupcakes. Most states require that a limited liability company have at least a. no minimum number of members. b. at least one member. c. at least two members. d. at least three members, including at least one general partner.

b. at least one member.

Mead, Nero, and Olen do business as Pipe & Plumbing Services. After Mead's relationship to the firm ends, Nero and Olen agree to discontinue the business. This is a. dissociation. b. dissolution. c. gross negligence. d. simple misconduct.

b. dissolution.

StartUp Investors, LLC, is a limited liability company without a written operating agreement. Among the members, a dispute arises concerning the division of profits. Under most LLC statutes, the profits will be a. distributed according to the members' proportionate shares of ownership in the firm. b. divided equally among the members. c. forfeited to the state. d. reinvested in the business until the dispute is resolved.

b. divided equally among the members.

Location! Realty LLC is a limited liability company. Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of a. all states. b. every state in which its members are citizens. c. no state. d. only the state in which it was formed.

b. every state in which its members are citizens.

Kathy and John decide to form a partnership to sell fish food to local fish farms for the next five years. To be enforceable under the Statute of Frauds, the partnership agreement a. must be signed by a notary public. b. must be in writing. c. must be oral. d. cannot involve a third party.

b. must be in writing.

Sable and Rex agree while talking on the phone to form a partnership to deal in transfers of real property. Their partnership agreement is legally binding a. only if a copy of the agreement is filed in the appropriate state office. b. only if the agreement is reduced to writing. c. only if the parties exchange valid consideration. d. without further action.

b. only if the agreement is reduced to writing.

Fay is admitted to Global Associates, an existing partnership. A partnership debt incurred before the date of her admission comes due. Fay is a. not liable for the debt. b. only liable for the debt up to the amount of his capital contribution. c. personally liable only to the extent the other partners do not pay. d. personally liable to the full extent of the debt.

b. only liable for the debt up to the amount of his capital contribution.

Newt is considering forms of business organization for Newton Design, an architectural firm. An advantage of a limited liability partnership is that partners can avoid personal liability for a. their own wrongful acts. b. only other partners' malpractice. c. only partnership obligations that exceed capital contributions. d. only partnership obligations that fall within capital contributions.

b. only other partners' malpractice.

Chocolate Sundry LLC's members and managers are Devlin, Effie, and Flavia. After Devlin's relationship to the firm ends, Effie and Flavia agree to discontinue the business. This is a. illegal. b. optional. c. required. d. wrongful.

b. optional.

Homer's Remodeling, LLC, is a limited liability company. Among the members, a dispute arises that their operating agreement does not cover. No statute applies. The dispute is governed by the principles of a. corporate law. b. partnership law. c. sole proprietorship law. d. joint venture law.

b. partnership law.

Phillipa is the sole proprietor of Fun Floral Arrangements. As a sole proprietor, on Fun Floral Arrangements' profits, Phillipa a. does not pay income taxes. b. pays only personal income taxes. c. is taxed twice. d. pays both personal and sole proprietor income taxes.

b. pays only personal income taxes.

National Capital Corporation and International Investments, Inc., form a joint stock company. The ownership of a joint stock company is represented by a. partnership certificates. b. shares of stock. c. title documents. d. trust certificates.

b. shares of stock.

Sweet Styles, Inc., a franchisor of clothing stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent action might be for Sweet to a. mandate the prices at which its franchisees sell their products. b. suggest the prices at which its franchisees sell their products. c. require its franchisees to buy inventory exclusively from Sweet. d. threaten its franchisees with a material breach of contract.

b. suggest the prices at which its franchisees sell their products.

Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic. Brad's dissociation from the firm results in a. the automatic termination of the firm's legal existence. b. the partnership's buyout of Brad's interest in the firm. c. the immediate maturity of all partnership debts. d. the temporary suspension of the partnership's business.

b. the partnership's buyout of Brad's interest in the firm.

Jordana is a member of Klondike Coffee, LLC, a limited liability company. Jordana is liable for Klondike's debts a. in proportion to the total number of members. b. to the extent of his capital contribution. c. to the extent that the other members do not pay the debts. d. to the full extent.

b. to the extent of his capital contribution.

Energy Unlimited, LP, is a limited partnership to which its partners, including Fink, have contributed capital. Energy's creditors include Graves Engineering, Inc. On Energy's dissolution, its assets will be distributed to pay a. Fink and Graves proportionately. b. Fink first. c. Graves first. d. neither Fink nor Graves.

c. Graves first.

Build-Rite Construction Corporation and Deals-R-Us, Inc., combine their efforts to build an office and retail complex. Their form of business organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

c. a joint venture.

Bee Hive Honey, LLC's members include Chad. For purposes of suing and being sued, Bee Hive Honey is a. an aggregate of Chad and the other members. b. a natural person in the members' "family." c. a legal entity apart from the owners. d. a non-participating third party.

c. a legal entity apart from the owners.

High Pointe LLC's members include Irvin. For purposes of holding title to property, High Pointe is a. an aggregate of Irvin and the other members. b. a natural person in the members' "family." c. a legal entity apart from the owners. d. a non-participating third party.

c. a legal entity apart from the owners.

Leo buys an exclusive territory in which he is authorized to set up a plant to make Midwest Dairy, Inc., products. After receiving the formula, Leo begins making Nice-brand ice cream and other Midwest products. This is a. a chain-style franchise. b. a distributorship franchise. c. a manufacturing franchise. d. no franchise.

c. a manufacturing franchise.

Pepsi-Cola Bottling Company is a. a chain-style franchise. b. a distributorship franchise. c. a manufacturing franchise. d. not a franchise.

c. a manufacturing franchise.

Cal sells "DownSize," a weight-reduction program, from a Web site, in competition with Eat-Less Inc.'s product "Fit 'n Trim." Eat-Less files a suit against Cal, alleging in part that he is a sole proprietor, but his enterprise should be deemed a different form of business. Cal's enterprise should most likely be considered a. a corporation because DownSize is sold online. b. a franchisee because DownSize is sold in competition to Fit 'n Trim. c. a sole proprietorship because Cal is a sole proprietor. d. no form of business entity because Cal has no formal organization.

c. a sole proprietorship because Cal is a sole proprietor.

Denise and Elke do business as Final Curtain Decorators. In most states, for purposes of holding title to property, this partnership would be treated as a. an aggregate of the individual partners. b. a natural person. c. an entity. d. a non-existent party.

c. an entity.

Noah and Orin do business as Personnel Partners. In most states, for purposes of suing and being sued, Personnel Partners would be treated as a. an aggregate of the individual partners. b. a natural person. c. an entity. d. a non-existent party.

c. an entity.

Greta is a member of Hovercraft LLC. As a member, Greta is a. a manager or officer, but not an owner. b. an investor, but not a manager, officer, or owner. c. an owner. d. a participant, but not an investor, manager, officer, or owner.

c. an owner.

Dani is considering forms of business organization for her financial advisory firm. Like most states, Dani's state requires that to form a limited liability company, she must file with a central state agency a. articles of certification. b. articles of formation. c. articles of organization. d. no specific documents.

c. articles of organization.

Connie, Drew, and Ellen are the general partners of Foreign Auto Repair, a limited partnership. Connie dies. The partnership can a. continue only after a distribution of its assets. b. continue only as a general partnership. c. continue only if Drew and Ellen consent. d. not continue because Connie's death dissolves the firm.

c. continue only if Drew and Ellen consent.

Jim and Kyle are partners in J&K Sales, which exports technical equipment under a three-year partnership agreement. The U.S. government declares that the equipment can no longer be exported. J&K a. dissolves as soon as the stated term expires. b. dissolves as soon as the partners agree to dissolve it. c. dissolves immediately unless the partners change its business. d. does not dissolve.

c. dissolves immediately unless the partners change its business.

Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agreements, it will specify that Comida can terminate the franchise a. at will. b. for any reason. c. for cause only. d. for no reason.

c. for cause only.

Mabel and Nicol do business as One World Realty. In acting on the firm's behalf in a deal with Property Acquisition Company, Mabel fails to account for the profit. To her firm, Mabel is a. liable for breach of the duty of care. b. liable for breach of the duty of economic sense. c. liable for breach of the duty of loyalty. d. not liable.

c. liable for breach of the duty of loyalty.

As the beneficiary of a business trust, Kevin's liability for trust debts and obligations is a. limited to his capital investment in the trust. b. limited to his personal assets. c. nothing. d. unlimited.

c. nothing.

Bo and Clancy decide to do business as Marketing & Promotion Services. To be a partnership, this association can result from an agreement that is a. express, but not from an agreement that is implied. b. implied, but not from an agreement that is express. c. oral, written, or implied by conduct. d. written, but not from an agreement that is oral or implied.

c. oral, written, or implied by conduct.

Otis is interested in buying a franchise from Plentiful Inc. This transaction, like other franchise deals, is regulated to protect a. certain types of anticompetitive agreements. b. franchisors from dishonest prospective franchisees. c. prospective franchisees from dishonest franchisors. d. the government's power to restrict freedom of contract.

c. prospective franchisees from dishonest franchisors.

A franchise agreement between Simple Software Company and Total Game, Inc., is silent on a time for termination of the franchise. Simple may a. never terminate. b. terminate at any time. c. terminate on reasonable notice. d. terminate on three days notice.

c. terminate on reasonable notice.

In-Home Maid Service Company uses a Web site to provide downloadable information to prospective franchises. This online information is the equivalent of an offer that must comply with a. the Automobile Dealers' Franchise Act of 1965. b. no law. c. the Federal Trade Commission's Franchise Rule. d. the state Franchise Disclosure Document, or FDD.

c. the Federal Trade Commission's Franchise Rule.

Pilar is interested in buying a franchise from Quixotic Travel & Tours Corporation. Quixotic must disclose material facts that Pilar needs to make an informed decision concerning this purchase, according to a. no law. b. the Petroleum Marketing Practices Act of 1979. c. the Federal Trade Commission's Franchise Rule. d. the Uniform Commercial Code.

c. the Federal Trade Commission's Franchise Rule.

Rita buys a Super Grill franchise. Super Grill requires that its franchisees buy its products for every phase of their operations. Because Rita wishes to buy less expensive products, she challenges the requirement. Her best argument is probably that the requirement violates a. the commerce clause. b. the Equal Protection Clause. c. the federal antitrust laws. d. the First Amendment.

c. the federal antitrust laws.

Frooty Drinks, Inc., and Great Gulp Bottling Company have a processing-plant franchise arrangement. This involves the transfer of a. a license. b. a trade name. c. the formula to make a certain product. d. the ownership of the business.

c. the formula to make a certain product.

Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic. The partners decide to dissolve Eastside. Dora collects and distributes the firm's assets. This results in a. nothing with respect to the firm's existence. b. the continuation of the firm's business. c. the termination of the firm's legal existence. d. the temporary suspension of the firm's business.

c. the termination of the firm's legal existence.

Buyers Club is an incorporated cooperative. Like other incorporated cooperatives, Buyers Club distributes profits to its owners on the basis of a. the amount of capital they contribute. b. the degree to which they participate in management. c. their transactions with the cooperative. d. the requirements of the state in which it was incorporated.

c. their transactions with the cooperative.

Kristal is a member of Laboratory CSI Services, LLC, a limited liability company. Kristal can participate in the firm's management a. only to the extent that she assumes liability for the firm's debts. b. only to the extent of her investment in the firm. c. to any extent. d. to no extent.

c. to any extent.

Shae's Café and Tommy's Grill form a joint venture. Shae can participate in the venture's management a. only to the extent that she assumes liability for the venture's debts. b. only to the extent of her investment in the venture. c. to any extent. d. to no extent.

c. to any extent.

Lucy is a limited partner in Metro Contractors, a limited partnership, which cannot pay its debts. Lucy is personally liable for the debts a. in proportion to the number of partners in the firm. b. to no extent. c. to the extent of her capital contribution. d. to the full extent.

c. to the extent of her capital contribution.

Bob operated a pet grooming shop under a franchise agreement with Clean Pets Corp (CPC). The agreement allowed CPC to terminate the franchise if Bob was fined for cruelty to animals. After an investigation initiated by a customer complaint, Bob was fined for cruelty. CPC terminated the franchise. Bob filed a suit against CPC for wrongful termination. The court will most likely rule in favor of a. Bob, because CPC had no good cause to terminate the franchise. b. Bob, because the fine for cruelty was based on a customer complaint. c. CPC, because a franchisor can terminate a franchise at any time. d. CPC, because the franchise was terminated for good cause.

d. CPC, because the franchise was terminated for good cause.

Doral, Esteban, and Fiona are general partners in Centreville Dentistry, a dental clinic. Their agreement states it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners. Doral's assignment of his interest in the clinic to Hometown Lenders results in a. nothing with respect to Doral or the clinic. b. the automatic termination of the clinic's legal existence. c. Doral's liability for all of the clinic's debts. d. Doral's wrongful dissociation and liability for any damages.

d. Doral's wrongful dissociation and liability for any damages.

Jessica's Jumpin' Jelly Beans, LLC, is a limited liability company. Unless indicated otherwise on Jessica's federal tax form, the firm will be taxed as a. a cooperative. b. a corporation. c. a joint venture. d. a partnership.

d. a partnership.

Fay is a member of Garden Groves LLC. Like other members of limited liability companies, Fay's liability for Garden Groves's obligations resembles the liability of a. a member of a joint venture. b. an owner of a sole proprietorship. c. a partner of a partnership. d. a shareholder of a corporation.

d. a shareholder of a corporation.

Julia owns and operates Collectable Dolls without creating a separate business organization. She receives all the profits from the doll sales. Collectable Dolls is most likely a a. a corporation. b. a limited liability company. c. a partnership. d. a sole proprietorship.

d. a sole proprietorship.

Owen, Paula, Quinn, and Rita combine to finance the building of Super Stores, a shopping mall. Their selected form of business organization is an investment group, or a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

d. a syndicate.

Will and Jay form Northwest Air Express, a general partnership. The essential elements of this partnership do not include a. a sharing of profits and losses. b. a joint ownership of the business. c. an equal right to management in the business. d. goodwill.

d. goodwill.

Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. To potential investors, Jumbo Juice must provide a. actual earnings figures. b. hypothetical earnings figures. c. projected earnings figures. d. none of the choices.

d. none of the choices.

Simone is a manager of Rolling Hills Resort LLC, a limited liability company. Rolling Hills is formed in a state that does not explicitly create fiduciary duties for LLC managers but does require the exercise of good business judgment. Unless a court rules otherwise, Simone owes fiduciary duties to a. Rolling Hills's members. b. Rolling Hills's suppliers. c. Rolling Hills's customers. d. none of the choices.

d. none of the choices.

Ryder and Sergei are partners in Timberline Gear, which sells mountain- and rock-climbing equipment. Ryder manages the business. Unless the partnership agreement states otherwise, Ryder is a. entitled to compensation in proportion to his effect on the business. b. entitled to compensation in proportion to his effort. c. entitled to compensation in proportion to his capital contribution. d. not entitled to compensation.

d. not entitled to compensation.

Rick and Sandy are limited partners in Total Profit Enterprises, a limited partnership. To avoid personal liability for partnership obligations, they must not a. acquire an interest in the firm. b. contribute property to the firm. c. engage in activities independent of the firm's business. d. participate in the firm's management.

d. participate in the firm's management.

Big Valu Grocery Stores is an unincorporated cooperative. Big Valu and other unincorporated cooperatives are generally treated like a. business trusts. b. corporations. c. joint stock companies. d. partnerships.

d. partnerships.

Rafaela Art Gallery and Sequoia Exhibitions form a joint venture. When a dispute arises, Rafaela files a suit against Sequoia. The court is most likely to apply the same principles to this joint venture as it applies to a. business trusts. b. cooperatives. c. corporations. d. partnerships.

d. partnerships.

Tundi is a partner in YooHoo! Amusement, a new partnership. A YooHoo! debt comes due. Tundi is a. not liable for the debt. b. only liable for the debt up to the amount of his capital contribution. c. personally liable only to the extent the other partners do not pay. d. personally liable to the full extent of the debt.

d. personally liable to the full extent of the debt.

Jin, Karlo, and other consumers form Metro Purchasing Cooperative. This form of business organization makes it possible for these individuals to a. avoid personal liability for the acts of the cooperative. b. obtain an exemption from state laws governing corporations. c. pay no taxes on their business income. d. pool their resources to gain an advantage in the market.

d. pool their resources to gain an advantage in the market.

Fern contracts to buy a franchise from Gooseberry Grocers, Inc. The contract is silent on the issue of territorial rights. Gooseberry allows a competing franchise to be established near Fern's store, which suffers a significant loss in profits. This is most likely a violation of a. no law. b. the ban on certain types of anticompetitive agreements. c. the Federal Trade Commission's Franchise Rule. d. the implied covenant of good faith and fair dealing.

d. the implied covenant of good faith and fair dealing.

Pricey Auto Corporation gives notice to Quint that Pricey is terminating their franchise arrangement. Winding up the business requires a. a new franchise agreement. b. nothing more than closing immediately. c. Quint's death, disability, or insolvency. d. the return of Pricey's property.

d. the return of Pricey's property.

Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is a. limited by state statute and varies from state to state. b. limited to the extent of capital expenditures. c. limited to the extent of his or her original investment. d. unlimited.

d. unlimited.