Practice Midterm BLW 203
false
"First in time, first in right" is the rule applicable to the use of a business name; that is, the first proprietor to use an assumed business name will be granted the exclusive right to use the name, regardless of whether the proprietor registered the name with the secretary of state.
Principal's Duties
-compensation -reimbursement & indemnification -cooperation -safe working conditions
2 rules for the formation of an agency
1. must be created for a lawful purpose 2. must have capacity to be an agent- no minors
false
A limited liability partnership (LLP) offers limited partners personal liability protections.
true
A partnership begins simply by one or more individuals beginning business.
true
All partners of an LLP may participate in management of partnership business.
false
An LLP is regulated by statute and therefore does not need a partnership agreement to define the rights and duties of the partners.
true
Creditors of a partnership may seek repayment of business debts from the personal assets of the partners.
true
Creditors of a sole proprietor may seek payment of business debts from assets of the sole proprietorship.
False
In an agency relationship, a principal acts on behalf of an agent.
true
LLPs offer more expansive personal liability protections to partners than general partnerships.
false
Partners may limit their personal liability for business debts and obligations through a partnership agreement.
Obedience
agent has the duty to follow all lawful instructions of the principal
loyalty
agent must act solely for the benefit of the principal. no conflict of interests. All information is confidential. Agent can not profit individually w/o permission from the principal
true
agents and principals owe fiduciary duties to each other
Personal liability
liability that goes beyond business assets to personal assets
implied by authority
no expressed agreement. Implied by the conduct of the parties
Expressed agency
parties have written/ oral contracts
apparent agency
principal falsely leads others to believe another person serves as an agent
notification
principal must know of all matters. must be in constant communication
Principal
the person for whom an agent acts. - the managing party
Why employee vs IC matters
-tax items -people like to say an employee is an IC so they don't have to pay social security taxes on those payments -IC is responsible for themselves
Craig should consider not only the value of the tangible business assets (equipment), but also the goodwill (reputation) and clientele of the business. These intangible assets of a business are generally worth more than the tangible assets.
Craig wants to sell a small commercial cleaning business that he owns. He isn't sure what the sale price for the business should be. He owns about $10,000 worth of business equipment and has several cleaning contracts with large businesses. What are some of the factors he should consider in determining a fair sales price?
The profit and losses of a partnership pass through the partnership and are taxed as the personal income of the partners. The partnership itself is not taxed on its profits and losses.
Explain how the business profits and losses of a partnership are taxed.
A sole proprietorship is a business conducted by one person. A partnership is conducted by two or more persons or entities.
Explain the difference between a sole proprietorship and a partnership
Respondent superior
Liability imposed on employers for acts of employees
true
Licensing requirements allow states and counties to regulate businesses.
True
Principals can be held liable for the actions of their agents.
true
Registration of an assumed business name helps avoid consumers' confusion with other businesses operating under similar names.
Yes, LLC must notify the public of their status
Should a limited liability company designate its status (LLC) in its name?
true
Sole proprietors are personally liable for all debts and obligations of their businesses.
true
The business income of a partnership is taxed as the personal income of the partners.
false
The term personal liability refers to a business owner's personal responsibility for the income taxes assessed on the profits and losses of the business.
Corporations offer continuity of life, free transferability of interests, limited personal liability, and centralization of management. With the exception of S corporations, corporate owners suffer double taxation. Partnerships terminate if one dies or withdrawals , impose restrictions on ownership, offer all partners (general partners) management rights, and subject partners to personal liability for the debts and obligations of their partnerships. Partnerships receive pass-through taxation.
What are the advantages of a corporation versus a limited liability partnership?
is a name other than the owner's name under which a business operates.
What is an assumed business name?
A limited partnership is managed by general partners, who are personally liable for all debts and obligations of the partnership. Limited partners are merely investors in a limited partnership's business and do not have the right to participate in management of the business. In contrast, limited liability partnerships (LLPs) offer all partners management rights and limit partners' vicarious liability for the negligence and malfeasance of their partners.
What is the difference between a limited partnership and a limited liability partnership?
Limited liability partnership
a general or limited partnership that registers as a limited liability partnership and thereby protects partners from vicarious liability for the negligence or malfeasance of the other partners
Corporation
a legal entity that is separate and distinct from its owners and traditionally is characterized by (a) continuity of life, (b) centralized management, (c) limited liability, and (d) free transferability of interests
Due care
agrees to use reasonable diligence and skill in performing the task in its entirety
constructive trust
anything an agent obtains during the relationship belongs to the principal.
Sole proprietorship
business operated by one person for profit
General partnership
business operated by two or more persons (including corporations, etc.) for profit
Limited partnership
business operated by two or more persons for profit with managers (general partners) and investors (limited partners)
limitations placed on business owners' personal responsibility for the debts and obligations of their businesses. If a business organization provides owners limited liability, creditors cannot look to the business owners' personal assets to satisfy business debts and obligations.
limited liability.
Disclosed
principal's identity is known to the 3rd party at the time the agent makes a contract for the principal with the 3rd party
Objective test
the question of if the facts of the parties written/spoken words indicate an agreement for one person to act on behalf of another
Cooperation
to provide the agent with what is needed to perform duties. ex credit card, office equipment
Fiduciary duties of an agent
-loyalty -obedience -accounting -notification
true
Business profits are taxed as a sole proprietor's personal income.
true
Limited partners are not responsible for the debts and obligations of their limited partnerships.
false
Limited partners manage limited partnerships.
true
Sole proprietors may limit their personal liability for business debts through contracts.
true
Sole proprietorships terminate upon the death of the proprietor.
In a limited liability partnership, not all partners can participate in the management of the business, and all partners remain personally liable for their own negligence and malfeasance as well as those they participated in or supervised.
What are the disadvantages of a limited liability partnership?
The profits and losses of a partnership are taxed as the personal income of the partners. Partnership losses may offset other sources of personal income of the individual partners.
What are the taxation advantages of a partnership?
Tort
a CIVIL wrong that causes someone else to suffer loss/harm resulting in legal liability for the person who commits the act
true
agents have actual authority/ apparent authority to act for their principals
Limited liability company
an unincorporated entity that offers its members management rights, limited personal liability, and the pass-through taxation of partnerships
true
formation of agency occurs through agreement which can be expressed or implied
avoidance
if an agent breaches the contract the principal can choose to avoid any contract that was entered in with the agent
indemnification
if the agent breach causes harm to some 3rd party who then sues the principal, the principal can seek indemnification from the agent
safe working conditions
inspect working conditions. give warning of any unsafe areas
Reimbursement & indemnification
must reimburse the agent for costs/ expenses incurred on the principals behalf. Required to indemnify the agent for liability incurred by agent while performing duties for the principal. ( must be lawful)
undisclosed
no information is given to the 3rd party by the agent at the time the contract is made
employee
one who works for & receives payment from an employer whose working conditions and methods are controlled
compensation
principal must pay agents for their services in a timely manner.
ratification
principals acceptance of an unauthorized act
Partially disclosed
principals identity isn't known to the 3rd party. but the 3rd party known the agent is representing someone
independent contractor
working conditions and methods are not controlled by the employer and the acts/ omissions the employer is not liable for
false
A principal may be held liable for the actions of an independent contractor.
true
A sole proprietorship can have more than one employee.
false
A sole proprietorship cannot have more than 35 shareholders.
someone who agrees to act for or represent another
Agent
true
An agent must be working on the principal's behalf in order for the principal to be held liable for the agent's actions.