Bus 250 Test 3
Which of the following scenarios illustrates a business world without agency relationships? a. The owner prepares the tax returns. b. Hiring an expert as an independent contractor. c. Hiring an expert as an employee. d. A corporation with only one employee.
a, The owner prepares the tax returns.
Which of the following results in a rightful dissociation of a partner? (Select all that apply) a. A partner provides the partnership with notice of intent to withdraw b. A partner becomes bankrupt c. A partner dies d. A partner is dissociated by the court
a. A partner provides the partnership with notice of intent to withdraw c. A partner dies
For what terminations does a principal NOT have a duty to notify third parties? a. Agencies terminated by operation of law b. Agencies in which a third party has dealt with the agent c. Agencies with apparent authority
a. Agencies terminated by operation of law
Which of the following statements is/are true? I. Shareholders can amend the bylaws. II. Directors can amend the bylaws. III. Both shareholders and directors must approve any amendment to the bylaws. a. I and II b. III c. I d. II
a. I and II
What does indemnification of an agent mean? a. The principal must reimburse the agent for expenses the agent incurred before the ending of the agency. b. That the agent is released from the duty of loyalty. c. That the agency relationship has been terminated. d. That the agent is released from the duty of confidentiality.
a. The principal must reimburse the agent for expenses the agent incurred before the ending of the agency.
A corporation that is formed in one state but does business in another state is referred to in the second state as: a. a foreign corporation. b. an alien corporation. c. a domestic corporation. d. a distant corporation.
a. a foreign corporation.
To meet the standard for the duty of care, a person must: a. act in good faith and with the judgment of an ordinarily prudent person. b. act in good faith and without a mistake. c. be faithful to the corporation. d. act in good faith and with the judgment of a highly skilled person.
a. act in good faith and with the judgment of an ordinarily prudent person.
What are the three ways in which a partnership can be dissolved? (Choose 3 answers.) a. by a court decree b. by failing to make a profit c. by operation of law d. by an act of the partners
a. by a court decree c. by operation of law d. by an act of the partners
A sole proprietorship differs from a corporation in: a. how stock is sold. b. the ability to earn a profit. c. where in the United States they may be located. d. the ability to be an educational organization.
a. how stock is sold.
Which of the following documents spells out the rights and duties of the members of a limited liability company (LLC)? a. operating agreement b. certificate of organization c. charter d. bylaws
a. operating agreement
The simplest form of business to establish is a: a. sole proprietorship. b. corporation. c. partnership. d. LLC.
a. sole proprietorship.
In ordinary circumstances, when the corporate veil has not been pierced, a shareholder may be liable up to: a. the amount of their investment. b. a portion of the settlement in a class-action lawsuit. c. $100,000. d. $1 million.
a. the amount of their investment.
Who is liable for contracts entered into on behalf of the corporation before the corporation is formed? a. the promoter b. the corporation c. the Chief Executive Officer d. no one, because that cannot happen
a. the promoter
When is an agent liable on a contract that the agent entered into in the business of the agent's principal? Choose 3 answers. a. when the principal is undisclosed b. when the principal is not satisfied with the terms of the contract c. if the agent entered into the contract in a personal capacity d. when the agent is acting without authority
a. when the principal is undisclosed c. if the agent entered into the contract in a personal capacity d.when the agent is acting without authority
What does the ratification of an agency relationship include? a. The principal led a third party to believe someone was an agent. b. A party affirms the contract another person made with a third party. c. There is an agreement between the principal and the agent. d. The law creates an agency relationship in the case of an emergency.
b. A party affirms the contract another person made with a third party.
Partners have which of the following duties? Select 3 answers. a. Litigating on behalf of the partnership b. Capital contribution c. Fiduciary duties d. Record keeping
b. Capital contribution c. Fiduciary duties d. Record keeping
Officers and directors owe which of the following duties to the corporation? Choose 2 answer choices. a. Duty of Good Decisions b. Duty of Loyalty c. Duty of Care d. Duty of Compensation
b. Duty of Loyalty c. Duty of Care
Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner. After the assignment, Bean asserts the right to I. participate in the management of TLC and II. Cobb's share of TLC's partnership profits. Bean is correct as to which of these rights? a. I only b. II only c. I & II d. Neither I or II
b. II only
Most limited liability company (LLC) statutes provide that unless the articles of organization specify otherwise, an LLC is assumed to be managed by: a. a board of nine managers. b. its members. c. a board of six members and six non-member managers. d. one manager.
b. its members.
What authority is ended with the termination of an agency relationship? a. Apparent authority b. Notice authority c. Actual authority d. All agency authorities
c. Actual authority
A corporate stockholder is entitled to which of the following rights? a. Elect officers b. Receive annual dividends c. Approve dissolution d. Prevent corporate borrowing
c. Approve dissolution
Which of the following is a requirement for the initial formation of a corporation? a. a board of directors b. a minute book c. Articles of Incorporation/Charter d. an initial stock offering
c. Articles of Incorporation/Charter
Jasper, Saul, and Kenyon plan to open a new business providing sky-diving lessons and selling sky-diving equipment. Each of them plans to contribute the same amount of money to get the business started, and each will work for the business. Jasper is concerned about the possibility of being liable for the acts of Saul and Kenyon. Jasper also wants to make sure he does not pay more taxes than required. After reviewing the types of business entities available, Jasper suggests to Saul and Kenyon that they organize their new business as a(n): a. partnership. b. corporation. c. LLC. d. close corporation.
c. LLC.
Heather is an artist and has several watercolors she would like to sell. Heather orally asks Rylee to sell the paintings for her and directs Rylee that each painting should be sold for at least $100. Rylee schedules a showing in her art gallery to display Heather's paintings. On the day of the showing, a customer offers to buy one of the paintings for $100, and Rylee accepts. When Heather finds out the price the painting sold for, she tries to get the painting back from the customer. Heather claims that she and Rylee did not have a written agency agreement, and, therefore, an agency relationship did not exist between them. Is Heather correct? a. No. Agency agreements are never in writing. b. Yes. Allowing this agency agreement to stand would violate the statute of frauds. c. No, most agency agreements do not have to be in writing to be effective. d. Yes, most agency agreements must be in writing to be effective.
c. No, most agency agreements do not have to be in writing to be effective.
Is a principal liable for the tortious actions of the principal's agent? a. No, only the agent is liable for the agent's torts. b. No, unless the principal authorized the tortious conduct. c. Yes, but the agent must reimburse the principal. d. Yes, but only if the principal authorized the tortious conduct.
c. Yes, but the agent must reimburse the principal.
Participating preferred stockholders: a. only receive payment after other preferred shareholders have been paid. b. only receive payment after common shareholders have been paid. c. are treated like both a preferred shareholder and a common shareholder. d. receive all their payments before all other shareholders.
c. are treated like both a preferred shareholder and a common shareholders
Which of the following actions will usually dissolve a partnership? a. one of the limited partners moves to another state b. the partnership defaults on a loan c. completion of the purpose of the partnership d. a limited partner assigns his financial rights
c. completion of the purpose of the partnership
After dissolution, a partnership's assets are distributed first: a. for the payment of income taxes. b. as distribution of profits to partners. c. for the payment of debts to partner and non-partner creditors. d. to return capital to partners.
c. for the payment of debts to partner and non-partner creditors.
Tala operates Sunshine Event Planning as a sole proprietorship. Lately, Tala has become dissatisfied with her employee, Leon. Leon continually refuses to follow directions, calls in late to work, and generally is not performing up to Tala's standards. Before Tala can fire Leon, she must obtain approval from: a. the Board of Directors of Sunshine Event Planning. b. the partners of Sunshine Event Planning. c. no one. d. the shareholders of Sunshine Event Planning.
c. no one.
In determining whether a partnership exists, the court will look at which of the following factors: (Choose 2 answers) a. the monetary investment of each person b. the type of business the business is engaged in c. the sharing of management responsibilities d. the sharing of profits and losses
c. the sharing of management responsibilities d. the sharing of profits and losses
Blackriver Partnership is in the process of winding up. It has three partners: Jason, Kiera, and Lancelot. The partnership has assets of $90,000, but debts of $60,000, including $30,000 it owes to Jason. Who gets what? a. Each partner receives $10,000. b. Each partner receives $30,000. c. Jason receives $30,000 and the other two get $10,000 each. d. Jason receives $40,000 and the other two get $10,000 each.
d. Jason receives $40,000 and the other two get $10,000 each.
Which of the following is required to create a sole proprietorship? a. An intention between two or more people to run a business b. Filing Articles of Incorporation with the secretary of state c. Filing Articles of Organization with the secretary of state d. Nothing
d. Nothing
What is the key factor in apparent authority? a. The agent's actions b. The actions of both the principal and the agent c. Apparent authority is dictated by operation of law in case of emergencies. d. The principal's actions
d. The principal's actions
How does a principal become liable to third parties on contracts? a. The agent ratifies the contract. b. The principal directly signs a contract with a third party. c. A principal is not liable to third parties on contracts. d. The principal's agent has the authority to bind the principal in a contract with a third party.
d. The principal's agent has the authority to bind the principal in a contract with a third party.
At what point in dissolution does a partner's liability cease? a. after another partner has dissociated b. as soon as the decision to dissolve has been made c. never d. after the winding up is complete and the partnership is dissolved
d. after the winding up is complete and the partnership is dissolved
Ellie, Josie, and Dylan are partners in a car dealership. Ellie gives notice to Josie and Dylan that she wants to withdraw from the business. As a result of Ellie leaving the partnership, Josie and Dylan: a. must dissolve the partnership. b. must continue the partnership unless they get a court order to dissolve the partnership. c. can only dissolve the partnership if the partnership agreement states that it must dissolve when a partner dissociates. d. can either continue the partnership without Ellie or agree to dissolve the partnership.
d. can either continue the partnership without Ellie or agree to dissolve the partnership.
Generally, a corporation's articles of incorporation must include all of the following except the: a. name of the corporation's registered agent b. name of each incorporator c. number of authorized shares d. quorum requirements
d. quorum requirements
A sole proprietorship differs from a limited liability company (LLC) in: a. the minimum number of owners. b. how stock is sold. c. ability to earn a profit. d. the documentation required for formation.
d. the documentation required for formation.
The formation of LLCs is governed by: a. federal statute. b. private agreements. c. the ULLCA. d. the laws of the state in which the LLC is created.
d. the laws of the state in which the LLC is created.
Is a written agreement required to form a partnership?
No
Who is liable to third parties for damage caused by an agent's tortious conduct if the principal had directed the agent to take that action? a. both the agent and the principal b. only the agent c. only the principal d. neither the agent nor the principal if the principal has insurance coverage
a. both the agent and the principal
An operating agreement for a limited liability company: a. typically includes provisions about choosing the LLC's management b. must be in writing and signed by all the officers of the company. c. is required for the operation of a limited liability company. d. may not specify how profits are divided.
a. typically includes provisions about choosing the LLC's management.
Which of the following is required in the Articles of Organization for an LLC? Select 2 answers. a. The agent's name and address b. The principal place of business c. The attorney's name and address d. The name of the business
b. The principal place of business d. The name of the business
What is the name of the document which establishes the processes for selling stock, should the need arise? a. Director's Agreement b. Officer's Agreement c. Shareholder Agreement d. Model Stock Sale Contract
c. Shareholder Agreement
A foreign corporation is: a. one that was incorporated in two or more different states. b. one that it privately held. c. one that was incorporated in a different state. d. one that was incorporated outside of the United States.
c. one that was incorporated in a different state.
The board of directors manages: a. the day-to-day activities of a corporation. b. employees' daily tasks. c. the business and affairs of the corporation. d. shareholder proxies.
c. the business and affairs of the corporation.
Mason is the CEO and sole shareholder of Mason Products, Inc., a corporation that manufactures and sells bird calls. Mason regularly uses the corporate credit card to purchase personal items, including furniture and clothes, and even makes monthly payments on his Corvette using the corporate credit card. When Mason Products becomes insolvent, its creditors file suit against Mason personally to seek payment for corporate debts. In this situation, the court is likely to: a. not hold Mason responsible because as CEO, he is protected by the business judgment rule. b. hold Mason responsible under the theory of ultra vires. c. not hold Mason personally responsible, because shareholders are not personally responsible for corporate debt. d. pierce the corporate veil and hold Mason personally responsible.
d. pierce the corporate veil and hold Mason personally responsible.
A partnership by estoppel is one in which: a. two partners are required to admit a third party as an additional partner. b. the partners cannot be held personally liable on partnership debts. c. the parties cannot be held liable as if an partnership existed, even though it actually did. d. the parties are not actually partners but are held liable as if they were.
d. the parties are not actually partners but are held liable as if they were.
Which of the following are qualities of a non-profit corporation? Select 2 answers. a. It does not provide dividends to shareholders. b. It does not provide dividends to shareholders. c. It provides minimal dividends to company shareholders. d. Its goal is to earn a profit.
a. It does not provide dividends to shareholders. d. Its goal is to earn a profit.
Where should Articles of Incorporation be filed? a. With the county recorder's office b. With the state c. With the federal government d. Articles of Incorporation are not filed.
b. With the state
Who can terminate an agency relationship? a. Only the agent may terminate. b. Neither may terminate the agency until the terms of the agreement have transpired. c. Either the agent or the principal may terminate. d. Only the principal may terminate.
c. Either the agent or the principal may terminate.
What are the two types of actual authority? Choose 2 answer choices. a. Apparent authority b. Fiduciary relationship authority c. Express authority d. Implied authority
c. Express authority d. Implied authority
Any partner: a. may create a business in direct competition with the partnership. b. is entitled to compensation for their time, skill, and effort. c. may encumber the property of the partnership to satisfy personal debt. d. may act as an agent who binds the partnership.
d. may act as an agent who binds the partnership.
How do agency relationships affect businesses and the business world? Choose 2 answer choices. a. Businesses can grow by hiring employees. b. Agency relationships eliminate legal concerns. c. Workers can specialize and become experts. d. Principals are benefited, but agents are not benefited.
a. Businesses can grow by hiring employees. c. Workers can specialize and become experts.
Which of the following is not necessary to create a partnership? a. Execution of a written partnership agreement b. Agreement to share ownership of the partnership c. Intention of conducting a business for profit d. Intention of creating a relationship recognized as a partnership
a. Execution of a written partnership agreement
In which of these situations might a court pierce the corporate veil? Choose 2 answers. a. Personal and corporate money is mixed together in one account. b. The corporation does not have sufficient capital to operate and meet its debts c. More than half of the officers have resigned or been fired due to low profits. d. The corporation has borrowed money from a shareholder.
a. Personal and corporate money is mixed together in one account. b. The corporation does not have sufficient capital to operate and meet its debts
Which of the following are essential elements of a partnership? Choose 2 answers. a. Profits and losses are shared among the members. b. All members have equal right to be involved in the management of the business. c. The name must include the word "partnership." d. All members have signed a written partnership agreement.
a. Profits and losses are shared among the members. b. All members have equal right to be involved in the management of the business.
What must a principal do to terminate an agency at will? a. Simply notify the agent of the termination. b. Give express written notification to the agent. c. Pay a severance payment to the agent. d. Get a court order to terminate the agency.
a. Simply notify the agent of the termination.
What are the fiduciary duties of an agent to her principal? Choose 3 answers. a. indemnification b. loyalty c. accounting d. obedience
b. loyalty c. accounting d. obedience
If harm is done by an agent, and it is discovered that this agent has been convicted of the same harm before at a previous job, what might a principal be liable for? a. negligent retention b. negligent hiring c. breach of fiduciary duty d. gratuitous hiring
b. negligent hiring
In deciding whether workers are employees or independent contractors, courts have considered: a. the impact of their decision on the national economy. b. the impact of their decision on tax revenues. c. the amount of control that an employer exercises over its workers. d. whether workers in these companies are earning at least the minimum wage.
c. the amount of control that an employer exercises over its workers.
Which of the following is a requirement for the formation of a limited liability company (LLC)? a. at least three members b. an initial stock offering c. an operating agreement d. articles (or certificate) of organization
d. articles (or certificate) of organization
Kurt asked his car mechanic, Quinn, for help in buying a used car. Quinn recommends a Ford Focus that she has been taking care of its whole life. Quinn was working for the seller. Which of the following statements is true? a. Quinn must pay Kurt the amount of money she received from the Ford's prior owner. b. After buying the car, Kurt finds out that it needs $1,000 in repairs. He can recover that amount from Quinn, but only if Quinn knew about the needed repairs before Kurt bought the car. c. Kurt cannot recover anything because Quinn had no obligation to reveal her relationship with the car's seller. d. Kurt cannot recover anything because he had not paid Quinn for her help.
a. Quinn must pay Kurt the amount of money she received from the Ford's prior owner.
Johnson lives near Dollywood, a popular theme park in Tennessee. Johnson decides to begin a new money-making venture selling screen printed t-shirts from a booth just down the road from the theme park, to take advantage of the traffic that flows by on its way to the park. Johnson's t-shirts, however, will not be Dollywood-themed t-shirts; they will be Johnson's own creations. Johnson's daughter Susan helps him in his new venture by manning the booth from time to time, but Johnson has total control over everything about the business—from ordering the t-shirts, paying the bills, pricing the t-shirts, paying the taxes on his sales, and receiving all the profits from the venture. Even though Johnson put no thought into what kind of business venture he was creating when he started his business, Johnson has effectively created a: a. sole proprietorship. b. corporation. c. limited liability company. d. franchise.
a. sole proprietorship.
Ellie, Josie, and Dylan are partners in a car dealership. Ellie gives notice to Josie and Dylan that she wants to withdraw from the partnership, and Josie and Dylan decide to continue the partnership without her. Shortly after Ellie leaves the partnership, she has lunch with an old friend, Justin. Justin has been looking for a new car and asks about the price of a particular car he saw on the website of the dealership, because he does not know that Ellie has left the partnership. Instead of telling Justin that she has left the partnership, Ellie quotes Dylan a price for the car, and Dylan accepts. When Dylan goes to the car dealership to complete the deal: a. the dealership must honor the deal unless it has provided Dylan notice of Ellie's dissociation. b. the dealership must honor the deal and reinstate Ellie as a partner. c. the dealership is not required to honor the deal because Ellie is no longer a partner. d. the dealership is not required to honor the deal whether or not it has provided Dylan notice of Ellie's dissociation.
a. the dealership must honor the deal unless it has provided Dylan notice of Ellie's dissociation.
Which of the following provisions are typically in an operating agreement for a limited liability company (LLC)? Choose 2 answers. a. whether the dissociation of a member, such as by death or departure, will trigger dissolution of the LLC b. the advertising plan for the company c. how membership interests may be transferred d. a record of the company's assets and debts
a. whether the dissociation of a member, such as by death or departure, will trigger dissolution of the LLC c. how membership interests may be transferred
Destiny Manufacturing, Inc., is incorporated under the laws of Nevada. Its principal place of business is in California, and it has permanent sales offices in several other states. Under the circumstances, which of the following is correct? a. California may validly demand that Destiny incorporate under the laws of the state of California. b. Destiny must obtain a certificate of authority to transact business in California and the other states in which it does business. c. Destiny is a foreign corporation in California, but not in the other states. d. California may prevent Destiny from operating as a corporation if the laws of California differ regarding organization and conduct of the corporation's internal affairs.
b. Destiny must obtain a certificate of authority to transact business in California and the other states in which it does business.
Which of the following happens when a partner dissociates? Choose 2 answers. a. The partner must continue to honor his duty of loyalty to the partnership. b. The dissociated partner's interest in the partnership must be purchased by the partnership. c. The partnership must dissolve and wind up business. d. The partnership may remain liable for acts of the dissociated partner for two years after dissociation.
b. The dissociated partner's interest in the partnership must be purchased by the partnership. d. The partnership may remain liable for acts of the dissociated partner for two years after dissociation.
The Board of Directors may conduct business: (Choose 2 answer choices) a. at any time. b. at special meetings. c. privately and outside of meetings called by the corporation. d. at regular meetings.
b. at special meetings. d. at regular meetings.
After dissolution, partners still have authority to do which of the following actions on behalf of the partnership? Choose 2 answers. a. take out a loan to pay creditors b. pay the debts of the partnership c. complete transactions that were started before dissolution d. sign a contract to perform a service in the ordinary course of business
b. pay the debts of the partnership c. complete transactions that were started before dissolution
If a partner dissociates, he is entitled to: a. force the termination of the partnership b. receive indemnification from liability for present partnership debt c. receive indemnification from damages he caused the partnership d. receive his share of the value of the partnership assets
b. receive indemnification from liability for present partnership debt
A principal will not be liable to a third party for a tort committed by an agent: a. unless the principal instructed the agent to commit the tort. b. unless the tort was committed within the scope of the agency relationship. c. if the agency agreement limits the principal's liability for the agent's tort. d. if the tort is also regarded as a criminal act.
b. unless the tort was committed within the scope of the agency relationship.
Isaiah wants to build a new shopping complex. He is afraid that once news gets out about his plans, the price of the land where he wants to build the shopping complex will increase in price. Isaiah, therefore, hires Landon to purchase the parcels of land for him and to keep the fact that Landon is working for Isaiah a secret. Landon enters into a written contract for the sale of the land with Miriam and does not tell Miriam that Landon is an agent for anyone else on the deal. Isaiah refuses to buy the property from Miriam. Is Landon obligated to perform the contract with Miriam? a. No, he is not because the purchase of the land benefits only the principal, Isaiah. b. No, he is not because Landon is not the principal. c. Yes, he is because there was an undisclosed principal who failed to perform. d. Yes, he is because agents are always liable for performance on contracts they enter into on behalf of their principal.
c. Yes, he is because there was an undisclosed principal who failed to perform.
Bart, Sam, and Greg create Big Barns Sales LLC, a company that builds pre-constructed barns. They file the certificate of organization with the secretary of state and create an operating agreement for the LLC. The operating agreement, however, does not address the how the company will be managed. The state statute regarding LLC management states that in the absence of an agreement otherwise, LLC's shall be member-managed. After a disagreement, two of the members want to dissolve the business, however, Sam wants it to continue. What is the outcome? a. The member with the largest capital investment will control the decisions to dissolve the business. b. The business cannot dissolve, nor can it continue to operate. c. The business cannot dissolve because Sam wants to maintain the business. d. The business will be dissolved because majority vote wins.
d. The business will be dissolved because majority vote wins.
Cox engaged Datz as her agent. It was mutually agreed that Datz would not disclose that he was acting as Cox's agent. Instead, he was to deal with prospective customers as if he were a principal acting on his own behalf. This he did and made several contracts for Cox. Assuming Cox, Datz, or the customer seeks to avoid liability on one of the contracts involved, which of the following statements is correct? a. Cox must ratify the Datz contracts to be held liable. b. Datz has no liability once he discloses that Cox was the real principal. c. The third party can avoid liability because he believed he was dealing with Datz as a principal. d. The third party may choose to hold either Datz or Cox liable.
d. The third party may choose to hold either Datz or Cox liable.
Finn learns that, despite his stellar record, he is being paid less than other salespeople at Barry Co., so he decides to start his own company. During his last month on the Barry payroll, he tells all of his clients about his new business. He also tells them that Barry is a great company, but his fees will be lower. After he opens the doors of his new business, most of his former clients move with him. Is Finn liable to Barry? a. No because he has not been disloyal to Barry—he praised the company. b. No because Barry was underpaying him. c. No because his clients have the right to hire whichever company they choose. d. Yes, Finn has violated his duty of loyalty to Barry.
d. Yes, Finn has violated his duty of loyalty to Barry.
The formation of a partnership without a partnership agreement requires which of the following? Select 2 answers. a. Sharing of profits and losses b. Five or more partners c. The intent to form a partnership d. Sharing of management duties
a. Sharing of profits and losses d. Sharing of management duties
At the first meeting of corporate shareholders, what business is normally conducted? Select 2 answers. a. The election of the board of directors b. The filing of the articles of incorporation c. Voting on the business name d. The adoption of corporate bylaws
a. The election of the board of directors d. The adoption of corporate bylaws
Kelly lives in Arkansas and works in the data division of Acxiom Corporation. Acxiom has its headquarters in Conway, Arkansas. Acxiom is incorporated in Delaware, however, because of the corporate-friendly laws in that state. Kelly works in a(n): a. alien corporation because Acxiom is incorporated in a different state than the division where Kelly works. b. foreign corporation because Acxiom is incorporated in a different state than the division where Kelly works. c. domestic corporation, because Acxiom's headquarters is in the same state where Kelly works. d. close corporation because Kelly works in a division of Acxiom located close to where she lives.
b. foreign corporation because Acxiom is incorporated in a different state than the division where Kelly works.
What will terminate an agency relationship? Choose 3 answers. a. passage of one year, as agency agreements must be updated annually b. lapse of a pre-specified time c. achievement of the purpose of the agency d. mutual agreement between agent and principal
b. lapse of a pre-specified time c. achievement of the purpose of the agency d. mutual agreement between agent and principal
Which of the following provisions are typically in a charter for a corporation? Choose 2 answers. a. the trade secrets of the corporation b. the name and address of the corporation's agent c. the intended business purpose of the corporation d. the advertising plan for the corporation
b. the name and address of the corporation's agent c. the intended business purpose of the corporation
A written agreement outlining the roles of partners, their rights, and their duties are called: a. Articles of Organization. b. a partnership agreement. c. Articles of Incorporation. d. Operating agreements.
b. a partnership agreement.
Ted Fein, a partner in the ABC Partnership, wishes to withdraw from the partnership and sell his interest to Gold. All of the other partners in ABC have agreed to admit Gold as a partner and to hold Fein harmless for the past, present, and future liabilities of ABC. A provision in the original partnership agreement states that the partnership will continue upon the death or withdrawal of one or more of the partners. As a result of Fein's withdrawal and Gold's admission to the partnership, Gold: a. is personally liable for partnership liabilities arising before and after his admission as a partner b. has the right to participate in the management of ABC c. acquired only the right to receive Fein's share of the profits of ABC d. must contribute cash or property to ABC in order to be admitted with the same rights as the other partners
b. has the right to participate in the management of ABC
Figgins is the dean of a college. He appointed Sue as acting dean while he was out of the country and posted an announcement on the college website announcing that she was authorized to act in his place. He also told Sue privately that she did not have the right to make admissions decisions. While Figgins was gone, Sue overruled the admissions committee to admit the child of a wealthy alumnus. Does the child have the right to attend this college? a. No because Sue was not authorized to admit him. b. No because Figgins did not ratify Sue's decision. c. Yes because Figgins was a fully disclosed principal. d. Yes because Sue had apparent authority.
d. Yes because Sue had apparent authority.
What documents spell out the powers of a corporation? Choose 2 answers. a. the bylaws b. certificate of corporate power c. de facto documentation d. the charter (also called the articles of incorporation)
a. the bylaws d. the charter (also called the articles of incorporation)
Under the Model Act, a corporation is required to have at least one director unless: Choose two. a. the corporation has 50 or fewer shareholders b. the corporation is a subsidiary corporation c. all the shareholders sign an agreement that eliminates the board d. the corporation is a charitable organization
a. the corporation has 50 or fewer shareholders c. all the shareholders sign an agreement that eliminates the board
At Business University, semester enrollment begins at midnight on April 1. Jasper asked his roommate, Alonso, to register him for an important required course as a favor. Alonso agreed to do so but then overslept. As a result, Jasper could not enroll in the required course he needed to graduate and had to stay in school for an additional semester. Is Alonso liable to Jasper? a. No because an agency agreement is invalid unless the agent receives payment. b. No because Alonso was not grossly negligent. c. No because the agreement was not in writing. d. Yes because Alonso was negligent.
b. No because Alonso was not grossly negligent.
If a partner wrongfully dissociates, do they get a vote on whether the partnership should continue? a. Yes, but only if their vote is to terminate the partnership. b. No, wrongfully dissociating partners do not get to vote on the matter. c. Yes, if their dissociation was due to their own bankruptcy. d. Yes, because they are still a partner.
b. No, wrongfully dissociating partners do not get to vote on the matter.
Roland and Alfreeda enter into a written agency agreement in which Alfreeda will represent Roland as his agent to obtain acting jobs for Roland. No termination provisions are included in the written agreement. If Roland wishes to terminate his agreement with Alfreeda: a. Roland must do so in writing because the agency agreement is in writing. b. Roland may do so by providing notice to Alfreeda in any reasonable manner. c. Roland must do so in person only. d. Roland must do so by sending the termination notice to Alfreeda by certified mail.
a. Roland must do so in writing because the agency agreement is in writing.
Under Delaware law, who has the right to amend the bylaws? Choose two. a. employees b. shareholders c. officers d. directors if permitted by the charter.
b. shareholders d. directors if permitted by the charter.
Which statement is true about creating a sole proprietorship? a. There is a waiting period of 30 days between opening the business and the time a sole proprietorship becomes official. b. No documentation is required to create a sole proprietorship. c. The owner of a sole proprietorship must file an official record of the business name with the secretary of state's office. d. The members of a sole proprietorship must write and sign an operating agreement.
b. No documentation is required to create a sole proprietorship.
Marlo is about to be transferred overseas and wants to sell her house. Julianna, who is not a real estate agent, offers to sell the house for Marlo for free. Marlo jumps at the chance to get such a valuable service for free! Because Julianna offered to sell the house for free, Julianna owes Marlo: a. no duty to sell the house, but if Julianna does attempt to sell the house, she owes Marlo the duty to use reasonable diligence and skill in performing the task. b. the duty to use reasonable diligence and skill to sell the house. c. the duty to perform as a reasonable real estate agent would perform in selling the house. d. no duty at all, because there was no compensation flowing from Marlo to Julianna.
a. no duty to sell the house, but if Julianna does attempt to sell the house, she owes Marlo the duty to use reasonable diligence and skill in performing the task.
Is a principal under a duty to compensate an agent who works on the principal's behalf? a. No, if a salary has not been agreed on. b. Yes, if the contract requires compensation. c. No, an agent is never paid. d. Yes, if the agent does a really good job above and beyond what is expected.
b. Yes, if the contract requires compensation.
What does agency by ratification require? Choose 2 answer choices. a. The principal must have hired the agent before the contract was signed. b. The principal affirms the agent's entire act, not just a portion. c. The principal must have the legal capacity to contract. d. The agent must have followed all of the principal's rules in negotiating and signing the contract.
b. The principal affirms the agent's entire act, not just a portion. c. The principal must have the legal capacity to contract.
Bly and Ahmik are partners in a sandwich shop. They have been struggling for the last couple of years and, finally, decide to close the sandwich shop and dissolve the partnership. During the winding-up process, Ahmik spends most of his time pursuing his next venture, so Bly is handling most of the work involved in collecting and preserving partnership assets and paying the debts of the partnership. If Bly requests payment for his services in winding up the partnership: a. he is not entitled to payment for those services, because it is part of his duty as a partner. b. he is entitled to payment for those services. c. he is entitled to payment for those services only if the partnership agreement provides for it. d. he is not entitled to payment for those services, because he receives a share in the partnership profits.
b. he is entitled to payment for those services.
Genna and four others are establishing a business to create monogrammed items of personal clothing to sell to the general public. Genna is concerned about entering into business with others and possibly being liable for their actions, so she convinces the others that they should incorporate. After doing some basic research on how to incorporate a business, Genna starts preparing the articles of incorporation. At a minimum, Genna must make sure that the articles of incorporation include: a. the name of the corporation and the name and address of each incorporator. b. the name of the corporation, the name and street address of the initial registered agent of the corporation and his or her registered office, and the name and address of each incorporator. c. the name of the corporation, the number of shares of stock the corporation is authorized to issue, the name and street address of the initial registered agent of the corporation and his or her registered office, and the name and address of each incorporator. d. the name of the corporation, the number of shares of stock the corporation is authorized to issue, and the name and address of each incorporator.
c. the name of the corporation, the number of shares of stock the corporation is authorized to issue, the name and street address of the initial registered agent of the corporation and his or her registered office, and the name and address of each incorporator.
Lola, Jacy, and Tate plan to create a company to manufacture bicycles. After reviewing the pros and cons of the various forms of business enterprises, they decide to create a limited liability company. To create a limited liability company: a. they must file a certificate of organization with the secretary of state and should create an operating agreement, although an operating agreement is not required. b. they must file an operating agreement with the secretary of state and should create a certificate of organization, although a certificate of organization is not required. c. they must file a certificate of organization and an operating agreement with the secretary of state. d. they must file a certificate of organization with the county clerk and should create an operating agreement, although an operating agreement is not required.
a. they must file a certificate of organization with the secretary of state and should create an operating agreement, although an operating agreement is not required.
Grover is a sales representative for Avon Products Inc., a company that sells beauty and gift products door-to-door. Ruby, Grover's manager, assigns Grover a certain territory in which to work. The territory that Grover is assigned has historically had one of the highest sales records in the state. Ruby is concerned that Grover is not adequately working the territory, so she allows Regina to also sell in that same territory. Does Grover have any grounds on which to file a lawsuit against Ruby? a. Yes, Ruby has violated a principal's duty of cooperation and may be liable to Grover for Grover's lost profits. b. Yes, Ruby has violated the duty of compensation and may be liable to Grover for Grover's lost profits. c. No, Ruby is just helping Grover fulfill his full potential. d. No, Ruby is just looking out for the best interests of the company.
a. Yes, Ruby has violated a principal's duty of cooperation and may be liable to Grover for Grover's lost profits.
Mork and Mindy create a for-profit corporation, Mork's House, to provide shelter to homeless and abused women and children. Mork and Mindy are shareholders of the corporation. Zada is also a shareholder in the corporation, along with five others. Douglas manages the day-to-day operations of the corporation. The bylaws of the corporation provide that the corporation is established for the sole purpose of providing shelter, food, and care for homeless and abused women and children and for no other purpose. When the refrigerator in Mork's House stops working, Douglas purchases a new refrigerator from Home Depot and charges it to the corporation. If Zada challenges the purchase as being ultra vires: a. she will lose, because purchasing the refrigerator is an express power of the corporation. b. she will win, because the bylaws do not address purchases of appliances. c. she will lose, because purchasing the refrigerator is an act reasonably necessary to accomplish the goals. d. she will win, because purchasing the refrigerator is an ultra vires act.
c. she will lose, because purchasing the refrigerator is an act reasonably necessary to accomplish the goals.
Jerry Hall and Lawrence Vaught practice law in the same building. They share equally in the overhead expenses, such as rent and utilities, required to keep the business running. Both Jerry and Lawrence handle their own cases, consult and accept their own clients, and purchase their own advertising. Jerry and Lawrence do occasionally handle a case together, and they have stationery that says "Hall and Vaught" on the letterhead. They each have their own stationery as well. Jerry and Lawrence keep their finances separate, except when they handle a case together; then, they split the proceeds equally. When a client of Jerry's becomes dissatisfied and sues Jerry for malpractice, she sues Lawrence as well. In deciding whether or not a partnership exists here, the court will look at: a. whether Jerry and Lawrence share profits and losses in the business. b. whether Jerry and Lawrence list themselves as partners on their letterhead. c. whether Jerry and Lawrence share profits and losses, whether they own the business jointly, and whether they have an equal right to be involved in the management of the business. d. whether Jerry and Lawrence have signed a partnership agreement.
c. whether Jerry and Lawrence share profits and losses, whether they own the business jointly, and whether they have an equal right to be involved in the management of the business.
Ben and Jerry are partners in an ice cream shop. They both work in the ice cream shop and share profits and expenses equally. Jerry thinks that expanding their ice cream shop to include a soda fountain would attract more customers. Without getting Ben's approval on the deal, Jerry signs a contract with the construction company to begin building the soda fountain. When Ben finds out, he is furious and says that he will not be responsible for payment under the contract. The construction company can enforce the contract against: a. neither Ben nor Jerry. b. both Ben and Jerry. c. Jerry only. d. Ben only.
b. both Ben and Jerry.
