Business Law Final

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Why is it important to monitor the employment practices of foreign suppliers?

Because many corporate watch groups will discover and publicize the unethical behavior of your company's foreign suppliers.

One view of duty-based ethics focuses on the principle of rights.

Consumers of a firm's products and services a firm's suppliers a firm's owners (shareholders) a firm's employees

Investors dissatisfied with profit-maximization theory look beyond profits to consider the triple bottom line.

Corporate profits the impact of profits on people the impact of profits on the planet

Highlight the three classifications of franchises.

Distributorship Chain-style business operations Manufacturing arrangements

Distribution of assets of a limited partnership—order of prioritiesed creditors.

1. Outside creditors and partner creditors 2. Partners and former partners entitled to distributions of partnership assets 3. Unless otherwise agreed, return of capital contributions and distribution of profit to partners

Limited liability company

A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership

Which of the following philosophers is most associated with general guiding principles for moral behavior?

Immanuel Kant

Olivia makes a statement on her Twitter account that casts a negative light on her employer. Her manager fires her for violating her company's social media policy. Olivia claims that federal law prohibits her from being fired. Does she have a valid argument?

Yes, because federal labor law protects employees' right to engage in "concerted activities."

Upper management wants to fire Gary because he is nonproductive. Using the utilitarian approach to business ethics, management would probably NOT consider

Gary's fundamental rights.

Highlight the two requirements that state statutes and case law governing franchises tend to emphasize the most:

Good faith Fair dealing

Members

The term used to designate a person who has an ownership interest in a limited liability company.

Patrick, the human resources manager at Acme Company, must decide how to cut personnel costs. This decision will harm employees who are laid off or fired. Patrick must balance the interests of employees who have been loyal to the firm for a long time against the interests of

Acme's shareholders

Franchise

Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright, under specified conditions or limitations, in the selling of goods and services

Pass-through entity

Any entity that does not have its income taxed at the level of that entity; examples are partnerships, S corporations, and limited liability companies.

To determine whether a franchisor has acted in good faith when terminating a franchise agreement, what do the courts attempt to do?

Attempt to balance the rights of both parties.

Highlight two common examples of distributorship-type franchising arrangements.

Automobile dealerships Peer distributorships

The family limited liability partnership (FLLP), is most often used in

agriculture

Under the common law, a partnership was treated only as .

an aggregate of its members

Federal and state laws attempt to protect franchisees from the ________and unfair termination of their franchises.

arbitrary

Celia has convinced Maria to start a new business as a partnership rather than as a sole proprietorship. Celia wants to avoid:

bearing the burden of all losses and liabilities

Rubina convinced Mariah to start a business with her in a partnership rather than a sole proprietorship. The disadvantage of a sole proprietorship that Rubina wants to avoid is

bearing the burden of all losses and liabilities.

Anna and Jennifer start a new business as a partnership, and agree from the beginning that if one of the partners wants to leave the partnership at a later date, that the other partner will purchase the leaving partner's ownership interest at book and amortized over a five-year term. This type of agreement is referred to as a

buy-sell agreement.

Individuals should evaluate their actions in light of the consequences that would follow if everyone in society acted in the same way. This is called the

categorical imperative

Chance, Justina, and Rich have been operating a chain of self-service laundries as a general partnership for three years. At the beginning of the fourth year, Justina declares bankruptcy. Under the version of the Uniform Partnership Act (UPA) that is in effect in most states, Justina's bankruptcy will

cause Justina's dissociation from the partnership.

Bonni wants to go into business for herself and knows she can start a corporation over the Internet. Instead she chooses to invest in a new local Taco Bell restaurant, which is an example of

chain-style business operation franchise

Regan owns and manages The Coffee Shoppe. She likes to experiment with different management styles and life philosophies. She recently studied Kantian ethics and asks her employees to begin following Kant's categorical imperative at work. This means that the employees should

consider their actions in light of the consequences if everyone in society acted the same way.

Most franchise relationships are governed primarily by

contract law

A _________ analysis involves assessing the negative and positive affects of alternative actions.

cost-benefit

Every person has certain duties to others, including humans and the planet. _________ ethics is rooted in this principle.

duty-based

One basic difference between partnership and agency law is that:

each partner has an ownership interest in the firm.

Roy, Andy and Tim are partners in a general partnership, and have all been sued individually based on a breach of contract relating to the partnership. The judge dismisses the lawsuit on the basis that the plaintiff should have filed a lawsuit only against the partnership under the UPA as an

entity.

An action is morally correct when it creates the least amount of harm for the _____people.

fewest

In order to form a valid limited partnership (LP), the partnership must:

file a certificate of limited partnership

One of the great benefits of LLCs, and one that helps promote investment, is the fact that:

foreign investors are allowed to become LLC members

When a limited partnership becomes a limited liability limited partnership (LLLP), a change is made in the liability of .

general partners

In an LLC, a member is someone who:

has an ownership interest in an LLC and limited liability for LLC debts

Ted is the owner and chief executive officer of a business. He recently began an advertising campaign to promote a new product that is regulated by state law. The law is somewhat unclear. Before launching the campaign, he researched the relevant law and consulted with his attorney in an effort to comply with the law. Nevertheless, the attorney general of his state has filed a lawsuit against him for deceptive advertising. Ted's best defense is that

he acted in good faith

When a group of members joint to form an LLC, the name of the organization must:

include the words "limited liability company" or the letters LLC.

Tina designed a new type of handbag that has proven to be very popular. She begins manufacturing these handbags on a large scale and considers her options for setting up a business to market the bags nationwide. She opts for a distributorship franchise under which she will

license distributors to sell her handbags.

In a limited partnership, the liability of a limited partner is:

limited to the capital contribution

Highlight the two options for management of an LLC.

member-managed manager-managed

Compliance with the law is sometimes called the

moral minimum

When a franchise agreement contains no set time for winding up a franchisee's business, a franchisee:

must be given a reasonable time to wind up the business

The upper-level management of Nationwide Sales Corporation wants to fire Andy because he is a nonproductive employee. Using a utilitarian approach to business ethics, management would probably consider

the costs and benefits of retaining a nonproductive employee.

Which of the following is NOT typically a part of the contents of an LLC's articles of organization filed with the central state agency?

the hours of operation of the business

What happens if a limited partner in a limited partnership participates in management?

the limited partner becomes just as liable as a general partner to any creditor

Xavier consults with his attorney about the management of his LLC. He has chosen the manager-managed LLC form of management in which:

the managers may be members, nonmembers, or a combination of both.

Typically, state law determines the duration of a franchise.

False

Information return

A tax return submitted by a partnership that only reports the income earned by the business.

Which of the following does NOT represent a major difference between an agency relationship and a partnership?

An agent is liable for the acts of the principle, but partners are not liable for the act of the partnership.

Partnership

An agreement by two or more persons to carry on, as co-owners, a business for profit.

Business ethics are consistent only with short-run profit maximization.

False

Chain-style franchises are common in manufacturing.

False

In all cases, joint ownership of property creates a partnership.

False

Managers who set unrealistic production or sales goals decrease the probability that employees will act unethically.

False

Religious ethical principles allow managers to make decisions with few possible negative consequences.

False

The Uniform Limited Liability Company Act (ULLCA) has now been adopted by almost all of the states.

False

Business ethics does NOT focus on:

How businesses are treated under international law.

Choose the correct order for the following lists of steps involved in a systematic approach to implementing ethical concerns in business.

Inquiry Discussion Decision Justification Evaluation

Typically, managers in a manager-managed LLC owe fiduciary duties to the

LLC and its members

You are starting a new company. You want your employees to act ethically. What will you NOT do?

Let employees know that only short-run profits matter.

Lisa owns and manages a small auto-parts store. She hesitates to discuss business ethics with her employees because she wants them to spend more time with the customers and she also doesn't think she should tell them how to behave. Is Lisa going to create an ethical workplace? Why or why not?

Lisa is unlikely to create an ethical workplace because the attitude of top management influences employee ethics.

Marshall owns and operates a construction firm. He uses inexpensive and low-grade building products and accepts inferior carpentry work from his subcontractors. Nevertheless, Marshall complies with all the city building codes as well as all state and federal laws. Has he fulfilled all of his ethical obligations?

No, because legal compliance is regarded as the moral minimum.

Franchisor

One licensing another (the franchisee) to use his or her trademark, trade name, or copyright in the sales of goods and services

Franchisee

One receiving a license to use another's (the franchisor's) trademark, trade name, or copyright in the sale of goods and services

Under the Foreign Corrupt Practices Act, some payments to minor foreign government officials are allowed to accelerate the performance of administrative services.

True

What is the simplest form of business?

Sole proprietorship

What is the most common termination statement in a typical franchise agreement?

That the franchise can be terminated "for cause" with grounds for termination

When making decisions, a business should evaluate the following.

The LEGAL implications of each decision. The PUBLIC relations impact The safety risks for CONSUMERS and employees. The FINANCIAL implications.

Highlight the act that requires companies to set up confidential systems so that "red flags" can be raised about suspected illegal and unethical business practices.

The Sarbanes-Oxley Act

Articles of organization

The document filed with a designated state official by which a limited liability company is formed

A partner's profit from the partnership is taxed as individual income to the individual partners.

True

Even when a contract contains a notice-and-cure provision, a franchisee's breach of the duty of honesty and fidelity may be enough to allow the franchisor to terminate the franchise.

True

LLCs are legal entitles apart from their owners and as such can sue or be sued, enter into contracts, and hold title to property.

True

Since the late 1970s, the Foreign Corrupt Practices Act has prohibited U.S. businesspersons from bribing foreign officials to secure beneficial contracts.

True

The application of the principle of rights, or rights theory, often involves conflicting rights.

True

The sharing of both profits and losses creates a legal inference that a partnership exists.

True

________ is a philosophical theory developed by two British philosophers, Bentham and Mill.

Utilitarianism

A limited liability company (LLC) combines the tax characteristics of:

a partnership with the liability of a corporation.

Three Essential Elements to Determine Whether a Partnership Exists:

a. A SHARING of profits or losses b. A joint OWNERSHIP of the business c. An EQUAL right to be involved in the management of business

A Partnership Probably Does Not Exist if Shared Profits Were Received as Payment of Any of the Following:

a. A debt by INSTALLMENTS or interest on a loan b. Wages of an employee or for the SERVICES of an independent contractor c. RENT to a landlord d. An annuity to a SURVIVING spouse or representative of a deceased partner e. A SALE of the goodwill [ The valuable reputation of a business viewed as an intangible asset.] of a business or property

The Factors an Entrepreneur Must Consider When Selecting an Organizational Form:

a. EASE of creation b. the LIABILITY of the owners c. tax CONSIDERATIONS d. the ABILITY to raise capital

Operating Agreements Typically Contain Provisions Relating to the Following Areas:

a. Management and how future MANAGERS will be chosen or removed. b. How PROFITS will be divided c. How membership INTERESTS may be transferred d.Whether the DISSOCIATION of a member, such as by death or departure, will trigger dissolution of the LLC e. Whether FORMAL members' meetings will be held. f. How voting RIGHTS will be apportioned.

Disclosure Requirements for Franchisor Under the FTC's Franchise Rule

a. Written or electronically recorded disclosures treating the range of goods and services included in the value and estimated PROFITABILITY of the franchise. b. To prevent deception, all representations made to prospective franchisees must have a REASONABLE basis at the time they are made. c. If a franchisor provides projected earnings, the franchisor must indicate whether they are based ACTUAL data or hypothetical examples. d. If actual data are used to make earnings projections, the franchisor must disclose the PERCENTAGE of its existing franchises that have achieved this result e. Franchisors must EXPLAIN termination, cancellation, and renewal provisions of the franchise contract.

Most franchise litigation involves claims for wrongful _______.

termination

When there is no expressed partnership agreement what governs the operation of partnership?

the Uniform Partnership Act

Bribery is acceptable in certain foreign countries. Indeed, U.S. Development, Inc., has found that the only way it can ensure delivery on certain contracts in these countries is to bribe the officials. This is

permitted by U.S. law if the payment is made to a minor official to speed up administrative procedures.

One of the reasons state governments and the federal government have passed statutes regulating franchises is to:

protect perspective franchisees from dishonest franchisors and franchise termination without good cause.

Pressler wants to be his own boss and wants to start a business. He has to decide which form of business organization to adopt and will likely consider all of the following EXCEPT:

publicity and public relations

The application of morals and ethics to a situation is usually called ethical ___________.

reasoning

Typically the franchisee _________little for the business on termination.

receives

Collette is a sole proprietor of a 3-D printing shop. She has considered changing her business organizational structure but cannot find an alternative that would give her the main advantage she enjoys as a sole owner, which is .

receives all the profits

Marsha is a sole proprietor of a small quilting shop. She has considered changing her business structure, but she cannot find an alternative structure that would give her the main advantage she enjoys as a sole owner. The major advantage is that she

receives all the profits.

Outcome-based ethics looks at the impact of decisions on key ____________.

stakeholders

Marsden wants to start a new company with different partners to explore oil-drilling opportunities in several states. When discussing the LLC form, Marsden's attorney mentions that one of the biggest disadvantages of the LLC form is that:

there is no uniform law governinng LLCs in the United States

A major premise of the _________approach to ethics is "the greatest good for the greatest number."

utilitarian

Ethics can be defined as the study of

what constitutes right and wrong behavior

Pick which one oversight action franchisors rarely, if ever, undertake:

when employees can take their breaks

Whenever an action affects the majority adversely, it is morally ______________.

wrong

You have to decide how to reduce labor costs by firing some of your workers, who will certainly be harmed. You must balance the interests of employees who have been loyal to the firm for a long time against the interests of

your firm's shareholders


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