CHAP12(2)

The most common form of business organization is

Proprietorship

A sole proprietorship comes into existence when

a person begins to do business for herself

Due to the inability to control sales, the government has, to date, prohibited the marketing of franchise operations over the internet.

false

Federal regulation prohibits franchise agreements from containing territorial restrictions

false

Franchisors may charge franchisees an up-front payment, but may not charge them a royalty fee based on annual sales

false

In most states, corporations legally exists for fifty years, then must renew their corporate charters

false

LLC Members have unlimited liability for torts committed in the name of the LLC

false

Limited liability companies are usually retained as shell operations

false

Limited liability companies need no formal document to begin operations: an oral agreement is sufficient

false

Most states have passed statues that say that members of limited liability companies will be personally liable for debts of the business

false

Partners in partnerships and shareholders in corporations, unlike proprietors, have liability limited to their amount of investment

false

Professional corporations allow doctors and other professionals to be exempt from tort suits for malpractice

false

Professional corporations are a business form often adopted by small businesses, especially in retail sales

false

The FTC franchise rule prohibits states from having additional regulations on franchises that go beyond the federal rules

false

The federal agency most concerned with regulating the franchise industry is the department of commerce

false

The retirement of a majority shareholder brings about the termination of the corporation

false

When the sole owner of a corporation dies, the corporation ceases to exists and the business must be reorganized

false

corporations may not be forced to dissolve against the wishes of the board of directors

false

limited liability companies have been popular since the late 1800s

false

limited liability companies, like corporations are presumed to have perpetual life

false

most franchisors provide trade name, but are not allowed to detail operations

false

offshore businesses are usually involved in money laundering operations

false

the most common form of franchise is the product distributorship

false

the two types of franchises allowed are product franchises and brand name franchises

false

An ____ is any name other than the name of the owner of the business

fictitious name

under traditional common law rules, a partnership

generally was not treated as a single legal entity

In a sole proprietorship, profits are taxed to the

individual owner of the proprietoship

The owner of a sole proprietorship

is legally the same as the business and is taxed the same as the business and may hire any number of employees

Which of the following is not true about a partnership?

it is always an independent legal entity

In most circumstances, a partnership is now treated as

legal entity

In a sole proprietorship, the capital usually

must come from the owner's own resources or be borrowed

A partnership can begin with either a __ or an __

oral agreement : implied agreement

There are ___ businesses in the United States

over 30 million

A ___ is an association of two or more persons to carry on a business as co-owners for profit

partnership

The oldest and simplest form of business organization is the

proprietorship

the ___ provides "default rules" that determine the operation of partnerships when the partnership agreement is silent or where there is no formal agreement among the partners

revised uniform partnership act

A person doing business for himself or herself is

sole proprietor

A person doing business for herself is a ____; the business is a ____.

sole proprietor and proprietorship

the majority of businesses in the united states are:

sole proprietorships

Under traditional common law rules, if you wanted to sue a partnership you had to

sue each partner individually

a written partnership agreement typically specifies the following except

that the partnership will be established under federal or state law

In a sole proprietorship, the owner

the business

A disadvantage of the sole proprietorship form is often

the limited alternatives for raising financial capital

Which of the following is a disadvantage of a sole proprietorship

the owner is personally liable for all the business debts & the limited alternatives for raising financial capital

A closed corporation typically limits the right to transfer stock

true

A limited liability company can be recreated to avoid termination

true

If a corporation is dissolved voluntarily, the creditors must be paid before the shareholders out of the assets of the firm

true

If the court "pierces the corporate veil" it may hold the shareholder(s) personally liable for corporate debts.

true

In a corporation, the profits are taxed and then the profits are taxed again when paid to the shareholders, so there is double taxation of corporate profits

true

It may be difficult to sell a partnership share in a partnership because determining the market value of the share may be difficult

true

Limited liability companies are guided by an operating agreement

true

Shell corporations are very easy to be set up in many states

true

Some states have adopted regulations for the sale of franchises that go beyond the federal requirements

true

The franchise rule requires franchisors to produce a detailed disclosure document before any money is paid by franchisees

true

The income from a partnerships is taxed as the personal income of the partners

true

The offering circular that franchisors must produce contains information about the background and experience of the executives of the franchise firm

true

The owners of a limited liability company are called members

true

Typically, members of a limited liability company will enter into an operating agreement that is similar to corporate by laws

true

franchise operators usually pay a franchise fee to buy the franchise

true

if a corporation is dissolved voluntarily, there must be a "winding up" of its affairs

true

limited liability companies are taxed like partnerships, but have the liability rules of a corporation

true

offshore businesses are often established for tax purpose

true