final

Kari is the sole proprietor of Living Earth Garden Shop. As a sole proprietor, on the business's profits, Kari pays

only personal income tax

The franchisor may require that the business use a particular organizational form and capital structure.

true

The intent to associate is a key element of a partnership

true

The law considers all new, single-owner businesses to be sole proprietorships unless the owner affirmatively adopts some other form.

true

Unless a limited liability company indicates otherwise, the Internal Revenue Service automatically taxes it as a partnership.

true

Shop n' Pay Convenience Stores, Inc., is a franchisor. Tonya operates a Shop n' Pay franchise. Ulysses is one of Tonya's employees. As a franchisor, if Shop n' Pay controls the day-to-day operations of the business to a significant degree, it may be liable for tortious acts by

Shop n' Pay, Tonya, or Ulysses.

Haute Dogs, Inc., sells a franchise to Ilene's Cuisine, a lunch truck. Ilene's Cuisine is

a franchisee

Bee Hive Honey, LLC's members include Chad, Dolores, and others. For purposes of suing and being sued, Bee Hive Honey is

a legal entity apart from the owners.

Instead of setting up a business to market her own products, Rita considers entering into a distributorship franchise with Sports Equipment Corporation. This involves the transfer of

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 majority if partners

Custom Auto Body & Detailing, LLC, is a limited liability company. Unless indicated otherwise on the Custom Auto's federal tax form, the firm will be taxed as

a partnership

Bayside Marina Company and Canoes & Kayaks Inc., share officers, directors, employees, property, and equipment. In reliance on Bayside Marina's reputation, Delivery Transport Inc. contracts to perform services for Canoes & Kayaks, but the firm does not pay. In terms of liability to Delivery Transport, a court is most likely to treat Bayside Marina and Canoes & Kayaks as

a partnership by estoppel

George buys from Haul-U Corporation the exclusive right to use the Haul-U trademark and sell and lease Haul-U-brand products in a certain area. Their franchise agreement requires George to pay certain administrative expenses. Their agreement may also require George to pay a percentage of the franchisor's

advertising costs

Noah and Orin do business as Personnel Providers, an employment agency. In most states, for purposes of suing and being sued, Personnel Providers, which is a partnership, would be treated as

an entinity

Rooster Red LLC grants a franchise to Qiana to open and operate a Rooster Red restaurant. Rooster Red will likely charge Qiana

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

Otto is considering forms of business organization for Pro Tree Service, his landscaping firm. Like most states, Otto's state requires that to form a limited liability company, he must file with a central state agency

articles of orginization

Coco is considering forms of business organization for her concessions business—Coco's Cakes. Most states require that a limited liability company have

at least one member

Level Fencing Company wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which Level Fencing must comply, prospective franchisees must

be able to download or save all electronic documents.

Sable and Rex agree while talking on the phone to form a partnership—The Home Source—to deal in transfers of real property. To be enforceable, their agreement must

be in writing

Qatar Global Investments is a foreign entity—a firm owned and operated by investors in a foreign country. With respect to a limited liability company in the United States, Qatar Global can

become a memebr

Nazih and Ovidia are limited partners in Physicians Medical Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Nazih and Ovidia are entitled to

complete access

Commercial Credit & Finance is a limited partnership. Derry, Eleni, and Frey are the general partners. Derry dies. The partnership can

continue only if Eleni and Frey consent.

Paradise Footwear buys a franchise from Quadrangle Athletic Shoes Inc. This relationship, like all other franchise relationships, is governed by

contract law

Corbin, a partner in Dentists & Orthodontists Clinic, applies for a loan with Evermore Bank allegedly on the firm's behalf but without the authorization of the other partners. Evermore knows that Corbin is not authorized to take out the loan. If Corbin defaults on the loan, liability for its unpaid amount will be imposed on

corbin only

Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically

dissolve

Eudora is interested in buying a franchise from First Home Realty Company. In this transaction, the Federal Trade Commission's Franchise Rule

enables Eudora to weigh the deal's risks and benefits.

Business Enterprise Company agrees to sell a commercial office building and parking garage to City Investments, Inc., which assigns the rights to the realty to Downtown Properties, LLC. Downtown Properties does not yet exist, but once it is created and comes into existence, the contract on novation will most likely be

enforceable

Location! Realty LLC is a limited liability company. Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of

every state in which its members are citizens

A franchisee is generally economically independent of the franchisor's integrated business system.

false

A limited liability company must be managed by nonmembers.

false

A limited partnership cannot be dissolved by court decree.

false

A member of a limited liability company (LLC) has the power and the right to dissociate from the LLC at any time.

false

After a partner dissociates from a continuing partnership, the partnership is no longer bound by the acts of the dissociated partner, even on a theory of apparent authority.

false

Any lawsuit against the business or its employees does not lead to unlimited personal liability for the owner of a sole proprietorship.

false

Dissociation normally entitles the partner to buy his or her interest from the partnership.

false

Every act of the partner concerning partnership business and "business of the kind" and every contract signed in the partnership's name bind the partner, but not the firm.

false

For federal income tax purposes, one-member limited liability companies are not taxed.

false

If a member's dissociation from a limited liability company is rightful, normally the dissociated member has the right to force the LLC to dissolve.

false

If no fixed duration of the partnership is specified, the partnership is a partnership in perpetuity, which means that the partnership cannot be dissolved.

false

In a limited partnership, a limited partner has full responsibility for the partnership and for all its debts.

false

Limited personal liability obviates the need to obtain for insurance for significant business liability risks.

false

No partner is deemed to be an agent of the other partners and of the partnership.

false

No state requires franchisors to provide presale disclosures to prospective franchisees.

false

On dissolution, the creditors of the partnership, but not the creditors of the individual partners, can make claims on the partnership's assets.

false

One can join a partnership even if all other partners do not consent.

false

Some states require the termination of a franchise when there is no "good cause" for it to continue.

false

The alter-ego theory can be applied to a corporation, but not a limited liability company.

false

The duration of a franchise is a matter determined by federal or state statutes.

false

The franchise agreement is not likely to set out standards such as sales quotas and record-keeping requirements.

false

The law governing limited liability companies is uniform.

false

The laws governing franchising are primarily designed to protect franchisors from dishonest franchisees.

false

The majority rule controls decisions that significantly affect the nature of the partnership or that are outside the ordinary course of the partnership business.

false

The partnership is a pass-through entity and a taxpaying entity.

false

When a franchise agreement contains a notice-and-cure provision, a franchisee's breach of the duty of honesty and fidelity is not enough to allow the franchisor to terminate the franchise.

false

a sole proprietor does not own the entire business.

false

Fletcher buys a Great Big Burgers, Inc., franchise. Great Big Burgers requires that its franchisees buy its products exclusively for every phase of their operations. Because Fletcher wishes to buy less expensive products, he challenges the requirement. His best argument is probably that the requirement violates

federal antitrust laws

Cookie Shops, Inc., sells a franchise to Donuts & Desserts, a mall food-court vendor. Cookie Shops is

franchisor

Luke and Maya form Northwest Air Express, a general partnership. The essential elements of this partnership do not include

goodwill

Round-Up Ranch and Smith & Jones, Accountants, are limited liability partnerships (LLPs). The major features of an LLP are that it limits the personal liability of the partners and

it allows the partnership to continue as a pass-through tax entity

Ralph is interested in buying a franchise from Sparkle Beverages Inc. For Ralph to make an informed decision concerning this purchase, Sparkle Beverages must disclose in writing or online

material facts such as the basis of projected earnings figures.

Edgar, Jon, and Phoebe do business as Reliable Movers. Phoebe develops a debilitating illness and can no longer work. Phoebe

may dissociate from the partnership.

Hillside Vineyards is a family limited liability partnership. All of the partners must be

natural persons or persons acting as fiduciaries for natural persons.

Quisa and Reilly are partners in Sport Bikes, which rents and sells bikes, bike accessories, and related gear. Quisa manages the business. Unless the partnership agreement states otherwise, Quisa is

not entitled to compensation.

Oliana is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Oliana does not participate in, know about, or ratify, Oliana would be liable for

only the contractual obligations.

Nikki and Orlando are limited partners in Port City Exports, a limited partnership. To avoid personal liability for partnership obligations, they must not

participate in the firm's management.

Pualani and Quentin do business as partners in Rio Vista Builders, a residential construction firm. For federal income tax purposes, Rio Vista would be treated as

pass through entity

A franchise agreement between Grid Tools Company and Hometown Hardware, Inc., is silent on a time for termination of the franchise. Grid Tools may

terminate on reasonable notice

Sauces n' Syrups, Inc., and Thad's Sweet & Spicy Bottling Plant have a manufacturing franchise arrangement. This involves the transfer of

the formula to make a certain product

Sasha contracts to buy a franchise from TrustMe Financial Consultants Inc. The contract is silent on the issue of territorial rights. When TrustMe allows a competing franchise to be established near Sasha's office, she suffers a significant loss in profits. This is most likely a violation of

the implied covenant of good faith and fair dealing.

FreezE Yogurt Corporation provides its prospective franchisees with projected earnings figures based on actual data. FreezE Yogurt must also disclose

the number and percentage of franchisees that achieved the figures.

Mix n' Match Clothing Corporation gives notice to Neely that Mix n' Match is terminating their franchise arrangement. Winding up the business requires

the return of Mix n' Match's property.

Buckley is a general partner in Cut-Rate Shipping, LLLP, a limited liability limited partnership, which cannot pay its debts. Buckley is personally liable for the debts

to the extent of his capital contribution.

A sole proprietor is free to make any decision he or she wishes concerning the business.

tru

A franchisee is generally legally independent of the franchisor.

true

A franchisor can suggest retail prices for the goods that a franchisee sells but cannot mandate them.

true

A joint stock company is generally treated as a partnership.

true

A limited liability company can be held liable for any loss or injury caused by the wrongful acts or omissions of its members.

true

A limited liability company can be taxed as a partnership.

true

A limited liability company is a citizen of every state of which their members are citizens.

true

A limited liability limited partnership is a type of limited partnership.

true

A limited liability partnership may exempt its partners from personal liability for any partnership obligation.

true

A majority of the states treat a partnership as an entity for most purposes

true

A partner may pursue his or her own interests without automatically violating the partner's fiduciary duties to the partnership and the other partners.

true

Devoting time, energy, and skill to partnership business is a partner's duty and is not a compensable service.

true

If a franchisee is induced to enter into a franchise contract by the franchisor's fraudulent misrepresentation, the franchisor may be liable for damages.

true

If a franchisor's decision to terminate a franchise is made in the normal course of business and reasonable notice is given, it is less likely that the termination will be considered wrongful.

true

If a limited liability company (LLC) agreement does not cover a topic, the state LLC statute will govern.

true

In a limited partnership, a general partner's dissociation from the firm normally will lead to dissolution unless all partners agree to continue the business.

true

In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product.

true

In choosing a form of business organization for a new enterprise, important factors include the ability to raise capital.

true

Limited liability companies are entities apart from their owners.

true

Limited liability company operating agreements typically contain provisions relating to management.

true

Limits on a partner's authority normally are effective only with respect to third parties who are notified of the limitation.

true

Members of limited liability companies are shielded from personal liability in many situations.

true

Most courts apply the same principles to joint ventures as they apply to partnerships

true

Most states apply to a limited liability company (LLC) formed in another state the law of the state where the LLC was formed.

true

On a partner's dissociation, the partner's duty of loyalty ends.

true

Some states require that a franchisor submit advertising aimed at prospective franchisees to the state for approval.

true

The franchise is not strictly speaking a business organizational form.

true