Final in Business Law
In the distribution of assets of a limited partnership, which group has the first priority? a. Outside creditors and partner creditors. b. Partners and former partners entitled to distributions of partnership assets. c. Unless otherwise agreed, partners, as they are entitled to return of capital contributions and distribution of profit.
a. Outside creditors and partner creditors.
Another disadvantage is that the proprietor's ability to raise capital is limited to personal funds and the funds of those who are willing to make loans. a. True b. False
a. True
Any event that makes it unlawful for the partnership to continue its business will result in dissolution. a. True b. False
a. True
Because risk is associated with the potential for higher profits, businesspersons are motivated to choose organizational forms that limit their liability while allowing them to take risks that may lead to greater profits. a. True b. False
a. True
Before a shareholder's meeting, a group of shareholders can create a shareholder voting agreement by agreeing in writing to vote their shares together in a specified manner. a. True b. False
a. True
Bonds normally have a fixed payment and a maturity date when the principal is returned to the bondholder. a. True b. False
a. True
Common carriers are held to a standard of care based on strict liability. a. True b. False
a. True
Corporate officers are hired by the directors. a. True b. False
a. True
Directors and officers may be liable for the actions of corporate employees under their supervision as well as for their own torts and crimes. a. True b. False
a. True
Each partner must exercise good faith during the dissolution of a partnership. a. True b. False
a. 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. a. True b. False
a. True
For an estray statute to apply, property must be lost not merely mislaid. a. True b. False
a. True
Generally, a person cannot buy property with zoning regulations in effect and then argue that a variance is needed for the property to be used for the owner's intended purpose. a. True b. False
a. True
If a board of directors declares a dividend to "pay back" investors but that dividend would cause them to have to miss paying several bills as they become due, the members of that board will be personally responsible for any loss to the corporation. a. True b. False
a. 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. a. True b. False
a. True
LLCs share many characteristics with corporations, such as they must be formed and operated in compliance with state law. a. True b. False
a. True
Ownership interests in real property are frequently transferred, or conveyed, by sale and the terms of the transfer are specified in a real estate sales contract. a. True b. False
a. True
The United States Supreme Court has held that zoning is a constitutional exercise of the government's police powers. a. True b. False
a. True
The amount of care required of a bailee increases as the benefit to the bailee becomes exclusive. a. True b. False
a. True
The events that may cause a member to be dissociated from the LLC include voluntary withdrawal, expulsion by other members, court order, incompetence, bankruptcy, and death. a. True b. False
a. True
The limited liability partnership (LLP) is a hybrid form of business designed mostly for professionals who normally do business as partners in a partnership. a. True b. False
a. True
To prevent arbitrary or bad faith terminations, state law may prohibit termination without "good cause" or require that certain procedures be followed in terminating a franchising relationship. a. True b. False
a. True
Under the Uniform Limited Liability Company Act (ULLCA), managers in a manager-managed LLC owe fiduciary duties, such as the duty of loyalty and the duty of care, to the LLC and its members, just as corporate directors and officers owe fiduciary duties to the corporation and its shareholders. a. True b. False
a. True
In most jurisdictions, a seller who knows of a defect that is not obvious and that would affect the value of the property in a material way has: a. a duty to disclose the problem. b. no obligation to disclose the problem. c. no obligation because the rule of caveat emptor applies.
a. a duty to disclose the problem.
A corporate director who sits on more than one board is engaging in illegal activity. a. True b. False
b. False
A corporation has a fifty-year existence by default. a. True b. False
b. False
A joint venture is generally treated like a corporation for tax purposes. a. True b. False
b. False
A landlord-tenant relationship is established by a sales contract. a. True b. False
b. False
A restrictive covenant is binding on the party who purchases the property originally, but not on subsequent purchasers. a. True b. False
b. False
After dissolution, the partnership immediately ceases to continue. a. True b. False
b. False
Directors are hired by the shareholders through an interview process. a. True b. False
b. False
Franchises account for a small percentage of this country's retail sales. a. True b. False
b. False
If a corporation cannot point to a document that articulates its express power, the corporation does not have the power. a. True b. False
b. False
If a member wrongfully dissociated from the LLC, he or she may still participate in the winding up process. a. True b. False
b. False
If a third party knows that a partner had no authority to commit the partnership, the partner's actions with the third party still bind the partnership and its partners. a. True b. False
b. False
In all cases, joint ownership of property creates a partnership. a. True b. False
b. False
LLCs are created by state statute and are uniform across the states. a. True b. False
b. False
LLPs must be formed and operated in compliance with federal law. a. True b. False
b. False
Preemptive rights are not important in close corporations because all of the shareholders are family or close friends. a. True b. False
b. False
Shareholders must approve any corporate decision that would cost more than $10,000. a. True b. False
b. False
The creation of a sublease typically releases the tenant from his or her obligations under the lease. a. True b. False
b. False
There is no difference between a public corporation and a publicly held corporation. a. True b. False
b. False
Typically, state law determines the duration of a franchise. a. True b. False
b. False
Under no circumstances is the tenant allowed to withhold rent. a. True b. False
b. False
Upon dissolution of an LLC, all assets must be sold immediately. a. True b. False
b. False
When a member dissociates from an LLC, he or she retains the right to participate as an agent for the LLC. a. True b. False
b. False
If a member dies or otherwise dissociates from an LLC, the LLC ______________. a. must continue b. may continue if the remaining members agree c. cannot continue
b. may continue if the remaining members agree
What happens if a limited partner in a limited partnership participates in management? a. Nothing. b. The limited partner reduces his or her liability. c. The limited partner becomes just as liable as a general partner to any creditor. d. The limited partner takes over the liability of all general partners.
c. The limited partner becomes just as liable as a general partner to any creditor.
Select two other types of debt that a corporation may have in addition to debt securities. a. Accounts uncollectible. b. Notes receivable. c. Notes payable. d. Accounts receivable. e. Accounts payable.
c. Notes payable. e. Accounts payable.
Ordinarily, who is entitled to vote at an annual corporate meeting? a. All persons who are past and present shareholders. b. All persons who are shareholders designated by the state. c. Only persons whose names appear on the corporation's stockholder records as owners are entitled to vote.
c. Only persons whose names appear on the corporation's stockholder records as owners are entitled to vote.
Because shareholders with a very small percentage of shares may not be able to travel to annual meetings, the law allows them to appoint someone else to vote their shares using a ______ authorization form. Management often _____ these.
Proxy, solicits
The reason that most states either permit or require cumulative voting when electing directors is to: a. reduce fraud among voters. b. allow directors to have greater input in the election process. c. allow minority shareholders a chance at electing a director. d. allow minority shareholders to control the election process.
c. allow minority shareholders a chance at electing a director.
To encourage shareholders to pay attention to the board's actions, when a shareholder's derivative suit is won, the damages: a. are fully paid to the shareholders who brought the suit. b. are paid to the shareholders, but only up to fifty percent of the damages. c. are paid into the corporation's treasury.
c. are paid into the corporation's treasury.
In a commercial bailment, the bailee has the right to place a claim on the specific property until he or she has been compensated. This claim is called a(n): a. artisan's lien. b. mechanic's lien. c. bailee's lien. d. bailment lien.
c. bailee's lien.
If one partner in a partnership declares bankruptcy, in most states, the bankruptcy will: a. do nothing to the partnership. b. dissolve the partnership automatically. c. cause the bankrupt partner's dissociation from the partnership. d. cause the partnership to declare bankruptcy.
c. cause the bankrupt partner's dissociation from the partnership.
One of the biggest disadvantages of organizing a company as an LLC is that: a. it is taxed like a partnership, unless the members choose differently. b. its members pay no taxes. c. there is no uniform law governing LLCs in the United States.
c. there is no uniform law governing LLCs in the United States.
Individual corporate directors _________ have the ability, as agents of the corporation, to bind the corporation.
Do not
Directors and officers have a duty of care to act _______ , to exercise the care that a(n) _______ person would exercise in similar circumstances, and to do what the director or officer believes is in the ______ of the corporation.
In good faith, ordinarily prudent, best interest
What are the options that exist for management of an LLC? Choose two: 1. ________ 2. ________ .
Member-managed, manager managed
Hotel owners are __________ liable for the loss of any cash or property that guests bring into their rooms. In many states, liability can be avoided by providing a ________ in which to keep guest's valuables and by ________ the guests of that availability.
Strictly, safe, notifying
What governs the operation of a partnership when there is no express partnership agreement? _________
The Uniform partnership Act
Select the three names that close corporations are often called. a. Closely held corporations b. Family corporations c. Unprofitable corporations d. Benefit corporations e. Privately held corporations f. S corporations
a. Closely held corporations b. Family corporations e. Privately held corporations
The types of ordinary bailments are distinguished according to which party receives a benefit from the bailment. a. True b. False
a. True
The type of corporation most at risk for piercing the corporate veil is the: a. publicly traded corporation. b. public corporation. c. close corporation.
c. close corporation.
Today most ultra vires acts involve: a. close corporations. b. publicly traded corporations. c. benefit corporations. d. nonprofit corporations.
d. nonprofit corporations.
If a corporation issues shares of stock for less than their fair market value, the shares are referred to as: a. preferred stock. b. common stock. c. split stock. d. watered stock.
d. watered stock.
Which of the following is a true hybrid of a partnership and a corporation? a. Joint stock company. b. Joint venture. c. Business trust. d. Syndicate.
a. Joint stock company.
Select the three main rights that directors have in order to properly function. a. Right to participation b. Right to compensation c. Right of inspection d. Right to indemnification e. Right to bind the corporation f. Right to termination
a. Right to participation c. Right of inspection d. Right to indemnification
Select the two situations where the bailee's duty of care is extraordinary: a. common carriers. b. jewelry repair. c. hotel operators. d. car dealers. e. valet services.
a. common carriers. c. hotel operators.
The two major types of concurrent ownership are (select two): a. joint tenancy. b. tenancy at sufferance. c. tenancy in common. d. tenancy at will.
a. joint tenancy. c. tenancy in common.
A tenant's transfer of his or her entire interest in the leased property to a third person for the entire remaining term of the lease is a(n) ________ of the lease.
assignment
Which of the following are examples of distributor-type franchising arrangements? Choose two: a. _________ b. . ______________
automobile dealership, beer distributor
Constructive delivery is always necessary for intangible property such as: a. a diamond ring. b. a shirt. c. stocks. d. cards.
c. stocks.
Stock may be described as: a. a document describing the ownership of the corporation. b. a debt owed by the government to the shareholder. c. a debt owed by the corporation to the shareholder. d. an ownership interest in the corporation.
d. an ownership interest in the corporation.
In a _______ , the bailor must notify the bailee of all known defects and any __________ defects that could have been discovered with _______ diligence. In a bailment for the sole benefit of the _________ , the bailor only need notify the bailee of any _______ defects.
Mutual-benefit bailment, hidden, reasonable, bailee, known
A syndicate may be organized as a corporation or as a general or limited partnership. a. True b. False
a. True
For the most part, special business forms are hybrid organizations, that is, they combine features of other organizational forms, such as partnerships and corporations. a. True b. False
a. True
Interests in land that do not include any rights to possess the property are known as nonpossessory interests. a. True b. False
a. True
The franchise relationship is defined by a contract between the franchisor and the franchisee. a. True b. False
a. True
A cooperative must be incorporated in order to be recognized. a. True b. False
b. False
The formation of both a traditional partnership and a limited partnership requires a public and formal proceeding that must follow statutory requirements. a. True b. False
b. False
The members of an LLC have little flexibility in operating or managing a business. a. True b. False
b. False
The most common way to acquire personal property is to produce it. a. True b. False
b. False
The name for a new business may be the same as, or similar to, the name of another business in the state. a. True b. False
b. False
The person who receives the property of another under the terms of a bailment agreement is called the bailor. a. True b. False
b. False
One of the reasons state governments and the federal government have passed statutes regulating franchises is to: a. increase the bargaining power of the franchisor. b. protect prospective franchisees from dishonest franchisors and franchise termination without good cause. c. decrease the flow of information to a franchisee.
b. protect prospective franchisees from dishonest franchisors and franchise termination without good cause.
When a partnership agreement does not specify how long it will last, it will end: a. in twelve months. b. whenever either partner wants to end it. c. in one year, plus one day. d. whenever both partners agree to end it.
b. whenever either partner wants to end it.
Most franchise relationships are governed primarily by ________. a. securities law b. environmental law c. contract law d. real estate law
c. contract law
The general rule with respect to mislaid property is that the: a. finder of the property obtains good title against everyone. b. finder of the property obtains good title against everyone except the true owner. c. owner of the place where the property was found becomes its caretaker. d. person who mislaid the property has given up all rights to it.
c. owner of the place where the property was found becomes its caretaker.
An LLC's members may want to reinvest the profits in the business rather than distribute the profits to members. In that situation, the members prefer that the LLC be taxed as a __________ .
corporation
After a partner's dissociation, his or her interest in the partnership must be purchased. a. True b. False
. True
A corporation must notify its shareholders of the date, time, and place of an annual meeting at least ___ days before the meeting date.
10
_________ states have adopted variants of the Uniform Residential Landlord and Tenant Act (URLTA).
21
Community property is a form of concurrent ownership found in ________ state(s).
A limited number
Shareholders have a right to inspect the corporate records for _______ purpose.
A proper
_______ is formed to control the market and thereby enable members to sell their goods at higher prices.
A seller-marketing cooperative
________________ of the states have enacted limited liability partnership (LLP) statutes.
Almost all
When a corporation is not operated as a separate entity, this is called the ___________ .
Alter-ego theory
Zoning restrictions _______ absolute.
Are not
The three types of bailments are: first, a bailment for the sole benefit of the ______ , also known as a ______ bailment; second, a bailment for the sole benefit of the _______ ; and third, a bailment for the _______ benefit of the bailor and the bailee, which is the most common type.
Bailor, gratuitous, bailee, mutual
The corporation's internal rules of management are called the __________ .
Bylaws
The two basic responsibilities or duties of a bailee are to take appropriate ______ the property and to ______ the property or otherwise ______ of it in accordance with the bailor's instructions.
Care of, surrender, dispose
The sole proprietorship also has the disadvantage of lacking ______ after the death of the proprietor.
Continuity
Tenants have a duty not to _______ the property.
Damage
One of the first steps in the incorporation process is __________ .
Deciding where to incorporate
When a corporation enters into a contract or engages in business with another corporation in which one of the board members has a personal interest, that board member must fully ______ the conflict and _____ voting.
Disclose, abstain from
For a gift to be effective, there must be ______ intent by the donor, or the one giving the gift, _______ of the property, and _______ by the donee.
Donative, delivery, acceptance
One main disadvantage of the corporate form of business is ____________ .
Double taxation of distributed income
One of the key advantages of the corporate form of business is ________ .
Limited liability of ownership
A _________ is the simplest form of business.
Sole proprietorship
An LLC that has _______ can choose to be taxed either as a partnership or as a corporation.
Two or more members
Acts that are beyond the express or implied powers of a corporation are called _______ acts.
Ultra vires
Failure to provide heat to a rental property in the winter would constitute _________ .
a constructive eviction
Select the two most common committees formed by large boards of publicly traded companies. a. Audit committee b. Banking committee c. Computing committee d. Debt committee e. Executive committee
a. Audit committee e. Executive committee
Which of the following is not a classification of a franchise? a. Vertically integrated. b. Distributorship. c. Chain-style business operation. d. Manufacturing arrangement.
a. Vertically integrated.
When a company distributes a portion of its income or profits in cash, property or stock to its shareholders in proportion to their shares, it is called: a. a dividend. b. a dissolution. c. a proxy. d. an assumption.
a. a dividend.
Federal and state laws attempt to protect franchisees from the ________ and unfair termination of their franchises. a. arbitrary b. good faith c. fair dealing
a. arbitrary
All states provide that when more than one partner in an LLP is negligent, each partner is jointly and severally liable for the entire result. a. True b. False
b. False
Although each partner must continue to exercise good faith, partners no longer have fiduciary duties to one another during the winding up process and the distribution of assets. a. True b. False
b. False
As of 2016, companies are not allowed to use crowdfunding to offer and sell securities. a. True b. False
b. False
The difference between a profit in gross and profit appurtenant is that: a. a profit in gross is a future interest and a profit appurtenant is a present interest in land. b. a profit appurtenant is related to adjacent land and a profit in gross is related to nonadjacent land. c. a profit in gross involves the use of a quick claim deed, while the profit appurtenant does not.
b. a profit appurtenant is related to adjacent land and a profit in gross is related to nonadjacent land.
Which of the following is typically NOT the way in which real property ownership can be transferred? a. Sale b. Gift c. Conjecture d. Will e. Inheritance f. Adverse possession g. Eminent domain
c. Conjecture
A corporation is a legal entity: a. created by local ordinance. b. created by an agency regulation. c. created by state statute. d. that naturally occurs when two or more people do business.
c. created by state statute.
Tenants typically do not have the right of: a. possession. b. quiet enjoyment. c. eviction. d. use of the premises.
c. eviction.
Preferred stock is often considered a more conservative, or less aggressive, investment than common stock because: a. it is called preferred. b. it never pays dividends. c. owners have priority on dividends. d. owners will prosper faster than common stock owners if the company does well.
c. owners have priority on dividends.
The Big R is a cooperative that has several outlets in the Simi Valley area. Its stores sell farm and ranch supplies. It was formed to obtain quantity discounts and pass them along to its members. Big R is a type of ________ .
consumer-purchasing cooperative
The main right of the bailee is the right to ________ .
control and possess the property
A ________ is not one of the three major forms of business.
cooperative
Corporations ______ enjoy many of the same rights and privileges under state and federal law that people enjoy.
do
Ownership of personal property may be acquired in all of the following ways except: a. purchase. b. possession. c. production. d. gift. e. accession. f. theft. g. confusion.
f. theft.
Real estate sales contracts are often contingent on the buyer's ability to obtain __________ .
financing
When a franchisor's decision to terminate a franchise was made in the normal course of the franchisor's business operations, however, that weighs __________ of the franchisor.
in favor
An LLC that has only ______ member(s) cannot be taxed as a partnership.
one
In most states, statutes require leases for terms exceeding ______ year(s) to be in writing.
one
A member of an LLC has the ______ to dissociate from the LLC at any time, but he or she may not have the ________ to dissociate.
power, right
In order for shareholders to exercise control, a ________ must be present, either in person or through proxies.
quorum
A 200-year-old oak tree located on a piece of property is considered to be ______________ .
real property
The main advantage of being the sole owner of a business is that the owner _________ .
receives all the profits
A statute that allows deeds, mortgages and other real property transactions to be recorded so as to provide notice to future purchasers or creditors of an existing claim on the property is known as a _______ .
recording statute
The articles of incorporation must include information such as the name, number of shares, and the name of its ___________ , or person designated to receive legal documents on its behalf.
registered agent
Corporations normally are financed by _______ . One type of security consists of borrowing funds and is called a ________ . The other main type of security consists of ownership in the corporation and is called a _______ , or equity security.
securities, bond, stock
The ______ , or owners, of a corporation elect the _________ who then hire the ________ to run the daily operations.
shareholders, directors, officers
A contract in which a lessee transfers his or her rights under a lease to a third party for part of the lease term is known as a(n) __________ .
sublease
Shari gets together with a group of her friends to pool their funds to buy a house, fix it up, and rent it out. This is a joint venture arrangement but also could be known as a __________ .
syndicate
Unless restricted by statute, deed, or otherwise, a landowner has a right to everything existing permanently below the surface of her or his property to ___________ .
the center of the earth
Generally, an incorporated cooperative distributes dividends, or profits, to its owners on the basis of __________ .
the owner's transactions with the cooperative
The type of deed that provides the buyer with the greatest legal protection is a _________ .
warranty deed
When one partner's relationship with a partnership comes to an end but the partnership continues to do business, it is known as _________
Dissociation
Generally, a partner obtains compensation from the partnership by ___________
Distribution of profits according to the partner's share in the business
A partnership's assets are distributed according to the following priorities: ____________ , then __________ .
Payments of debts, including those owed to partner and non partner creditors, return of capital contributions and distributions of profits to partners
In a limited partnership, the liability of a limited partner is: a. limited to the capital contribution. b. unlimited. c. limited to the total capital of the LP. d. $100,000.
a. limited to the capital contribution.
When deciding which form of business organization to adopt a person will likely consider all of the following except: a. his need for start-up capital. b. publicity and public relations. c. the various types of liability to which owners are subject. d. tax issues.
b. publicity and public relations
To determine whether a franchisor has acted in good faith when terminating a franchise agreement, what do the courts attempt to do? a. Determine the franchisor's net worth. b. Determine the franchisee's net worth. c. Attempt to balance the rights of both parties.
c. Attempt to balance the rights of both parties.
What is the major advantage of an LLP? a. It increases the liability of the partners. b. It allows the partnership to be taxed as a corporation. c. It limits the personal liability of partners to only their own wrongful acts.
c. It limits the personal liability of partners to only their own wrongful acts.
Which of the following issues is NOT typically addressed in a franchise contract? a. Whether the premises must be leased or purchased outright. b. Determination of the territory to be served. c. Names of prospective temporary employees. d. A particular organizational form to be used.
c. Names of prospective temporary employees.
Unless a hunter has violated a law, that hunter who kills a moose has assumed ownership of it. a. True b. False
a. True
When the government uses its power of eminent domain to acquire land owned by a private person or company, it is called _________ .
A taking
What are the two requirements that state statutes and case law governing franchises tend to emphasize the most? Choose two: 1. _________ 2. _______ .
Good faith, fair dealing
Most voting trusts _______ an expiration date.
Have
Normally, the dissociated member has the right to have his or her _______ bought out by other members
Interest
Real property _____ become personal property by ________ the land. Personal property _______ become real property if it is _______ real property.
May, removing it from, may, affixed to
In ______ states, it is presumed that a co-tenancy is a tenancy in common.
Most
The most common type of ordinary bailment is the _______ bailment.
Mutual-benefit
In most states, a shareholder ______ have a stock certificate to prove ownership of the stock.
Need not
When a government takes private property without paying compensation, the landowner is forced to sue the government for compensation. a. True b. False
a. True
To become an S corporation, a corporation must meet specific criteria, such as restriction on the ________ of shareholders, as well as the types of _________ that can be issued.
Number, stock
When a member dissociates from an LLC, he or she loses the right to participate in management. a. True b. False
a. True
To be considered a bailment, the property that is entrusted must be property. There must be ________ of the property but not transfer of title. Finally, there must be an agreement that the property will be ______ or ________ otherwise _______ according to the bailor's directions.
Personal, delivery, returned, disposed of
The bailee has the right of _______ , the right to _______ bailed property, the right to be _______ for services rendered, and the right to limit _______ .
Possession, use, compensated, liability
With respect to officers, most corporations have a _______ , one or more ______ , a secretary, and a ________ .
President, vice president, treasurer
In real property law, the right to enter onto and remove things from the property of another (for example, the right to enter onto a person's land and remove sand and gravel therefrom) is known as a ______ .
Profit
A sole proprietor pays only personal income taxes (including Social Security and Medicare taxes) on the business's ______ , which are reported as personal income.
Profits
Today most state corporate statutes are at least partially based on the __________ .
Revised model business cooperation act
For a sole proprietorship, creditors can pursue the owner's personal ________ to satisfy any business debts. a. bankruptcy b. assets c. reputation d. engagement
b. assets
When a joint tenant transfers her or his rights to another without the consent of the other joint tenants, doing so _______ the joint tenancy.
Terminates
A joint stock company has many features of a corporation. Which of the following is NOT one of the ways in which a joint stock company is like a corporation? a. Its shareholders have personal liability. b. It is usually managed by directors or officers of the company. c. It can have perpetual existence.
a. Its shareholders have personal liability.
In what order are proceeds from the sale of an LLC's assets distributed? a. Pay off debts to creditors, return members' capital contributions, distribute remainder to members in equal shares. b. Return members' capital contributions, pay off debts to creditors, distribute remainder to members in equal shares. c. Distribute remainder to members in equal shares, pay off debts to creditors, return members' capital contributions.
a. Pay off debts to creditors, return members' capital contributions, distribute remainder to members in equal shares.
There are many public policy reasons for the adverse possession doctrine. Select three. a. Resolving boundary disputes b. Resolving title concerns c. Assuring property is put to productive use d. Avoiding unnecessary paperwork e. Moving to electronic record keeping f. Assisting the poor in obtaining property
a. Resolving boundary disputes b. Resolving title concerns c. Assuring property is put to productive use
In a sale for real estate, who is normally responsible for having the premises inspected for physical or mechanical defects and for insect infestation? a. The buyer b. The seller c. The real estate agent d. The state
a. The buyer
A corporation automatically will be taxed under subchapter C unless it elects to become an S corporation. a. True b. False
a. True
A limited liability limited partnership (LLLP) differs from a limited partnership in that a general partner in an LLLP has the same liability as a limited partner in a limited partnership. a. True b. False
a. True
Certain personal property, known as fixtures, can become so closely associated with the real property to which it is attached that the law views it as real property. a. True b. False
a. True
If a partner withdraws prematurely from a partnership for a term, that partner has breached the partnership agreement and may be liable for any resulting losses. a. True b. False
a. True
If the partnership agreement does not indicate how the profits will be shared, the Uniform Partnership Act provides that profits will be shared equally. a. True b. False
a. True
In a chain-style business operation, a franchise operates under a franchisor's trade name. a. True b. False
a. True
Many states require a franchisor to register a disclosure document known as the Franchise Disclosure Document (FDD). a. True b. False
a. True
Most easements and profits are created by an express grant in a contract, a deed, or a will. a. True b. False
a. True
One of the hallmarks of the corporate form is that shareholders may lose their investment in the corporation but no more than that. a. True b. False
a. True
Partners can agree ahead of time on how the assets will be valued and divided if the partnership dissolves, using, for example, buy-sell agreements. a. True b. False
a. True
Private equity firms use their private equity capital to invest in existing corporations. a. True b. False
a. True
Termination provisions of the franchise contracts may mean that the franchisee, who normally invests substantial time and financial resources in making the franchise operation successful, receives little or nothing for the business on termination. a. True b. False
a. True
The most common remedy for an ultra vires act is an injunction. a. True b. False
a. True
The sharing of both profits and losses creates a legal inference that a partnership exists. a. True b. False
a. True
To pierce the corporate veil is to expose the shareholders to personal liability. a. True b. False
a. True
The express powers of a corporation come from which three sources? a. U.S. and state constitutions. b. State laws. c. The Revised Model Business Corporations Act. d. The Uniform Commercial Code. e. The articles of incorporation. f. The bylaws. g. The Uniform Express Powers Act.
a. U.S. and state constitutions. e. The articles of incorporation. f. The bylaws.
Select the two answers that identify the important distinctions between real property and personal property: a. different taxation b. different formalities for acquisition c. different rights of ownership d. different values e. different ability to give it in a will
a. different taxation b. different formalities for acquisition
A joint tenancy differs from a tenancy in common primarily in that a joint tenancy has the: a. right of survivorship. b. right of ownership. c. right of development.
a. right of survivorship.
Under common law, a partnership was treated only as ______
an aggregate of individuals t
Chain-style franchises are common in manufacturing. a. True b. False
b. False
What type of liability occurs when a third party has the option of suing all the partners together or one or more of the partners separately? a. Joint liability. b. Joint and several liability. c. Several liability. d. Imputed liability.
b. Joint and several liability.
What is the most common termination statement in a typical franchise agreement? a. That the franchise can be terminated within ten days' notice. b. That the franchise can be terminated "for cause" with grounds for termination. c. That the termination must go to arbitration.
b. That the franchise can be terminated "for cause" with grounds for termination.
A major difference between a joint venture and a partnership is that: a. a partnership is composed of members, and a joint venture is not. b. a joint venture is a one-time association, whereas a partnership is ongoing. c. partners are taxed individually, but joint ventures are not.
b. a joint venture is a one-time association, whereas a partnership is ongoing.
Variance requests require: a. no hearing. b. a public hearing. c. a private hearing. d. a thirty-day waiting period
b. a public hearing.
The business judgment rule states that directors and officers: a. must make good business judgments or be held personally liable for any loss to the corporation. b. are immune from liability for bad business decisions, provided they exercised due care and used their best judgment in guiding corporate management. c. are never liable for bad business decisions if they attend all their meetings and vote for the actions.
b. are immune from liability for bad business decisions, provided they exercised due care and used their best judgment in guiding corporate management.
One basic difference between partnership and agency law is that: a. in a partnership, partners are not deemed to be agents of the other partners. b. each partner has an ownership interest in the firm. c. each partner does not have an ownership interest in the firm.
b. each partner has an ownership interest in the firm.
Officers and directors have a special relationship with the corporation and its shareholders and are called: a. registered agent. b. fiduciaries. c. responsible parties. d. managers.
b. fiduciaries.
In order to form a valid limited partnership (LP), the partnership must: a. file articles of organization. b. file a certificate of limited partnership. c. file an amended partnership agreement.
b. file a certificate of limited partnership.
The general rule with respect to lost property is that the: a. finder of the property obtains good title against everyone. b. finder of the property obtains good title against everyone except the true owner. c. owner of the place where the property was found becomes its caretaker. d. person who lost the property has given up all rights to it.
b. finder of the property obtains good title against everyone except the true owner.
One of the benefits of LLCs, and one that helps promote investment, is the fact that: a. investors must be accredited. b. foreign investors are allowed to become LLC members. c. members are registered with the SEC.
b. foreign investors are allowed to become LLC members.
A bailment for the sole benefit of the bailor is a(n): a. compensated bailment. b. gratuitous bailment. c. unique bailment. d. gift bailment.
b. gratuitous bailment.
What best describes an entrepreneur? a. A person who knows how to evaluate which stocks to purchase. b. Someone who can expertly manage other people's investments. c. Someone who initiates and assumes the financial risk of a new business enterprise.
c. Someone who initiates and assumes the financial risk of a new business enterprise.
How is the buyout price of a dissociated partner calculated? a. The remaining partners decide among themselves. b. State law determines the total amount. c. The price is based on the amount that would have been distributed to the partner if the partnership had been wound up on the date of dissociation.
c. The price is based on the amount that would have been distributed to the partner if the partnership had been wound up on the date of dissociation.
Fee simple absolute is: a. an interest in land that exists only for the life of the person and then reverts to the original owner. b. a future nonpossessory interest in real estate. c. an interest in land in which the owner has the greatest possible aggregation of rights and privileges.
c. an interest in land in which the owner has the greatest possible aggregation of rights and privileges.
The two categories of enterprises for which a limited liability partnership (LLP) is especially attractive are: a. farmers and manufacturers. b. manufacturers and computer hardware businesses. c. professional services and family businesses. d. professional services and unions.
c. professional services and family businesses.
If a group of people form a nonprofit membership organization to buy materials for their activities at a discount, they have probably formed a _______ .
cooperative
A limited liability company (LLC) combines the tax characteristics of: a. a corporation with the liability of shareholders. b. a partnership with the liability of partners. c. a corporation with the liability of a partnership. d. a partnership with the liability of a corporation.
d. a partnership with the liability of a corporation.
Starting a new business as a partnership rather than as a sole proprietorship will allow a person to avoid: a. being taxed as a limited liability corporation. b. receiving all the profits. c. undertaking limited liabilities. d. bearing the burden of all losses and liabilities.
d. bearing the burden of all losses and liabilities.
Most corporate enterprises in the United States can be considered: a. public corporations. b. S corporations. c. benefit corporations. d. close corporations.
d. close corporations.
In most states, when a tenant moves out of leased premises before the term of the lease expires, the landlord is required to make a reasonable attempt to lease the property to another party. Legally, this is called the duty ______________ a. of unlawful detainer. b. of minimum compensation. c. to enjoin damages. d. to mitigate damages.
d. to mitigate damages.
When a single shareholder owns sufficient shares to exercise _______ control over the corporation, that shareholder is called a _____ shareholder and owes _______ duties to the minority shareholders.
de facto, majority, fiduciary
Starting a sole proprietorship normally is easier and less _____ than starting any other kind of business.
Costly
The bankruptcy, retirement, death or mental incompetence of a general partner will cause the dissociation of that partner and the dissolution of the limited partnership _______________
Unless the other members agree to continue the firm
Generally, the termination provisions of contracts are more favorable to the franchisee than to the franchisor. a. True b. False
b. False
The sole proprietor has limited liability, or legal responsibility, for all obligations that arise in doing business. a. True b. False
b. False
When a franchise agreement contains no set time for winding up a franchisee's business, a franchisee: a. must wind up the business within seven working days. b. must be given a reasonable time to wind-up the business. c. normally must comply with state franchise winding-up statutes.
b. must be given a reasonable time to wind-up the business.
What happens when, after winding up, the partnership's liabilities are greater than its assets? a. Nothing, because unpaid creditors can no longer pursue their legal claims. b. The partner who made the largest investment is liable for all remaining unpaid claims. c. The partners bear the losses in the same proportion in which they shared the profits. d. The partners bear the losses in equal proportion.
c. The partners bear the losses in the same proportion in which they shared the profits.
When a group of members join to form an LLC, the name of the organization must: a. convey the purpose of their organization. b. be registered with the SEC. c. include the words, "limited liability company," or the letters, "LLC".
c. include the words, "limited liability company," or the letters, "LLC".
Under a distributorship franchise the owner will: a. pay for one-half of the franchisee's start-up costs. b. grant a trade name to the owner's authorized dealers. c. license distributors to sell the owner's products.
c. license distributors to sell the owner's products
Which of the following fiduciary duties does a partner owe the partnership? Choose two. a. reinvestment of profits b. assumption of a management role c. loyalty d. proximate cause e. care
c. loyalty e. care
All but one of the following is included in partnership winding-up activities: a. collecting the partnership assets. b. preserving the partnership assets. c. signing new contracts for the partnership. d. paying debts. e. accounting to each partner for the value of his or her interest.
c. signing new contracts for the partnership.
In the LLC form of management: a. a state-appointed receiver manages the firm. b. the managers must be certified public accountants. c. the managers may be members, both members and nonmembers, or only nonmembers. d. members may not participate in management of the LLC.
c. the managers may be members, both members and nonmembers, or only nonmembers.
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 a __________ .
chain-style business operations franchise
Generally speaking, a limited partnership will be dissolved if: a. a limited partner leaves. b. the partnership business relocates. c. a limited partner gets married. d. a court issues the appropriate decree.
d. a court issues the appropriate decree.
Dissolution of a partnership generally can be brought about by all of the following except: a. acts of the partners. b. operation of law. c. judicial decree. d. the insistence of a competitor.
d. the insistence of a competitor.
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? a. The name of the business. b. The business' principal address. c. The name and address of a registered agent. d. The members' names. e. The hours of operation of the business. f. How the LLC will be managed.
e. The hours of operation of the business.
Most franchise litigation involves claims for wrongful ________ .
termination
