Question 1

Which of the following statements is correct about the requirements of an LLP?

Accepted Answer

A)  The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must execute a Partnership Agreement. 
B)  The parties must execute a Partnership Agreement identifying itself with the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must file a form with the secretary of the state. 
C)  The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, the parties must execute a Partnership Agreement, and the parties must file a form with the secretary of the state. 
D)  The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must file a form with the secretary of the state. 
E)  The parties only need to file a form with the secretary of the state. 
A)  The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must execute a Partnership Agreement. 
B)  The parties must execute a Partnership Agreement identifying itself with the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must file a form with the secretary of the state. 
C)  The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, the parties must execute a Partnership Agreement, and the parties must file a form with the secretary of the state. 
D)  The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must file a form with the secretary of the state. 
E)  The parties only need to file a form with the secretary of the state.

Question 2

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-When a person decides to go into business on his or her own without further formality, what do they form?

Accepted Answer

A)  Individual entity 
B)  Sole proprietorship 
C)  Single entity 
D)  Sole entrepreneurship 
E)  Single entrepreneurship 
A)  Individual entity 
B)  Sole proprietorship 
C)  Single entity 
D)  Sole entrepreneurship 
E)  Single entrepreneurship

Question 3

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-Shareholders elect the members of the board of directors of a corporation.

Accepted Answer

A) True 
 B)False

Question 4

[R&R Landscaping, LLC] R&R Landscaping, LLC, is registered as a limited liability company in Illinois. R&R provides corporate landscape design and maintenance. During a large corporate project near Chicago, the driver of R&R's bulldozer lost control, went into oncoming traffic, and caused injuries to Viktor. Viktor wants to file a lawsuit and, after research, learns that R&R is owned by Rohan, an Illinois resident, and Roland, an Indiana resident, and that R&R filed articles of organization in Illinois and a certificate of authority in Indiana.
-In Indiana, where R&R filed its certificate of authority, what term would be used to identify R&R's type of company?

Accepted Answer

A)  Out-of-state company 
B)  Alien company. 
C)  Out-of-state operator. 
D)  Foreign company. 
E)  External business. 
A)  Out-of-state company 
B)  Alien company. 
C)  Out-of-state operator. 
D)  Foreign company. 
E)  External business.

Question 5

________ are responsible for running the day-to-day business of a corporation.

Accepted Answer

A)  Employees 
B)  Shareholders 
C)  Officers 
D)  Board of Directors 
E)  Managers 
A)  Employees 
B)  Shareholders 
C)  Officers 
D)  Board of Directors 
E)  Managers

Question 6

What is the term used for the process under which an LLC must register in every additional state in which it intends to operate?

Accepted Answer

A)  Qualification. 
B)  Registration. 
C)  Approval. 
D)  Organization. 
E)  Incorporation. 
A)  Qualification. 
B)  Registration. 
C)  Approval. 
D)  Organization. 
E)  Incorporation.

Question 7

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-Which of the following statements is false regarding a general partnership?

Accepted Answer

A)  It is easy to create. 
B)  Income of the business is personal income. 
C)  Business losses can be deducted from taxes. 
D)  The partners are considered agents of the partnership. 
E)  In most cases partners do not have personal liability for losses. 
A)  It is easy to create. 
B)  Income of the business is personal income. 
C)  Business losses can be deducted from taxes. 
D)  The partners are considered agents of the partnership. 
E)  In most cases partners do not have personal liability for losses.

Question 8

[R&R Landscaping, LLC] R&R Landscaping, LLC, is registered as a limited liability company in Illinois. R&R provides corporate landscape design and maintenance. During a large corporate project near Chicago, the driver of R&R's bulldozer lost control, went into oncoming traffic, and caused injuries to Viktor. Viktor wants to file a lawsuit and, after research, learns that R&R is owned by Rohan, an Illinois resident, and Roland, an Indiana resident, and that R&R filed articles of organization in Illinois and a certificate of authority in Indiana.
-In which state(s) can Viktor file suit against R&R?

Accepted Answer

A)  Only Illinois, because that is the state of incorporation. 
B)  Only Illinois, because that is the state of registration. 
C)  Only Illinois, because that is that state where the LLC's articles of organization are filed. 
D)  Either Indiana or Illinois, as long as the proper documentation was filed in those states. 
E)  Either Indiana or Illinois, which are the states in which the LLC's members reside. 
A)  Only Illinois, because that is the state of incorporation. 
B)  Only Illinois, because that is the state of registration. 
C)  Only Illinois, because that is that state where the LLC's articles of organization are filed. 
D)  Either Indiana or Illinois, as long as the proper documentation was filed in those states. 
E)  Either Indiana or Illinois, which are the states in which the LLC's members reside.

Question 9

What was the result in Meyer v. Christie, the case in the text involving whether an agreement to enter into a joint venture existed?

Accepted Answer

A)  That the evidence showed only an anticipatory agreement to form a joint venture in the future, not the actual formation of a joint venture. 
B)  That no joint venture existed because there was evidence contrary to the intent to form a joint venture. 
C)  That any alleged joint venture agreement was unenforceable under the statute of frauds because it was premised upon an unenforceable oral agreement to purchase and transfer land. 
D)  That while a joint venture existed, no damages were found. 
E)  That a joint venture existed with no prohibition against damages. 
A)  That the evidence showed only an anticipatory agreement to form a joint venture in the future, not the actual formation of a joint venture. 
B)  That no joint venture existed because there was evidence contrary to the intent to form a joint venture. 
C)  That any alleged joint venture agreement was unenforceable under the statute of frauds because it was premised upon an unenforceable oral agreement to purchase and transfer land. 
D)  That while a joint venture existed, no damages were found. 
E)  That a joint venture existed with no prohibition against damages.

Question 10

[Tutoring Concerns] André and Sasha want to go into business together and plan on offering a tutoring service to high school and college students. André proposes that they share control of the business and split profits equally and not bother with a written agreement. Sasha, however, is concerned about being able to pay their debts, since they will have to rent tutoring space, and purchase computers and supplies. She is also concerned about parents and students who may sue if their test scores do not improve. She tells André that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells André that they should form a corporation to shield their personal assets. André, however, tells Sasha that their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would result in a tax being imposed twice.
-Which of the following is true regarding André's assertion regarding taxes?

Accepted Answer

A)  André is correct insofar as the corporation would be required to pay taxes on its profits, and the shareholders would also be required to pay taxes on dividends. 
B)  André is incorrect because all businesses are taxed in the same manner. 
C)  André is incorrect but only because the law involving taxation of corporations does not apply until there are at least 10 shareholders. 
D)  André is incorrect but only because the law involving taxation of corporations does not apply until there are at least 75 shareholders. 
E)  André is correct but only because his proposal does not involve a writing and the filing of paperwork with the secretary of their state. 
A)  André is correct insofar as the corporation would be required to pay taxes on its profits, and the shareholders would also be required to pay taxes on dividends. 
B)  André is incorrect because all businesses are taxed in the same manner. 
C)  André is incorrect but only because the law involving taxation of corporations does not apply until there are at least 10 shareholders. 
D)  André is incorrect but only because the law involving taxation of corporations does not apply until there are at least 75 shareholders. 
E)  André is correct but only because his proposal does not involve a writing and the filing of paperwork with the secretary of their state.

Question 11

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-Which of the following statements is false regarding a sole proprietorship?

Accepted Answer

A)  A sole proprietorship requires few legal formalities. 
B)  A sole proprietor has complete control of the management of the business. 
C)  The sole proprietor keeps all the profits from the business. 
D)  Profits are taxed as the personal income of the sole proprietor. 
E)  A sole proprietor is not personally liable for obligations of the business. 
A)  A sole proprietorship requires few legal formalities. 
B)  A sole proprietor has complete control of the management of the business. 
C)  The sole proprietor keeps all the profits from the business. 
D)  Profits are taxed as the personal income of the sole proprietor. 
E)  A sole proprietor is not personally liable for obligations of the business.

Question 12

[Language-Science Kits] The president of Kool Science, Inc., which makes educational science kits for children, calls the president of Language Fun, Inc., which makes foreign language learning materials for children. They discuss production of three educational toys which teach both science and foreign language to children. They agree that Kool will work with Language to create and market the three toys, and that they will use Kool's manufacturer to produce the product.
-What type of business organization is best suited for the situation of Kool Science and Language Fun?

Accepted Answer

A)  Cooperative. 
B)  Joint Venture. 
C)  Business Trust 
D)  General partnership 
E)  Corporation 
A)  Cooperative. 
B)  Joint Venture. 
C)  Business Trust 
D)  General partnership 
E)  Corporation

Question 13

Which of the following statements is true regarding joint ventures?

Accepted Answer

A)  Participants in a joint venture usually share profits equally, but share losses based on the percentage of contribution. 
B)  Participants in a joint venture usually share losses equally, but share profits based on the percentage of contribution. 
C)  The joint venture is not automatically terminated when one of the members dies. 
D)  A joint venture requires the filing of a formal agreement with the state. 
E)  Courts frequently apply sole proprietorship law to joint ventures. 
A)  Participants in a joint venture usually share profits equally, but share losses based on the percentage of contribution. 
B)  Participants in a joint venture usually share losses equally, but share profits based on the percentage of contribution. 
C)  The joint venture is not automatically terminated when one of the members dies. 
D)  A joint venture requires the filing of a formal agreement with the state. 
E)  Courts frequently apply sole proprietorship law to joint ventures.

Question 14

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-In the absence of an express agreement, which act governs partnerships in most states?

Accepted Answer

A)  The Joint Partnership Act 
B)  The Uniform Joint Agreement Act 
C)  The Uniform Partnership Act 
D)  The Associated Partnership Act 
E)  The Joint Agreement Act 
A)  The Joint Partnership Act 
B)  The Uniform Joint Agreement Act 
C)  The Uniform Partnership Act 
D)  The Associated Partnership Act 
E)  The Joint Agreement Act

Question 15

Which of the following establishes how a franchise agreement will be terminated?

Accepted Answer

A)  The franchise agreement 
B)  The Franchise Termination Act 
C)  The Franchisor-Franchisee Protection Act 
D)  The Franchisee Protection Act 
E)  The Franchise Wrap-Up Act 
A)  The franchise agreement 
B)  The Franchise Termination Act 
C)  The Franchisor-Franchisee Protection Act 
D)  The Franchisee Protection Act 
E)  The Franchise Wrap-Up Act

Question 16

Elias and his rich friends want to purchase a professional baseball team and need to raise a large amount of money in a short time. Which of the following forms of business organization is often used in Elias' situation?

Accepted Answer

A)  Cooperative. 
B)  Syndicate. 
C)  Sole proprietorship. 
D)  Joint stock company. 
E)  Limited Liability Partnership. 
A)  Cooperative. 
B)  Syndicate. 
C)  Sole proprietorship. 
D)  Joint stock company. 
E)  Limited Liability Partnership.

Question 17

Kendra and Amelia operate an art gallery, owned as a partnership. Kendra disappeared. A few days later, Amelia learned that Kendra embezzled $75,000 of government grant money through the company. Is Amelia responsible for the $75,000?

Accepted Answer

A)  No, because the embezzlement was done by Kendra. 
B)  Yes, but only if Amelia was aware of the embezzlement. 
C)  Yes, because Amelia and Kendra are partners. 
D)  No, because partners are not responsible for the wrongful acts of other partners. 
E)  Yes, but only to the extent of Amelia's investment into the partnership. 
A)  No, because the embezzlement was done by Kendra. 
B)  Yes, but only if Amelia was aware of the embezzlement. 
C)  Yes, because Amelia and Kendra are partners. 
D)  No, because partners are not responsible for the wrongful acts of other partners. 
E)  Yes, but only to the extent of Amelia's investment into the partnership.

Question 18

Trampoline Park, Inc. is licensed to sell the new Tramp-o-matic trampoline that is manufactured by SMPB Manufacturing. What type of arrangement is this?

Accepted Answer

A)  distributorship 
B)  manufacturing arrangement 
C)  chain-style business operation 
D)  franchise 
E)  operational surplus agreement 
A)  distributorship 
B)  manufacturing arrangement 
C)  chain-style business operation 
D)  franchise 
E)  operational surplus agreement

Question 19

DirtyBike Manufacturer manufactures dirt bikes in Cleveland, Ohio. DirtyBike gives an exclusive license to Paul's Dirt Bikes in Oklahoma City, Oklahoma to sell the bikes. This is an example of:

Accepted Answer

A)  a franchise 
B)  a distributorship 
C)  a chain style business 
D)  manufacturing arrangement 
E)  exclusive manufacturing arrangement 
A)  a franchise 
B)  a distributorship 
C)  a chain style business 
D)  manufacturing arrangement 
E)  exclusive manufacturing arrangement

Question 20

A(n) ________ is an organization formed by individuals who usually pool their resources to gain an advantage in the market.

Accepted Answer

A)  incorporated partnership 
B)  cooperative 
C)  limited liability partnership 
D)  syndicates 
E)  market specialist group 
A)  incorporated partnership 
B)  cooperative 
C)  limited liability partnership 
D)  syndicates 
E)  market specialist group

Exam 35: Forms of Business Organization

Which of the following statements is correct about the requirements of an LLP?

________ are responsible for running the day-to-day business of a corporation.

What is the term used for the process under which an LLC must register in every additional state in which it intends to operate?

What was the result in Meyer v. Christie, the case in the text involving whether an agreement to enter into a joint venture existed?

Which of the following statements is true regarding joint ventures?

Which of the following establishes how a franchise agreement will be terminated?

Elias and his rich friends want to purchase a professional baseball team and need to raise a large amount of money in a short time. Which of the following forms of business organization is often used in Elias' situation?

Kendra and Amelia operate an art gallery, owned as a partnership. Kendra disappeared. A few days later, Amelia learned that Kendra embezzled $75,000 of government grant money through the company. Is Amelia responsible for the $75,000?

Trampoline Park, Inc. is licensed to sell the new Tramp-o-matic trampoline that is manufactured by SMPB Manufacturing. What type of arrangement is this?

DirtyBike Manufacturer manufactures dirt bikes in Cleveland, Ohio. DirtyBike gives an exclusive license to Paul's Dirt Bikes in Oklahoma City, Oklahoma to sell the bikes. This is an example of:

A(n) ________ is an organization formed by individuals who usually pool their resources to gain an advantage in the market.

An Introduction to Dynamic Business Law

Business Ethics

The Us Legal System

Alternative Dispute Resolution

Constitutional Principles

International and Comparative Law

Crime and the Business Community

Tort Law

Negligence and Strict Liability

Product Liability

Liability of Accountants and Other Professionals

Intellectual Property

Introduction to Contracts

Agreement

Consideration

Capacity and Legality

Legal Assent

Contracts in Writing

Third-Party Rights to Contracts

Discharge and Remedies

Introduction to Sales and Lease Contracts

Title, Risk of Loss, and Insurable Interest

Performance and Obligations Under Sales and Leases

Remedies for Breach of Sales and Lease Contracts

Warranties

Negotiable Instruments: Negotiability and Transferability

Negotiation, Holder in Due Course, and Defenses

Liability, Defenses, and Discharge

Checks and Electronic Fund Transfers

Secured Transactions

Other Creditors Remedies and Suretyship

Bankruptcy and Reorganization

Agency Formation and Duties

Liability to Third Parties and Termination

Partnerships: Nature, Formation, and Operation

Partnerships: Termination and Limited Partnerships

Corporations: Formation and Financing

Corporations: Directors, Officers, and Shareholders

Corporations: Mergers, Consolidations, Terminations

Corporations: Securities and Investor Protection

Employment and Labor Law

Employment Discrimination

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

The Nature of Property, Personal Property, and Bailments

Real Property

Landlord-Tenant Law

Insurance Law

Wills and Trusts

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