Question 1

The case of Apcar v.Gaus illustrates that it is essential to comply with all the technicalities of a limited liability partnership statute.

Accepted Answer

A) True 
 B)False  True

Question 2

Andy wants to start his own business.He has decided to rent space in a "strip mall" and open a pet shop.Additionally,he will provide dog grooming services.He figures he can do almost everything himself,though he will need to hire a part-time employee on an "as needed" basis.His friend,Lacy,has agreed to work when needed.
Andy is considering operating his business as a sole proprietorship.What are the primary legal advantages and disadvantages to this form of business ownership for Andy's pet shop?

Accepted Answer

There are many advantages to operating the pet shop as a sole proprietorship.There are no formal procedures required to create a this type of business ownership.Though he may be required by local or state law to obtain a particular license,a retail sales tax number,etc.,such requirements would exist no matter what form of business ownership he selected.A proprietorship is not regarded as a separate tax entity,so Andy can report his earnings and expenses on his individual income tax return (using Schedule C).Thus,he is not subject to double taxation as is the corporate business.Additionally,as a small business,he is exempted from a great deal of statutory law that applies to larger businesses.For example,he is not subject to Title VII of the Civil Rights Act which only applies to companies with 15 or more employees,nor is he subject to the Family and Medical Leave Act which applies to companies with 50 or more employees.Certainly,Andy faces some serious disadvantages as a sole proprietor.He is personally liable for any debts or claims made against the company or his employees.As a proprietor,he will have a difficult time raising capital,since the money can only come from savings or loans.If the business is a failure,he may wind up losing all his savings and have serious debt obligations that could drive him into bankruptcy.Also,since he is sole proprietor,he has no one else to share the potential liability in the event of a claim not covered by insurance.

Question 3

Which of the following would not be personally liable for the debts of the business?

Accepted Answer

A)  A sole proprietor. 
B)  A partner in a general partnership. 
C)  A general partner in a limited liability limited partnership. 
D)  A general partner in a limited partnership. 
A)  A sole proprietor. 
B)  A partner in a general partnership. 
C)  A general partner in a limited liability limited partnership. 
D)  A general partner in a limited partnership. C

Question 4

In order to obtain limited liability,Tom and Doris formed an LLC to operate their catering business.They sometimes deposited the proceeds from catering jobs into their personal checking accounts and if they needed to pay personal bills and were short of funds,they used the business account.If creditors of the business cannot get payment for their invoices,is there anything a court can do to help the creditors?

Accepted Answer

It is common under corporate law for sha

Question 5

The form of business ownership that is the most easily transferable is the:

Accepted Answer

A)  general partnership. 
B)  corporation. 
C)  limited liability company. 
D)  limited partnership. 
A)  general partnership. 
B)  corporation. 
C)  limited liability company. 
D)  limited partnership.

Question 6

Alan,a dentist,and his wife Martha,an attorney,can protect their personal assets with limited liability from their business dealings by creating and operating a professional corporation together.

Accepted Answer

A) True 
 B)False

Question 7

The business form that is taxed as a partnership and gives all owners limited liability,is:

Accepted Answer

A)  a close corporation. 
B)  a limited partnership. 
C)  a limited liability company. 
D)  a general partnership. 
A)  a close corporation. 
B)  a limited partnership. 
C)  a limited liability company. 
D)  a general partnership.

Question 8

The importance of a Subchapter S corporation is:

Accepted Answer

A)  its organizational structure. 
B)  its treatment of shareholders for income taxation purposes. 
C)  its requirement of restrictive transfer rights of the shares. 
D)  its small cost of formation. 
A)  its organizational structure. 
B)  its treatment of shareholders for income taxation purposes. 
C)  its requirement of restrictive transfer rights of the shares. 
D)  its small cost of formation.

Question 9

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

Accepted Answer

A)  Limited liability company. 
B)  Business trust. 
C)  Close corporation. 
D)  Franchise. 
A)  Limited liability company. 
B)  Business trust. 
C)  Close corporation. 
D)  Franchise.

Question 10

Briefly discuss the limitations on a corporation electing Subchapter "S" status.

Accepted Answer

For a corporation to elect Subchapter "S

Question 11

What federal agency requires that the seller of a franchise give the potential buyer an offering circular and audited financial statements?

Accepted Answer

A)  The Securities and Exchange Commission (SE
C) . 
B)  The Interstate Commerce Commission (IC
C) . 
C)  The Federal Trade Commission (FT
C) . 
D)  The Franchise Sales Commission (FS
C) . 
A)  The Securities and Exchange Commission (SE
C) . 
B)  The Interstate Commerce Commission (IC
C) . 
C)  The Federal Trade Commission (FT
C) . 
D)  The Franchise Sales Commission (FS
C) .

Question 12

Corporations have perpetual existence.

Accepted Answer

A) True 
 B)False

Question 13

The Federal Trade Commission requires franchisors to:

Accepted Answer

A)  give prospective franchisees an offering circular at least 14 business days prior to the signing of a contract or payment of any money. 
B)  disclose the exact amount of the initial investment required. 
C)  disclose any litigation the company has ever been involved in 
D)  disclose how many franchisees have gone out of business in the prior five years. 
A)  give prospective franchisees an offering circular at least 14 business days prior to the signing of a contract or payment of any money. 
B)  disclose the exact amount of the initial investment required. 
C)  disclose any litigation the company has ever been involved in 
D)  disclose how many franchisees have gone out of business in the prior five years.

Question 14

All of the following are characteristics of a closely held corporation EXCEPT:

Accepted Answer

A)  the shares are publicly traded. 
B)  the corporation can typically operate without a board of directors. 
C)  the shareholders usually restrict share transfer. 
D)  minority shareholders are provided more protection than in regular corporations. 
A)  the shares are publicly traded. 
B)  the corporation can typically operate without a board of directors. 
C)  the shareholders usually restrict share transfer. 
D)  minority shareholders are provided more protection than in regular corporations.

Question 15

Trudy wishes to buy a national franchise.What information is the seller legally required to provide before she buys the franchise?

Accepted Answer

The Federal Trade Commission requires th

Question 16

The corporate form of business:

Accepted Answer

A)  was first known and used by the Greeks and then spread through the Romans to England. 
B)  was not known until about 1737 when Sir Francis LaRue developed the concept. 
C)  was first allowed in the State of New York around 1811 and is considered to be an American creation. 
D)  None of the above. 
A)  was first known and used by the Greeks and then spread through the Romans to England. 
B)  was not known until about 1737 when Sir Francis LaRue developed the concept. 
C)  was first allowed in the State of New York around 1811 and is considered to be an American creation. 
D)  None of the above.

Question 17

Limited liability is a major advantage of a partnership as compared to a corporation.

Accepted Answer

A) True 
 B)False

Question 18

A partnership is a taxable entity,separate from the partners.

Accepted Answer

A) True 
 B)False

Question 19

Harold and Zack have pooled their money together to buy real estate but have filed no formal papers to form a business.Harold,a lawyer,handles all the legal matters and Zack,a real estate broker,finds buyers for the property they have subdivided.Harold and Zack are engaged in a:

Accepted Answer

A)  partnership. 
B)  close corporation. 
C)  limited liability company. 
D)  business trust. 
A)  partnership. 
B)  close corporation. 
C)  limited liability company. 
D)  business trust.

Question 20

Generally,a joint venture is a partnership created for one limited purpose.

Accepted Answer

A) True 
 B)False

Exam 31: Starting A Business

The case of Apcar v.Gaus illustrates that it is essential to comply with all the technicalities of a limited liability partnership statute.

Which of the following would not be personally liable for the debts of the business?

The form of business ownership that is the most easily transferable is the:

Alan,a dentist,and his wife Martha,an attorney,can protect their personal assets with limited liability from their business dealings by creating and operating a professional corporation together.

The business form that is taxed as a partnership and gives all owners limited liability,is:

The importance of a Subchapter S corporation is:

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

Briefly discuss the limitations on a corporation electing Subchapter "S" status.

What federal agency requires that the seller of a franchise give the potential buyer an offering circular and audited financial statements?

Corporations have perpetual existence.

The Federal Trade Commission requires franchisors to:

All of the following are characteristics of a closely held corporation EXCEPT:

Trudy wishes to buy a national franchise.What information is the seller legally required to provide before she buys the franchise?

The corporate form of business:

Limited liability is a major advantage of a partnership as compared to a corporation.

A partnership is a taxable entity,separate from the partners.

Harold and Zack have pooled their money together to buy real estate but have filed no formal papers to form a business.Harold,a lawyer,handles all the legal matters and Zack,a real estate broker,finds buyers for the property they have subdivided.Harold and Zack are engaged in a:

Generally,a joint venture is a partnership created for one limited purpose.

Introduction To Law

Business Ethics And Social Responsibility

Dispute Resolution

Common Law,Statutory Law,And Administrative Law

Constitutional Law

Intentional Torts And Business Torts

Negligence And Strict Liability

Crime

International Law

Introduction To Contracts

Agreement

Consideration

Legality

Capacity And Consent

Written Contracts

Third Parties

Performance And Discharge

Remedies

Practical Contracts

Introduction To Sales

Ownership And Risk

Warranties And Product Liability

Performance And Remedies

Secured Transactions

Creating A Negotiable Instrument

Liability For Negotiable Instruments

Accountants' Liability

Agency Law

Employment Law

Labor Law

Partnerships

Life And Death Of A Corporation

Corporate Management

Shareholders

Securities Regulation

Bankruptcy

Antitrust

Consumer Law

Environmental Law

Cyberlaw

Intellectual Property

Real Property And Tenant-landlord Law

Personal Property And Bailment

Planning For The Future: Wills,Trusts,And Insurance

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