Question 1

All of the following statements about management of a sole proprietorship is correct except

Accepted Answer

A)  The sole proprietor has sole discretion to bind the business. 
B)  The sole proprietor has no oversight committees. 
C)  The sole proprietor has a fiduciary duty to the employees. 
D)  The sole proprietor may change to another form of entity at the sole proprietor's will. 
A)  The sole proprietor has sole discretion to bind the business. 
B)  The sole proprietor has no oversight committees. 
C)  The sole proprietor has a fiduciary duty to the employees. 
D)  The sole proprietor may change to another form of entity at the sole proprietor's will. C

Question 2

A franchisor sells the right to operate the business and use the business's trade secrets to a(n)

Accepted Answer

A)  Franchisee 
B)  Successor 
C)  Principal 
D)  Member 
A)  Franchisee 
B)  Successor 
C)  Principal 
D)  Member A

Question 3

Gwendolyn Melvin wishes to start a children's sports store called, "Just Let 'Em Play!" as a sole proprietor. What form must she file so that she can use another name than her own?

Accepted Answer

A)  UCC-1 statement 
B)  Disclosure statement 
C)  DBA Certificate 
D)  Name Certificate 
A)  UCC-1 statement 
B)  Disclosure statement 
C)  DBA Certificate 
D)  Name Certificate C

Question 4

Business owners are also known as __________.

Accepted Answer

A)  Principals 
B)  Executives 
C)  Officers 
D)  Fiduciaries 
A)  Principals 
B)  Executives 
C)  Officers 
D)  Fiduciaries

Question 5

A franchisor assists the franchisee with all the following except

Accepted Answer

A)  Financing 
B)  Training 
C)  Supplies 
D)  Filing the articles of incorporation 
A)  Financing 
B)  Training 
C)  Supplies 
D)  Filing the articles of incorporation

Question 6

Mike owns Swibel Trucking, a successful trucking business, as a sole proprietor. After many successful years in business, one night he decides he wants to change his business to a partnership so that he can share the burden and devote more time to pursue his hobby of duck watching full time. What steps must he take to change the type of business entity to a partnership?

Accepted Answer

A)  None as a sole proprietor can convert to another business form at the proprietor's will. 
B)  He must seek approval by the board. 
C)  He must hire an oversight committee to ensure that the sole proprietorship is effectively shut down. 
D)  He must dissolve the sole proprietorship, notify clients and creditors and apply for a partnership authorization. 
A)  None as a sole proprietor can convert to another business form at the proprietor's will. 
B)  He must seek approval by the board. 
C)  He must hire an oversight committee to ensure that the sole proprietorship is effectively shut down. 
D)  He must dissolve the sole proprietorship, notify clients and creditors and apply for a partnership authorization.

Question 7

Jed wants to pass his sole proprietorship on to his son Luke in his will. Can her do this?

Accepted Answer

A)  No. 
B)  Yes. 
C)  No unless the court can prove the Luke is in the best position to run the business. 
D)  Yes if the court finds that no other heirs exist. 
A)  No. 
B)  Yes. 
C)  No unless the court can prove the Luke is in the best position to run the business. 
D)  Yes if the court finds that no other heirs exist.

Question 8

Which statement below is correct about a sole proprietorship?

Accepted Answer

A)  It is created by filing bylaws. 
B)  It has low start-up costs and minimal filing. 
C)  It can have multiple owners. 
D)  It faces double taxation. 
A)  It is created by filing bylaws. 
B)  It has low start-up costs and minimal filing. 
C)  It can have multiple owners. 
D)  It faces double taxation.

Question 9

Which of the following is true about a sole proprietorship?

Accepted Answer

A)  It is subject to corporate income tax. 
B)  The owner must file a tax return on behalf of the business. 
C)  The owner reports income and expenses on the owner's own tax return. 
D)  Sole proprietorships face double taxation. 
A)  It is subject to corporate income tax. 
B)  The owner must file a tax return on behalf of the business. 
C)  The owner reports income and expenses on the owner's own tax return. 
D)  Sole proprietorships face double taxation.

Question 10

A chief drawback to a sole proprietorship as a form of business is because of the complete lack of protection of the Principal's personal assets.

Accepted Answer

A) True 
 B)False

Question 11

Shawna, a sole proprietor, dies suddenly. What will happen to the business?

Accepted Answer

A)  The sole proprietorship will transfer to an heir. 
B)  The sole proprietorship will terminate. 
C)  The sole proprietorship will operate posthumously until a court order decrees it terminated. 
D)  The sole proprietorship will pass to the highest bidder. 
A)  The sole proprietorship will transfer to an heir. 
B)  The sole proprietorship will terminate. 
C)  The sole proprietorship will operate posthumously until a court order decrees it terminated. 
D)  The sole proprietorship will pass to the highest bidder.

Question 12

The doctrine that allows a creditor to seek recovery from the purchaser of assets even when the purchaser did not expressly assume such liabilities as part of the purchase is called

Accepted Answer

A)  Joint and several liability 
B)  Unlimited liability 
C)  Successor liability 
D)  Contributory liability 
A)  Joint and several liability 
B)  Unlimited liability 
C)  Successor liability 
D)  Contributory liability

Question 13

Explain the basic elements of a franchise agreement that binds the parties in the franchise.

Accepted Answer

A franchise agreement covers the length

Question 14

Raul wants a simple method to start-up a small marketing company. The marketing firm has relatively low revenue and expenses. Which type of business entity would you suggest?

Accepted Answer

A)  Partnership 
B)  Corporation 
C)  Franchise 
D)  Sole proprietorship 
A)  Partnership 
B)  Corporation 
C)  Franchise 
D)  Sole proprietorship

Question 15

A sole proprietor is liable

Accepted Answer

A)  For all the debts of the business. 
B)  Only up to half of the debt of the business. 
C)  Not liable for the debt of the business. 
D)  For what the courts determine as fair and just repayment of the debts of the business. 
A)  For all the debts of the business. 
B)  Only up to half of the debt of the business. 
C)  Not liable for the debt of the business. 
D)  For what the courts determine as fair and just repayment of the debts of the business.

Question 16

Discuss the factors a person must take into consideration and evaluate when deciding to start a sole proprietorship.

Accepted Answer

Students' answers will vary, but a compl

Question 17

All of the following are methods that a sole proprietorship can raise money except

Accepted Answer

A)  Sell ownership in the business. 
B)  Private loans. 
C)  Commercial loans. 
D)  Line of credit. 
A)  Sell ownership in the business. 
B)  Private loans. 
C)  Commercial loans. 
D)  Line of credit.

Question 18

Explain the options available to a sole proprietorship to capitalize and explain if capitalization of a sole proprietorship is an advantage or disadvantage.

Accepted Answer

A sole proprietorship has limited option

Question 19

A franchise agreement is the exclusive governing agreement for the franchise.

Accepted Answer

A) True 
 B)False

Question 20

In Lewis v. Moore, the court ruled

Accepted Answer

A)  Since Moore was a sole-proprietorship she could not close down the business without a majority vote of the employees. 
B)  Moore could not close down the business if it would be detrimental the employees. 
C)  Since Moore was a sole proprietor she was free to dissolve it at any time. 
D)  Moore needed to have shareholder approval before dissolving the business. 
A)  Since Moore was a sole-proprietorship she could not close down the business without a majority vote of the employees. 
B)  Moore could not close down the business if it would be detrimental the employees. 
C)  Since Moore was a sole proprietor she was free to dissolve it at any time. 
D)  Moore needed to have shareholder approval before dissolving the business.

Exam 27: Choice of Business Entity and Sole Proprietorships

All of the following statements about management of a sole proprietorship is correct except

A franchisor sells the right to operate the business and use the business's trade secrets to a(n)

Gwendolyn Melvin wishes to start a children's sports store called, "Just Let 'Em Play!" as a sole proprietor. What form must she file so that she can use another name than her own?

Business owners are also known as __________.

A franchisor assists the franchisee with all the following except

Jed wants to pass his sole proprietorship on to his son Luke in his will. Can her do this?

Which statement below is correct about a sole proprietorship?

Which of the following is true about a sole proprietorship?

A chief drawback to a sole proprietorship as a form of business is because of the complete lack of protection of the Principal's personal assets.

Shawna, a sole proprietor, dies suddenly. What will happen to the business?

The doctrine that allows a creditor to seek recovery from the purchaser of assets even when the purchaser did not expressly assume such liabilities as part of the purchase is called

Explain the basic elements of a franchise agreement that binds the parties in the franchise.

Raul wants a simple method to start-up a small marketing company. The marketing firm has relatively low revenue and expenses. Which type of business entity would you suggest?

A sole proprietor is liable

Discuss the factors a person must take into consideration and evaluate when deciding to start a sole proprietorship.

All of the following are methods that a sole proprietorship can raise money except

Explain the options available to a sole proprietorship to capitalize and explain if capitalization of a sole proprietorship is an advantage or disadvantage.

A franchise agreement is the exclusive governing agreement for the franchise.

In Lewis v. Moore, the court ruled

Legal Foundations and Thinking Strategically

Business, Societal, and Ethical Contexts of Law

Business and the Constitution

The American Judicial System, Jurisdiction, and Venue

Resolving Disputes: Litigation and Alternative Dispute Resolution

Contracts: Overview, Definition, Categories, and Source of Law

Mutual Assent: Agreement and Consideration

Capacity and Legality

Enforceability

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Contracts for the Sale of Goods: Overview of Article 2

Sales Contracts: Agreement, Consideration, and the Statute of Frauds

Title, Allocation of Risk, and Insurable Interest

Performance and Cure in Sales Contracts

Breach and Remedies in a Sales Transaction

UCC Article 2A: Lease Contracts

Sales Warranties

Definition, Creation, and Categories of Negotiable Instruments

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Regulation of Issuance: The Securities Act of 1933

Regulation of Trading: The Securities Exchange Act of 1934

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