Question 1

Limited liability means that a shareholder can never be held liable for the obligations of the corporation.

Accepted Answer

A) True 
 B)False

Question 2

"In small businesses with few shareholders,the corporate law rules that require a corporation to have shareholders who elect directors and who,in turn,appoint officers are highly artificial and unnecessary." Do you agree or disagree with this statement? Explain why.

Accepted Answer

It is tempting to dismiss the distinct r

Question 3

A limited liability partnership (LLP)is a variation on the partnership form of business.Which of the following is false?

Accepted Answer

A) An LLP has the characteristics of a general partnership,but with specific limitations on the liability of the partners. 
B) The limitation on liability of an LLP varies depending on the province. 
C) An LLP provides special tax treatment that is not available in a limited partnership or a general partnership. 
D) An LLP is limited to certain practicing professions. 
E) An LLP must include the words Limited Liability Partnership or its abbreviation,LLP. 
A) An LLP has the characteristics of a general partnership,but with specific limitations on the liability of the partners. 
B) The limitation on liability of an LLP varies depending on the province. 
C) An LLP provides special tax treatment that is not available in a limited partnership or a general partnership. 
D) An LLP is limited to certain practicing professions. 
E) An LLP must include the words Limited Liability Partnership or its abbreviation,LLP.

Question 4

Artemis is a university professor carrying on an Internet-based auction business that is losing money.He is concerned about liability and wants to transfer the business to a corporation he will incorporate.He will be the sole shareholder,director,and officer.He thinks that his business will continue to lose money for the next couple of years before it turns profitable.He is living on his professor's income and plans to continue to deduct the business losses against that income.Can he do this?

Accepted Answer

No,Artemis cannot deduct the losses agai

Question 5

If Ted and Mary were entering into a business relationship and did not want to be found to be partners,it would be sufficient to include a clause in their agreement to that effect.

Accepted Answer

A) True 
 B)False

Question 6

Owen is a prominent accountant in his community.He is retiring from a partnership he has been in with several other accountants.He directs the partners to get rid of all letterhead with his name on it.Inadvertently,some of the firm's old letterhead is retained.The firm uses one of these pieces of old letterhead showing Owen as a partner to order several computers from a local business that the partnership had not dealt with previously.The business decides to sell the computers to the firm on credit.Owen is definitely liable as a partner to pay for the computers.

Accepted Answer

A) True 
 B)False

Question 7

The value of common shareholders' shares in a non-publicly traded company,is based on the residual value of the corporation,which is inherently difficult to assess.Consequently,the value of common shares is generally somewhat uncertain.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is TRUE?

Accepted Answer

A) Both limited partnerships and general partnerships come into existence as soon as two or more people start carrying on business with a view to a profit. 
B) Both limited partners and general partners have unlimited liability for the obligations of the partnership. 
C) All partners in both limited partnerships and general partnerships are entitled to give advice regarding management. 
D) In a limited partnership,the liability of all partners for the obligations of the partnership is limited. 
E) A limited partner can control the general partner without losing their limited liability as a limited partner. 
A) Both limited partnerships and general partnerships come into existence as soon as two or more people start carrying on business with a view to a profit. 
B) Both limited partners and general partners have unlimited liability for the obligations of the partnership. 
C) All partners in both limited partnerships and general partnerships are entitled to give advice regarding management. 
D) In a limited partnership,the liability of all partners for the obligations of the partnership is limited. 
E) A limited partner can control the general partner without losing their limited liability as a limited partner.

Question 9

Which statement best describes the circumstances in which a court will disregard the separate existence of a corporation and impose liability on a shareholder for obligations owed by the corporation to a creditor? A court will impose liability on a shareholder

Accepted Answer

A) when the corporation has breached its contract with the creditor. 
B) when the creditor is an individual who really needs the money,and imposing liability on the shareholder is the only way to ensure that the individual obtains relief. 
C) when a business has been incorporated to do something or facilitate the doing of something that is illegal or improper,such as fraud.The business is being used as a cloak for a fraudulent or illegal purpose. 
D) when a corporation does not have sufficient assets to meet its reasonably foreseeable liabilities resulting from carrying on its business. 
E) When the court decides in its unfettered discretion that it would be just,fair,and equitable to all parties to do so. 
A) when the corporation has breached its contract with the creditor. 
B) when the creditor is an individual who really needs the money,and imposing liability on the shareholder is the only way to ensure that the individual obtains relief. 
C) when a business has been incorporated to do something or facilitate the doing of something that is illegal or improper,such as fraud.The business is being used as a cloak for a fraudulent or illegal purpose. 
D) when a corporation does not have sufficient assets to meet its reasonably foreseeable liabilities resulting from carrying on its business. 
E) When the court decides in its unfettered discretion that it would be just,fair,and equitable to all parties to do so.

Question 10

Ella is a partner in a law firm operating as a general partnership.One of the firm's clients deposited $1 million in the firm account to be used by Ella to complete a real estate purchase.Ella negligently bungled the transaction with the result that the client lost the $1 million.Which of the following is TRUE?

Accepted Answer

A) The partnership is liable for Ella's negligence including each partner jointly and severally. 
B) The partnership is not liable for Ella's negligence because they did not authorize Ella to commit negligence. 
C) The partnership would not be liable for Ella's negligence if it was a limited partnership. 
D) The partnership is not liable for Ella's negligence because Ella breached her fiduciary duty to act in the best interests of the partnership. 
E) The partnership is not liable for Ella's negligence because negligence may be a criminal act as well as a tort. 
A) The partnership is liable for Ella's negligence including each partner jointly and severally. 
B) The partnership is not liable for Ella's negligence because they did not authorize Ella to commit negligence. 
C) The partnership would not be liable for Ella's negligence if it was a limited partnership. 
D) The partnership is not liable for Ella's negligence because Ella breached her fiduciary duty to act in the best interests of the partnership. 
E) The partnership is not liable for Ella's negligence because negligence may be a criminal act as well as a tort.

Question 11

Norman and Velma are partners carrying on a trucking business.They share a single truck.Which of the following is TRUE?

Accepted Answer

A) Norman will never be liable for any negligence by Velma in driving the truck. 
B) Norman will always be liable for Velma's negligence in driving the truck. 
C) Norman will be liable for Velma's negligence in driving the truck only if it is committed in the course of her employment. 
D) Norman will be liable for Velma's negligence in driving the truck if the negligence is in the course of the partnership business. 
E) Norman will be liable for Velma's negligence in driving the truck only if he was aware that she was using it. 
A) Norman will never be liable for any negligence by Velma in driving the truck. 
B) Norman will always be liable for Velma's negligence in driving the truck. 
C) Norman will be liable for Velma's negligence in driving the truck only if it is committed in the course of her employment. 
D) Norman will be liable for Velma's negligence in driving the truck if the negligence is in the course of the partnership business. 
E) Norman will be liable for Velma's negligence in driving the truck only if he was aware that she was using it.

Question 12

Ten years ago,Tad and Tori created a partnership.At that time,Tad contributed $400 000 in property and Tori contributed $600 000 in cash as capital for the partnership.Two years later,Tori provided $300 000 to the partnership as an interest-free loan.That loan has not yet been repaid.During the entire life of the partnership,Tori performed approximately 60 percent of the partnership's work,while Tad tended to devote much of his time to various charitable causes that were unrelated to the partnership.The partnership has now been dissolved.Sale of the partnership assets produced a fund of $1.2 million.It is necessary to spend $200 000 on debts that the partnership still owes to various creditors.Assuming that the parties have not replaced or modified the default rules applicable to their partnership,

Accepted Answer

A) Tori will receive an amount equal to her original contribution and repayment of her loan. 
B) Tori will receive an amount that reflects the fact that she performed 60 percent of the partnership's work. 
C) Tad and Tori will receive the same amount. 
D) A judge will consider all of the circumstances and then exercise a discretion to determine how much each party is entitled to receive. 
E) Tori will receive $800 000. 
A) Tori will receive an amount equal to her original contribution and repayment of her loan. 
B) Tori will receive an amount that reflects the fact that she performed 60 percent of the partnership's work. 
C) Tad and Tori will receive the same amount. 
D) A judge will consider all of the circumstances and then exercise a discretion to determine how much each party is entitled to receive. 
E) Tori will receive $800 000.

Question 13

Which of the following would be a good reason to choose to make an equity investment in a corporation rather than lending money to a corporation?

Accepted Answer

A) The return paid on an equity investment is more secure than the return on debt. 
B) The holder of an equity investment always receives a higher return than a debt holder. 
C) The holder of equity has the same legal entitlement to receive dividends as a debt holder has to receive interest. 
D) The return on equity is riskier than debt but is not fixed and may be higher. 
E) It is easier to assess the price of an equity investment. 
A) The return paid on an equity investment is more secure than the return on debt. 
B) The holder of an equity investment always receives a higher return than a debt holder. 
C) The holder of equity has the same legal entitlement to receive dividends as a debt holder has to receive interest. 
D) The return on equity is riskier than debt but is not fixed and may be higher. 
E) It is easier to assess the price of an equity investment.

Question 14

Rachi is a wealthy business person with substantial personal assets.One of the businesses she carries on is a health club.She has carried on this business as a sole proprietorship,but she has decided to incorporate a corporation under the Canada Business Corporations Act to carry it on.She will be the sole shareholder and director.If you were a client of the health club,which of the following would be a legitimate concern based on the change in the legal status of the health club business?

Accepted Answer

A) Management personnel will change. 
B) Standards for cleanliness and service quality will decline. 
C) Prices for annual memberships will go up. 
D) The risk that any claim you might have against the business will not be paid will likely increase. 
E) It will be no use to you to complain to Rachi about any problems you have with the operation of the health club. 
A) Management personnel will change. 
B) Standards for cleanliness and service quality will decline. 
C) Prices for annual memberships will go up. 
D) The risk that any claim you might have against the business will not be paid will likely increase. 
E) It will be no use to you to complain to Rachi about any problems you have with the operation of the health club.

Question 15

Which of the following is FALSE?

Accepted Answer

A) A sole proprietor is exclusively responsible for performing all contracts entered into in connection with the business. 
B) Sole proprietors must include any income or loss from the sole proprietorship business in their income for income tax purposes. 
C) A sole proprietor is vicariously liable for torts of employees in the course of the sole proprietorship business. 
D) A sole proprietor cannot be an employee of the sole proprietorship business. 
E) A sole proprietorship is a cautious method of forming of business as the proprietor has no legal liability for tort of contract and the proprietorship business is a separate legal entity from the proprietor. 
A) A sole proprietor is exclusively responsible for performing all contracts entered into in connection with the business. 
B) Sole proprietors must include any income or loss from the sole proprietorship business in their income for income tax purposes. 
C) A sole proprietor is vicariously liable for torts of employees in the course of the sole proprietorship business. 
D) A sole proprietor cannot be an employee of the sole proprietorship business. 
E) A sole proprietorship is a cautious method of forming of business as the proprietor has no legal liability for tort of contract and the proprietorship business is a separate legal entity from the proprietor.

Question 16

Terrence has invested $10 000 to become a limited partner in Bede Limited Partnership.Bede Management Co is the general partner in Bede Limited Partnership.Ogruk is the sole shareholder of Bede Management.Which of the following is TRUE?

Accepted Answer

A) Terrence can never be liable for more than the $10 000 he has invested. 
B) Bede Limited Partnership can never be liable for more than the total amount invested by all limited partners. 
C) Terrence is prohibited from taking control of Bede Limited Partnership. 
D) Terrence is prohibited from providing management advice to Bede Limited Partnership. 
E) Terrence could work for Bede Limited Partnership as the office manager of Bede Management Co and he might not lose his limited liability,but he must be cautious concerning the control he exercises over the limited partner's business. 
A) Terrence can never be liable for more than the $10 000 he has invested. 
B) Bede Limited Partnership can never be liable for more than the total amount invested by all limited partners. 
C) Terrence is prohibited from taking control of Bede Limited Partnership. 
D) Terrence is prohibited from providing management advice to Bede Limited Partnership. 
E) Terrence could work for Bede Limited Partnership as the office manager of Bede Management Co and he might not lose his limited liability,but he must be cautious concerning the control he exercises over the limited partner's business.

Question 17

Wilder and Joanne are carrying on a law firm business as a partnership under the name Wilder and Joanne Law Firm.Joanne has decided to leave.Which of the following strategies will best ensure that she does not become liable for any obligation of the firm arising after she moves on?

Accepted Answer

A) Joanne takes out an advertisement in a local newspaper announcing her retirement. 
B) Joanne agrees to allow her name to be used in the firm name but obtains an indemnity from Wilder against any liabilities which arise as a result. 
C) Joanne enters into an agreement with Wilder under which he promises to remove her name from the firm name,as well as from all letterhead and other papers of the firm. 
D) Joanne sends a letter to all of the clients she knows,advising them of her retirement. 
E) There is no way for Joanne to guarantee that she will not be liable for partnership debts after she leaves.The best method is to dissolve the partnership by court application for dissolution on notice to all possible claimants against the partnership,its assets,or its income. 
A) Joanne takes out an advertisement in a local newspaper announcing her retirement. 
B) Joanne agrees to allow her name to be used in the firm name but obtains an indemnity from Wilder against any liabilities which arise as a result. 
C) Joanne enters into an agreement with Wilder under which he promises to remove her name from the firm name,as well as from all letterhead and other papers of the firm. 
D) Joanne sends a letter to all of the clients she knows,advising them of her retirement. 
E) There is no way for Joanne to guarantee that she will not be liable for partnership debts after she leaves.The best method is to dissolve the partnership by court application for dissolution on notice to all possible claimants against the partnership,its assets,or its income.

Question 18

Ernesto owns three companies that all provide moving services within the city of Toronto.Ernesto is the sole shareholder in each of the companies,and each company only owns one truck worth $30 000 and no other assets.Ernesto has insurance covering up to $40 000.One of these companies has destroyed all of Meaghan's furniture during a move,valued at $80 000.If she sues,which of the following is false?

Accepted Answer

A) Meaghan can only recover damages from Ernesto's third-party insurance. 
B) The court may pierce the corporate veil in order to adequately compensate Meaghan. 
C) Meaghan may be able to recover $70 000 from the corporation. 
D) Ernesto may have to declare bankruptcy on the corporation. 
E) The driver who caused the damage may be liable for a portion of the damage. 
A) Meaghan can only recover damages from Ernesto's third-party insurance. 
B) The court may pierce the corporate veil in order to adequately compensate Meaghan. 
C) Meaghan may be able to recover $70 000 from the corporation. 
D) Ernesto may have to declare bankruptcy on the corporation. 
E) The driver who caused the damage may be liable for a portion of the damage.

Question 19

Babak and Cal are partners in a restaurant business.Their partnership agreement says that Babak does not have authority to sign contracts for supplies for the partnership business.Babak contracted with Doris for the supply of 10 kilograms of haddock for the partnership.Which of the following is TRUE?

Accepted Answer

A) The contract is not binding on the partnership. 
B) The contract is binding on the partnership unless Doris knew that Babak did not have authority to contract. 
C) The contract is not binding on the partnership unless Doris asked Babak if he had authority to contract on behalf of the partnership. 
D) The contract is binding on the partnership if Doris thought that Cal was a partner. 
E) The contract is binding on the partnership,but Cal is not personally responsible for the contract. 
A) The contract is not binding on the partnership. 
B) The contract is binding on the partnership unless Doris knew that Babak did not have authority to contract. 
C) The contract is not binding on the partnership unless Doris asked Babak if he had authority to contract on behalf of the partnership. 
D) The contract is binding on the partnership if Doris thought that Cal was a partner. 
E) The contract is binding on the partnership,but Cal is not personally responsible for the contract.

Question 20

Which of the following statements is TRUE?

Accepted Answer

A) The process for bringing a corporation into existence in Canada is essentially the same as for bringing a sole proprietorship or partnership into existence. 
B) Corporations have the same legal characteristics as sole proprietorships. 
C) Corporations may be subject to the same licensing requirements as sole proprietorships and partnerships. 
D) Just like partners and sole proprietors,shareholders are entitled to participate in the management of the business. 
E) The taxation of corporations and partnerships is the same. 
A) The process for bringing a corporation into existence in Canada is essentially the same as for bringing a sole proprietorship or partnership into existence. 
B) Corporations have the same legal characteristics as sole proprietorships. 
C) Corporations may be subject to the same licensing requirements as sole proprietorships and partnerships. 
D) Just like partners and sole proprietors,shareholders are entitled to participate in the management of the business. 
E) The taxation of corporations and partnerships is the same.

Limited liability means that a shareholder can never be held liable for the obligations of the corporation.

"In small businesses with few shareholders,the corporate law rules that require a corporation to have shareholders who elect directors and who,in turn,appoint officers are highly artificial and unnecessary." Do you agree or disagree with this statement? Explain why.

A limited liability partnership (LLP)is a variation on the partnership form of business.Which of the following is false?

If Ted and Mary were entering into a business relationship and did not want to be found to be partners,it would be sufficient to include a clause in their agreement to that effect.

The value of common shareholders' shares in a non-publicly traded company,is based on the residual value of the corporation,which is inherently difficult to assess.Consequently,the value of common shares is generally somewhat uncertain.

Which of the following statements is TRUE?

Which statement best describes the circumstances in which a court will disregard the separate existence of a corporation and impose liability on a shareholder for obligations owed by the corporation to a creditor? A court will impose liability on a shareholder

Norman and Velma are partners carrying on a trucking business.They share a single truck.Which of the following is TRUE?

Which of the following would be a good reason to choose to make an equity investment in a corporation rather than lending money to a corporation?

Which of the following is FALSE?

Terrence has invested $10 000 to become a limited partner in Bede Limited Partnership.Bede Management Co is the general partner in Bede Limited Partnership.Ogruk is the sole shareholder of Bede Management.Which of the following is TRUE?

Wilder and Joanne are carrying on a law firm business as a partnership under the name Wilder and Joanne Law Firm.Joanne has decided to leave.Which of the following strategies will best ensure that she does not become liable for any obligation of the firm arising after she moves on?

Which of the following statements is TRUE?

Risk Management and Sources of Law

Litigation and Alternative Dispute Resolution

Introduction to Torts

Intentional Torts

Miscellaneous Torts Affecting Business

Negligence

The Nature and Creation of Contracts

Consideration and Privity

Representations and Terms

Contractual Defects

Discharge and Breach

Contractual Remedies

Special Contracts: Sale of Goods

Special Contracts: Negotiable Instruments

Real Property: Interests and Leases

Real Property: Sales and Mortgages

Personal Property: Bailment and Insurance

Intellectual Property

Electronic Commerce

Agency and Other Methods of Carrying on Business

Legal Rules for Corporate Governance

Secured Transactions

Dealing With Bankruptcy and Insolvency

Government Regulation of Business

Individual Employment

Organized Labour

Filters

Exam 21: Basic Forms of Business Organizations

Limited liability means that a shareholder can never be held liable for the obligations of the corporation.

"In small businesses with few shareholders,the corporate law rules that require a corporation to have shareholders who elect directors and who,in turn,appoint officers are highly artificial and unnecessary." Do you agree or disagree with this statement? Explain why.

A limited liability partnership (LLP)is a variation on the partnership form of business.Which of the following is false?

If Ted and Mary were entering into a business relationship and did not want to be found to be partners,it would be sufficient to include a clause in their agreement to that effect.

The value of common shareholders' shares in a non-publicly traded company,is based on the residual value of the corporation,which is inherently difficult to assess.Consequently,the value of common shares is generally somewhat uncertain.

Which of the following statements is TRUE?

Which statement best describes the circumstances in which a court will disregard the separate existence of a corporation and impose liability on a shareholder for obligations owed by the corporation to a creditor? A court will impose liability on a shareholder

Norman and Velma are partners carrying on a trucking business.They share a single truck.Which of the following is TRUE?

Which of the following would be a good reason to choose to make an equity investment in a corporation rather than lending money to a corporation?

Which of the following is FALSE?

Terrence has invested $10 000 to become a limited partner in Bede Limited Partnership.Bede Management Co is the general partner in Bede Limited Partnership.Ogruk is the sole shareholder of Bede Management.Which of the following is TRUE?

Wilder and Joanne are carrying on a law firm business as a partnership under the name Wilder and Joanne Law Firm.Joanne has decided to leave.Which of the following strategies will best ensure that she does not become liable for any obligation of the firm arising after she moves on?

Which of the following statements is TRUE?

Risk Management and Sources of Law

Litigation and Alternative Dispute Resolution

Introduction to Torts

Intentional Torts

Miscellaneous Torts Affecting Business

Negligence

The Nature and Creation of Contracts

Consideration and Privity

Representations and Terms

Contractual Defects

Discharge and Breach

Contractual Remedies

Special Contracts: Sale of Goods

Special Contracts: Negotiable Instruments

Real Property: Interests and Leases

Real Property: Sales and Mortgages

Personal Property: Bailment and Insurance

Intellectual Property

Electronic Commerce

Agency and Other Methods of Carrying on Business

Legal Rules for Corporate Governance

Secured Transactions

Dealing With Bankruptcy and Insolvency

Government Regulation of Business

Individual Employment

Organized Labour

Filters