Exam 7: Methods of Carrying on Business

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Where a corporation borrows money, only the corporation is responsible for that debt, not the shareholders.

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Joe and Mary promote several dances at school and split the profits.Will this be enough to establish a partnership?

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Directors owe a fiduciary duty to the corporation.

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In a franchise arrangement, describe the advantages offered in such a business structure to the franchisor.

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Joe and Sam were in business school together, and after they graduated they decided to open an ice cream store in a mall.They had skipped the classes in which they were taught about different methods and forms of carrying on business and so gave no thought to how they would structure their relationship.Which of the following is true with respect to the legal positions of Joe and Sam?

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Explain under what circumstances a shareholder's right to sue against oppression arises.

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A franchisee normally pays an initial investment of capital, a franchise fee, and a percentage of the profits.

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Shareholders have a right to bring an action against the directors on behalf of the company when the directors fail in their duty to the corporation.

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Distinguish between a sole proprietorship and a corporation.

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When a personal guarantee has been signed by a shareholder, the creditor can demand payment from that shareholder despite the separate legal entity nature of the corporation.

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In a franchise arrangement, one business enters into a contract with another to sell its products exclusively.Which of the following is true with respect to a franchise?

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Explain how a person's status as a limited partner could be lost.

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A partnership enjoys tax advantages not available to a sole proprietor.

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Mr.Ace of Oink Inc., a closely held corporation, is one of three shareholders.After several years of considerable success, the corporation hit hard times.The other shareholders, Mr.Bane and Mr.Curr, in the best interests of the corporation, voted Mr.Ace out as a director and voted not to renew his employment contract.Upset by these events, Mr.Ace wanted to sell his interest and leave the corporation.The other two shareholders, however, refused to buy his shares.Furthermore, when Mr.Ace attempted to sell his shares to his brother, who was interested in the corporation, the other shareholders refused to register the brother as a member.Which of the following is true?

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Explain the power of a minority shareholder in decision-making situations.

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Shareholders do not owe a duty to the corporation.

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In which one of the following situations has the duty between partners not been breached?

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Dennis, Sam, George, and Ray were partners in an accounting business, and Ray decided he wanted to retire.He sold his share of the partnership to Leonardo, but Leonardo is not a partner unless the other partners approve the change.

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In which of the following relationships is a fiduciary duty owed?

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If a person wants to invest in a partnership but avoid the obligations associated with partnership, what can she do?

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