Exam 20: Agency and Liability to Third Parties

Which of the following was the result on appeal in Mary Kay, Inc. a/k/a Mary Kay Cosmetics, Inc. v. Janet Isbell, the case in the text in which it was claimed that Mary Kay, Inc. wrongfully terminated Isbell's franchise in violation of the Arkansas Franchise Practices Act on the basis that Isbell used retail store space to sell products as opposed to only conducting sales in customers' homes?

Members of the board of directors of a corporation are elected by shareholders.

A franchisee is the owner of a trade name or trademark who is a party to an arrangement whereby another party sells goods or services under the trade name or trademark.

Reference - Tutoring Concerns. Wally and Sally want to go into business together and plan on offering a tutoring service to high school and college students. Wally proposes that they share control of the business and split profits equally and not bother with a written agreement. Sally, 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 the students' test scores do not improve. She tells Wally that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells Wally that they should form a corporation to shield their personal assets. Wally, however, says their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would likely result in double taxation. Is Wally correct that with his proposal that they share control of the business and split profits equally, there could be no personal liability for debts?

Under the Uniform Limited Liability Company Act, an LLC will dissolve after the passage of _____________ consecutive days during which the company has no members.

Which of the following is false regarding franchises?

Which of the following was the result on appeal in Colette Bohatch v. Butler & Binion, the case in the text in which the plaintiff, the partner in a law firm, sued after she was expelled from the partnership following her complaint that one of the other partners was overbilling a client?

In which of the following does the franchisor provide the franchisee with the formula or necessary ingredient to manufacture a product?

Which of the following is false regarding a sole proprietorship?

Suzanne wants to open a legal litigation support business and market to attorneys for their needs in court preparation such as copying, preparation of exhibits, and the service of subpoenas. She expects to hire three employees to assist her. Assuming she has sufficient funding, what type of business form would you encourage her to adopt and why?

Reference - Community Fair. Craig and Melinda are searching for a one-time business opportunity that will enable them to make a sufficient amount of cash to take a really great vacation to Galapagos. They live in a rather small rural community that has not, to date, had a community fair. Craig and Melinda decide to sponsor a fair on a weekend in October and to arrange for exhibits and awards, beauty contests, pie eating contests, food vendors, and amusement rides. The profit to Craig and Melinda will come from ticket sales and from charges to food vendors for the privilege of setting up shop. Apart from some minor skirmishes between Craig and Melinda regarding management rights, preparations go fairly well. When the weekend of the fair arrives, things initially go fairly smoothly. Unfortunately, however, one of the beauty contestants slips on the runway. An argument broke out during the pie eating contests resulting in angry contestants throwing pies and injuring spectators. Finally, an elderly lady who was angry because she did not win the prize for the best honey jabbed the volunteer judge with her cane. All injured parties threaten to sue Craig and Melinda. Craig tells Melinda that she should bear the larger percentage of any damages because the idea for the fair was initially hers, and she obtained all necessary permits. Melinda, on the other hand, tells Craig that he should be wholly responsible for any damages because he was put in charge of all competitions. They can reach no agreement regarding winding up the project and splitting the meager profits, and angrily go their separate ways with no resolution. As she is leaving, Melinda shouts to Craig that as her agent he should have done a better job with security. Which of the following is true regarding the liability of Craig and Melinda for the fair?

How is a limited liability company formed?

A general corporation may only have up to 200 shareholders while an S corporation cannot have more than 75 shareholders.

Which of the following is the most popular form of business ownership in the U.S.?

Which of the following is true regarding joint ventures?

A limited partnership and a limited liability partnership refer to the same type of business organization.

Which of the following is true regarding S corporations?

Reference - Community Fair. Craig and Melinda are searching for a one-time business opportunity that will enable them to make a sufficient amount of cash to take a really great vacation to Galapagos. They live in a rather small rural community that has not, to date, had a community fair. Craig and Melinda decide to sponsor a fair on a weekend in October and to arrange for exhibits and awards, beauty contests, pie eating contests, food vendors, and amusement rides. The profit to Craig and Melinda will come from ticket sales and from charges to food vendors for the privilege of setting up shop. Apart from some minor skirmishes between Craig and Melinda regarding management rights, preparations go fairly well. When the weekend of the fair arrives, things initially go fairly smoothly. Unfortunately, however, one of the beauty contestants slips on the runway. An argument broke out during the pie eating contests resulting in angry contestants throwing pies and injuring spectators. Finally, an elderly lady, who was angry because she did not win the prize for the best honey, jabbed the volunteer judge with her cane. All injured parties threaten to sue Craig and Melinda. Craig tells Melinda that she should bear the larger percentage of any damages because the idea for the fair was initially hers, and she obtained all necessary permits. Melinda, on the other hand, tells Craig that he should be wholly responsible for any damages because he was put in charge of all competitions. They can reach no agreement regarding winding up the project and splitting the meager profits, and angrily go their separate ways with no resolution. As she is leaving, Melinda shouts to Craig that as her agent he should have done a better job with security. Which of the following is the type of business organization that best fits Craig and Melinda's project?

Which of the following was the result on appeal in Kenneth Parker v. Concelia Parker, the case in the text in which the plaintiff in a divorce proceeding claimed that he was entitled to a significant portion of lottery winnings won by his wife on the theory that the parties were engaged in a joint venture?

For purposes of federal jurisdiction, a limited liability company is considered a citizen in _____________.