Deck 35: Forms of Business Organization

Question 1

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
Hulume and Dalneisha have decided to open and operate a flower shop together. This type of business is considered a(n) ________.

A) entity partnership
B) partnership
C) sole proprietorship
D) joint corporation
E) limited liability corporation

Answer 1

B

Question 2

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
A limited liability company is incorporated in the state in which it does business.

Answer 2

False

Question 3

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
A sole proprietor is considered a separate legal entity for purposes of incorporation.

Answer 3

False

Question 4

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
Cooperatives may be incorporated or unincorporated.

Question 5

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
An S corporation cannot have more than 75 shareholders.

Question 6

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
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.

Question 7

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
Shareholders elect the members of the board of directors of a corporation.

Question 8

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
From the text reading, in order to ensure that members work to preserve the assets of the LLPs, which country's Limited Liability Partnership Law puts restrictions on which types of capital contribution are permitted, as well as restrictions on the distribution of partnership assets?

A) Japan
B) China
C) Great Britain
D) Russia
E) Denmark

Question 9

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
Shareholders hire the officers of a corporation.

Question 10

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
An LLC is considered a citizen of every state in which its members reside for purposes of jurisdiction.

Question 11

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
When one of the members dies, a joint venture is not automatically terminated.

Question 12

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
A syndicate is a type of partnership agreement in which company members hold transferable shares while the company's goods are held in the partners' names.

Question 13

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
A limited partnership consists of limited partners, but not general partners.

Question 14

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
When a person decides to go into business on his or her own without further formality, what do they form?

A) Individual entity
B) Sole proprietorship
C) Single entity
D) Sole entrepreneurship
E) Single entrepreneurship

Question 15

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
Which of the following statements is false regarding a sole proprietorship?

A) A sole proprietorship requires few legal formalities.
B) A sole proprietor has complete control of the management of the business.
C) The sole proprietor keeps all the profits from the business.
D) Profits are taxed as the personal income of the sole proprietor.
E) A sole proprietor is not personally liable for obligations of the business.

Question 16

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
A corporation can raise capital by issuing stock.

Question 17

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
If a general partner dies in a limited partnership, the limited partnership carries on as if the partner were never a part of the partnership.

Question 18

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
A limited partnership and a limited liability partnership refer to the same type of business organization.

Question 19

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
Britton is starting a new internet business by himself. Which of the following business organization formats will he most likely use to start the business?

A) Sole proprietorship
B) Limited partnership
C) Limited liability partnership
D) Corporation
E) Limited liability company

Question 20

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
A partnership in which the partners share management responsibilities equally, but some partners are limited in regards to the amount of profit distribution to which they are entitled is an example of a limited partnership.

Question 21

Which of the following partnerships is distinguishable from other forms of partnership because the partners' liability for professional malpractice is limited to the partnership?

A) General partnership
B) Limited partnership
C) Professional partnership
D) Limited liability partnership
E) Loss limiting partnership

Question 22

Who is responsible for managing the business of a corporation?

A) Investors
B) Shareholders
C) Officers
D) Administrators
E) Members of the board of directors

Question 23

________ are responsible for running the day-to-day business of a corporation.

A) Employees
B) Shareholders
C) Officers
D) Board of Directors
E) Managers

Question 24

DirtyBike Manufacturer manufactures dirt bikes in Cleveland, Ohio. DirtyBike gives an exclusive license to Paul's Dirt Bikes in Oklahoma City, Oklahoma to sell the bikes. This is an example of:

A) a franchise
B) a distributorship
C) a chain style business
D) manufacturing arrangement
E) exclusive manufacturing arrangement

Question 25

Which of the following statements is false regarding a limited partnership?

A) There must be at least one general partner.
B) There must be at least two limited partners.
C) The partnership must use the word "limited" in its title.
D) The parties must file a certificate of partnership with a state office to create it.
E) If a limited partner dies, the limited partnership is usually unaffected.

Question 26

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
In the absence of an express agreement, which act governs partnerships in most states?

A) The Joint Partnership Act
B) The Uniform Joint Agreement Act
C) The Uniform Partnership Act
D) The Associated Partnership Act
E) The Joint Agreement Act

Question 27

Which of the following statements is false regarding limited liability companies?

A) Members need not be citizens of the U.S.
B) Limited liability companies have the limited liability of corporations yet may be taxed like partnerships.
C) A limited liability company is formed by filing articles of organization in the state in which members want to establish their LLC.
D) For purposes of jurisdiction, an LLC is considered a citizen of every state in which its members reside.
E) Owners of an LLC are referred to as incorporators.

Question 28

Which of the following is a partnership agreement in which company members hold transferable shares, while all the goods of the company are held in the names of the partners?

A) A joint stock company
B) A joint corporation
C) A joint partnership
D) A collusive partnership
E) A collusive corporation

Question 29

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
Which of the following is not a type of partnership?

A) Limited partnerships
B) General partnerships
C) Limited liability partnerships
D) Limited liability company
E) Cooperative

Question 30

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
In a ________ the general partners assume unlimited personal liability for the partnership debts, however, the limited partners assume no liability beyond the capital they invested and have no part in the management.

A) Liability with limitations partnership
B) General partnership
C) Limited partnership
D) Limited liability company
E) There is no such entity

Question 31

What was the result in Patterson v. Dominos' Pizza, LLC, the case in the text addressing whether a franchisor can be held vicariously liable by a franchisee's employee for sexual harassment, retaliation, and tort claims?

A) The franchisor failed to remedy sexual harassment by the franchisee, and thus was vicariously liable.
B) The franchisor was not vicariously liable for sexual harassment by the franchisee because it was not the plaintiff's employer.
C) The franchisor was vicariously liable for sexual harassment by the franchisee because it was the plaintiff's employer.
D) The franchise agreement governed whether or not the franchisor was vicariously liable for sexual harassment by the franchisee.
E) The case was remanded to the trial court to determine whether the franchisor stands in an employment or agency position in relation to the franchisee and its employees, in order to determine if the plaintiff-employee can pursue her claims against the franchisor.

Question 32

Assuming all other requirements are met, which of the following entity can avoid double taxation?

A) Dual purpose corporation.
B) The duplex corporation.
C) The S corporation.
D) Foreign born entities.
E) The T corporation.

Question 33

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
Which of the following statements is false regarding a general partnership?

A) It is easy to create.
B) Income of the business is personal income.
C) Business losses can be deducted from taxes.
D) The partners are considered agents of the partnership.
E) In most cases partners do not have personal liability for losses.

Question 34

Which statement is true regarding S corporations?

A) They are considered partnerships yet taxed like corporations as long as they follow regulations.
B) They cannot have more than 80 shareholders.
C) Shareholders do not report profit on their personal income tax forms.
D) They may be formed under state law.
E) Income is taxed only when distributed to the shareholders, who must not report the income on their personal income tax forms.

Question 35

When a group decides to organize for the purpose of pooling their resources to gain a market advantage, this is known as a(n) ________.

A) corporation
B) consortium
C) cooperative
D) syndicate
E) enterprise

Question 36

Which statement is true regarding corporations?

A) A corporation is not a separate legal entity.
B) A corporation may not be sued.
C) A corporation is created according to federal law.
D) Shareholders may typically be held liable for debts of the corporation.
E) The corporation must pay taxes on profits, and shareholders must pay taxes on dividends they receive from the corporation.

Question 37

What was the result in Meyer v. Christie, the case in the text involving whether an agreement to enter into a joint venture existed?

A) That the evidence showed only an anticipatory agreement to form a joint venture in the future, not the actual formation of a joint venture.
B) That no joint venture existed because there was evidence contrary to the intent to form a joint venture.
C) That any alleged joint venture agreement was unenforceable under the statute of frauds because it was premised upon an unenforceable oral agreement to purchase and transfer land.
D) That while a joint venture existed, no damages were found.
E) That a joint venture existed with no prohibition against damages.

Question 38

What is the correct term for the investor-owners of a corporation?

A) Profit owners
B) Profit and loss owners
C) Approved investors
D) Limited partners
E) Shareholders

Question 39

A limited liability company offers the tax advantages of a ________ and the liability advantages similar to a ________, while also allowing for unlimited shareholders.

A) limited partnership, sole proprietorship
B) partnership, corporation
C) corporation, limited partnership
D) general corporation, limited liability company
E) s-corporation, partnership

Question 40

________ adopted the limited liability company model of Germany.

A) The United States
B) Canada
C) Italy
D) Spain
E) Mexico

Question 41

[Tutoring Concerns] André and Sasha want to go into business together and plan on offering a tutoring service to high school and college students. André proposes that they share control of the business and split profits equally and not bother with a written agreement. Sasha, 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 their test scores do not improve. She tells André that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells André that they should form a corporation to shield their personal assets. André, however, tells Sasha that their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would result in a tax being imposed twice.
What type of arrangement did André propose when he suggested that they share control of the business and split profits equally, not bothering with a written agreement?

A) A joint sole proprietorship
B) A partnership
C) A corporation
D) An S corporation
E) A limited partnership

Question 42

Which of the following statements is true regarding joint ventures?

A) Participants in a joint venture usually share profits equally, but share losses based on the percentage of contribution.
B) Participants in a joint venture usually share losses equally, but share profits based on the percentage of contribution.
C) The joint venture is not automatically terminated when one of the members dies.
D) A joint venture requires the filing of a formal agreement with the state.
E) Courts frequently apply sole proprietorship law to joint ventures.

Question 43

Aimee's ice cream is known all across the United States for its very smooth and creamy mint flavoring. If Aimee's provides the secret formula to Ben and Jerry's Ice Cream to manufacture the mint flavor, this is a type of ________

A) distributorship
B) manufacturing arrangement
C) chain-style business operation
D) approved business franchise
E) acknowledged standards operation

Question 44

A ________ is a partnership agreement in which company members hold transferable share while all the goods of the company are in the names of the partners?

A) A business trust
B) A syndicate
C) A joint venture
D) A joint stock company
E) A cooperative

Question 45

A(n) ________ is an organization formed by individuals who usually pool their resources to gain an advantage in the market.

A) incorporated partnership
B) cooperative
C) limited liability partnership
D) syndicates
E) market specialist group

Question 46

[Daria's Bakery] Daria decided to open her own bakery. She decided she did not need a lawyer to advise her on different forms of ownership. Unfortunately, Daria had not paid attention in business law class. She proceeded to simply open her business called Daria's Bakery. Eli told Daria that he wanted to order some cookies for his girlfriend, Kirsten, but that Kirsten had allergies to peanuts. Daria told him not to worry because she would make up a special batch just for him. Daria had hired some assistants because she was so busy. She told an assistant, Kate, to make up several batches of cookies for different customers including Eli and told her to leave out the peanuts in Eli's batch because of the allergy. Kate, however, forgot about the peanut allergy and proceeded to make Eli's cookies with peanuts. Eli picked up the cookies and gave one to Kirsten in the car. Kirsten became violently ill, vomited in Eli's car, and had to have her stomach pumped. Eli and Kirsten sought recovery from Daria who told them that Kirsten's doctor bill and Eli's car cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Eli and Kirsten, Daria discussed her problems with the bakery with her parents. Daria's parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities.
Which of the following would be an appropriate form of business organization for Daria and her parents, such that her parents could invest but not participate in management?

A) General partnership
B) Limited partnership
C) Managed partnership
D) Combined partnership
E) Family-Based partnership

Question 47

[Tutoring Concerns] André and Sasha want to go into business together and plan on offering a tutoring service to high school and college students. André proposes that they share control of the business and split profits equally and not bother with a written agreement. Sasha, 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 their test scores do not improve. She tells André that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells André that they should form a corporation to shield their personal assets. André, however, tells Sasha that their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would result in a tax being imposed twice.
Which of the following is true regarding André's assertion regarding taxes?

A) André is correct insofar as the corporation would be required to pay taxes on its profits, and the shareholders would also be required to pay taxes on dividends.
B) André is incorrect because all businesses are taxed in the same manner.
C) André is incorrect but only because the law involving taxation of corporations does not apply until there are at least 10 shareholders.
D) André is incorrect but only because the law involving taxation of corporations does not apply until there are at least 75 shareholders.
E) André is correct but only because his proposal does not involve a writing and the filing of paperwork with the secretary of their state.

Question 48

An example of a syndicate would be:

A) Ford Motor Company
B) a law partnership
C) an investment group trying to acquire the Minnesota Vikings football team
D) a car dealership
E) U-Haul trucking

Question 49

Fernando and Juanita have decided to start a new business. They have joined forces to have a food truck that serves fresh fruit smoothies at the local ball park. This type of business is known as a(n) ________.

A) interest with a venture
B) joint venture
C) syndicate
D) franchise
E) enterprise

Question 50

Trampoline Park, Inc. is licensed to sell the new Tramp-o-matic trampoline that is manufactured by SMPB Manufacturing. What type of arrangement is this?

A) distributorship
B) manufacturing arrangement
C) chain-style business operation
D) franchise
E) operational surplus agreement

Question 51

Which of the following is a business organization governed by a group of trustees who operate the trust for the beneficiaries?

A) A joint enterprise
B) A syndicate
C) A business trust
D) An S corporation
E) An E corporation

Question 52

McDonalds, Sonic, Burger King, and Kentucky Fried Chicken are examples of a(n) ________ because the franchise operate under the franchisor's business name and act subject to the franchisor's standards and methods of business operation.

A) distributorship
B) manufacturing arrangement
C) chain-style business operation
D) multiple business franchise
E) entrepreneurship agreement

Question 53

In China, which of the following is defined as "an organization which possesses civil legal capacity for civil acts and which, according to the law, independently enjoys civil rights and assumes civil obligations"?

A) Legal person
B) Legal corporation
C) Public entity
D) Civil organization
E) Public organization

Question 54

Radonna has just secured a license to sell Sonic products in her town of Normandy, Missouri. This agreement between Radonna and Sonic is known as a(n) ________.

A) joint venture
B) franchise
C) joint partnership
D) limited liability partnership
E) entrepreneurship agreement

Question 55

[Daria's Bakery] Daria decided to open her own bakery. She decided she did not need a lawyer to advise her on different forms of ownership. Unfortunately, Daria had not paid attention in business law class. She proceeded to simply open her business called Daria's Bakery. Eli told Daria that he wanted to order some cookies for his girlfriend, Kirsten, but that Kirsten had allergies to peanuts. Daria told him not to worry because she would make up a special batch just for him. Daria had hired some assistants because she was so busy. She told an assistant, Kate, to make up several batches of cookies for different customers including Eli and told her to leave out the peanuts in Eli's batch because of the allergy. Kate, however, forgot about the peanut allergy and proceeded to make Eli's cookies with peanuts. Eli picked up the cookies and gave one to Kirsten in the car. Kirsten became violently ill, vomited in Eli's car, and had to have her stomach pumped. Eli and Kirsten sought recovery from Daria who told them that Kirsten's doctor bill and Eli's car cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Eli and Kirsten, Daria discussed her problems with the bakery with her parents. Daria's parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities.
Which of the following is a true statement regarding Daria's statement that she had no personal liability?

A) She was correct.
B) She was correct only if she can establish that she has paid all her business taxes on time.
C) She was correct only if she can establish that she has at least 5 employees.
D) She was incorrect.
E) She was incorrect unless she signed an agreement with a financial institution in order to get a loan for the business and agreed in the document that she would not accept personal liability for any losses.

Question 56

[Tutoring Concerns] André and Sasha want to go into business together and plan on offering a tutoring service to high school and college students. André proposes that they share control of the business and split profits equally and not bother with a written agreement. Sasha, 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 their test scores do not improve. She tells André that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells André that they should form a corporation to shield their personal assets. André, however, tells Sasha that their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would result in a tax being imposed twice.
Is André correct in his assertion that by sharing control of the business and splitting profits equally there could be no personal liability for debts?

A) Yes, he is correct so long as they do not reach an agreement in writing.
B) Yes, because they will be considered a partnership regardless of whether any agreement is in writing.
C) Yes, because so long as they have nothing in writing, their arrangement will be considered a joint venture.
D) Yes, so long as they sign no contracts by which they agree to be personally liable.
E) No, he is incorrect.

Question 57

[Daria's Bakery] Daria decided to open her own bakery. She decided she did not need a lawyer to advise her on different forms of ownership. Unfortunately, Daria had not paid attention in business law class. She proceeded to simply open her business called Daria's Bakery. Eli told Daria that he wanted to order some cookies for his girlfriend, Kirsten, but that Kirsten had allergies to peanuts. Daria told him not to worry because she would make up a special batch just for him. Daria had hired some assistants because she was so busy. She told an assistant, Kate, to make up several batches of cookies for different customers including Eli and told her to leave out the peanuts in Eli's batch because of the allergy. Kate, however, forgot about the peanut allergy and proceeded to make Eli's cookies with peanuts. Eli picked up the cookies and gave one to Kirsten in the car. Kirsten became violently ill, vomited in Eli's car, and had to have her stomach pumped. Eli and Kirsten sought recovery from Daria who told them that Kirsten's doctor bill and Eli's car cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Eli and Kirsten, Daria discussed her problems with the bakery with her parents. Daria's parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities.
Daria initially set up which type of business?

A) A franchise
B) A sole proprietorship
C) An individual proprietorship
D) A general company
E) An S corporation

Question 58

Which of the following is a group that comes together for the explicit purpose of financing a specific large project?

A) A business trust
B) A joint venture
C) A syndicate
D) A franchise
E) An enterprise

Question 59

Which of the following establishes how a franchise agreement will be terminated?

A) The franchise agreement
B) The Franchise Termination Act
C) The Franchisor-Franchisee Protection Act
D) The Franchisee Protection Act
E) The Franchise Wrap-Up Act

Question 60

Delly and Telum are in a franchise agreement. They have a dispute as to their franchise agreement. Which of the following law(s) relates specifically to franchises?

A) civil law
B) the UCC and contract law
C) constitutional law
D) agency law
E) corporate or partnership laws

Question 61

Which of the following statements is true about taxes in a limited partnership?

A) Limited partners are not double taxed, but general partners are.
B) Both limited partners and general partners pay taxes on their share of the profit.
C) Both limited partners and general partners are double taxed.
D) General partners, but not limited partners, pay taxes for profits of the partnership.
E) Both limited partners and general partners are double taxed, however, the amount of tax liability by limited partners is capped.

Question 62

Which of the following statements is true about cooperatives?

A) Courts never treat cooperatives like a partnership.
B) Like shareholders of a corporation, members of incorporated cooperatives enjoy limited liability.
C) Cooperatives are not incorporated.
D) Unincorporated cooperatives are treated like limited liability companies.
E) Cooperatives may be incorporated or unincorporated, however, in either case, liability for its members is the same.

Question 63

What is the term used for the process under which an LLC must register in every additional state in which it intends to operate?

A) Qualification.
B) Registration.
C) Approval.
D) Organization.
E) Incorporation.

Question 64

Winston tells Lenita that he prefers to form an S corporation because he does not want to attach "LLC" to the name of the company. Lenita responds that the option of an S corporation is not available for their situation. Is she correct?

A) Yes, because they do not have the appropriate number of shareholders for an S corporation.
B) Yes, because all the owners are not U.S. citizens.
C) Yes, because all the owners are not U.S. citizens and they do not have the appropriate number of shareholders for an S corporation.
D) No, because the owners of an S corporation are not required to be U.S. citizens.
E) No, because only one owner need be a U.S. citizenship for purposes of forming an S corporation.

Question 65

[Cookie Problems] Rashi makes great chocolate chip cookies and sells them in her café called Rashi's Famous Cookies. Some of her friends have expressed interest in selling her cookies. They want to use her name and identify the cookies as Rashi's Famous Cookies. Seeing a business opportunity, Rashi agrees to bake the cookies and provide them frozen to her friends who will open other cafés under her café's name. Rashi strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers, pursuant to her agreements with them. Lola, one of Rashi's friends who entered into an agreement with Rashi to open a café and sell the cookies, was not being careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Jonah, becoming ill. Jonah threatens to sue both Lola and Rashi. Rashi is so exasperated that she cancels all the franchise contracts. Although the franchise agreements provide that,as long as requirements are met, the franchise agreements will continue for a period of two years, Rashi takes the position that the cookies involve a personal service using a trade secret, and that she cannot be held liable to her franchisees for discontinuation of the franchises.
Will Rashi likely be held liable to Jonah?

A) Yes, but only if Lola has officially filed for bankruptcy protection.
B) Yes, but only if Lola is insolvent.
C) Yes, because the cookies had her name on them.
D) No, because she was a franchisor.
E) It is unclear and depends on whether she exercised too much authority in the day-to-day affairs of Lola's business.

Question 66

[Cookie Problems] Rashi makes great chocolate chip cookies and sells them in her café called Rashi's Famous Cookies. Some of her friends have expressed interest in selling her cookies. They want to use her name and identify the cookies as Rashi's Famous Cookies. Seeing a business opportunity, Rashi agrees to bake the cookies and provide them frozen to her friends who will open other cafés under her café's name. Rashi strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers, pursuant to her agreements with them. Lola, one of Rashi's friends who entered into an agreement with Rashi to open a café and sell the cookies, was not being careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Jonah, becoming ill. Jonah threatens to sue both Lola and Rashi. Rashi is so exasperated that she cancels all the franchise contracts. Although the franchise agreements provide that,as long as requirements are met, the franchise agreements will continue for a period of two years, Rashi takes the position that the cookies involve a personal service using a trade secret, and that she cannot be held liable to her franchisees for discontinuation of the franchises.
Which of the following statements is true regarding Rashi's inspections of franchisees' kitchens?

A) Franchise law prohibits such inspections because a franchisee is seen as a separate corporation.
B) Franchise law prohibits such inspections because a franchisee is seen as a separate partnership.
C) Rashi had the right to do so only if she can establish the existence of customer complaints.
D) Rashi had the right to do so only if workers' compensation claims had been filed against the franchisees involved.
E) Rashi had the right to inspect the kitchens.

Question 67

Kendra and Amelia operate an art gallery, owned as a partnership. Kendra disappeared. A few days later, Amelia learned that Kendra embezzled $75,000 of government grant money through the company. Is Amelia responsible for the $75,000?

A) No, because the embezzlement was done by Kendra.
B) Yes, but only if Amelia was aware of the embezzlement.
C) Yes, because Amelia and Kendra are partners.
D) No, because partners are not responsible for the wrongful acts of other partners.
E) Yes, but only to the extent of Amelia's investment into the partnership.

Question 68

[R&R Landscaping, LLC] R&R Landscaping, LLC, is registered as a limited liability company in Illinois. R&R provides corporate landscape design and maintenance. During a large corporate project near Chicago, the driver of R&R's bulldozer lost control, went into oncoming traffic, and caused injuries to Viktor. Viktor wants to file a lawsuit and, after research, learns that R&R is owned by Rohan, an Illinois resident, and Roland, an Indiana resident, and that R&R filed articles of organization in Illinois and a certificate of authority in Indiana.
In which state(s) can Viktor file suit against R&R?

A) Only Illinois, because that is the state of incorporation.
B) Only Illinois, because that is the state of registration.
C) Only Illinois, because that is that state where the LLC's articles of organization are filed.
D) Either Indiana or Illinois, as long as the proper documentation was filed in those states.
E) Either Indiana or Illinois, which are the states in which the LLC's members reside.

Question 69

[Cookie Problems] Rashi makes great chocolate chip cookies and sells them in her café called Rashi's Famous Cookies. Some of her friends have expressed interest in selling her cookies. They want to use her name and identify the cookies as Rashi's Famous Cookies. Seeing a business opportunity, Rashi agrees to bake the cookies and provide them frozen to her friends who will open other cafés under her café's name. Rashi strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers, pursuant to her agreements with them. Lola, one of Rashi's friends who entered into an agreement with Rashi to open a café and sell the cookies, was not being careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Jonah, becoming ill. Jonah threatens to sue both Lola and Rashi. Rashi is so exasperated that she cancels all the franchise contracts. Although the franchise agreements provide that,as long as requirements are met, the franchise agreements will continue for a period of two years, Rashi takes the position that the cookies involve a personal service using a trade secret, and that she cannot be held liable to her franchisees for discontinuation of the franchises.
Is Rashi correct that she was entitled to cancel all franchise agreements?

A) No, she was not entitled to cancel any franchise agreements.
B) No, while she was arguably justified in canceling Lola's franchise agreement, she was not justified in canceling other franchise agreements because no breach of the other franchise agreements had occurred.
C) No, she could only cancel all franchises after a judgment was entered against her, and that had not yet occurred.
D) Yes, because a personal service type of franchise was involved, she could cancel all the franchises at will.
E) Yes, she can cancel the franchises but only if she can establish that her profits were less than had been expected.

Question 70

Winston wants to have an office in California and one in Atlanta. Lenita tells Winston that, if they form an LLC, they only need to file paperwork in one of those states. Is she correct?

A) No, LLCs usually need to register in every state in which they intend to operate.
B) No, like a partnership, one of the advantages of an LLC is that they do need to file formal documents with the state in order to operate.
C) Yes, the state in which she registers will send copies to all other states in which the business intends to operate.
D) Yes, an LLC only needs to file documents in one state, as there is now an online system that covers all states.
E) Yes, by law, an LLC can only be registered in one state.

Question 71

Under which of the following types of business organization is the ownership transferable to another person?

A) Sole proprietorship, general partnership, limited liability company, and corporation.
B) General partnership, limited liability company, and corporation, but not sole proprietorship.
C) Limited liability company and corporation, but not sole proprietorship or general partnership.
D) Corporation, but not sole proprietorship, general partnership, nor limited liability company.
E) Corporation and general partnership, but not sole proprietorship nor limited liability company.

Question 72

[Tutoring Concerns] André and Sasha want to go into business together and plan on offering a tutoring service to high school and college students. André proposes that they share control of the business and split profits equally and not bother with a written agreement. Sasha, 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 their test scores do not improve. She tells André that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells André that they should form a corporation to shield their personal assets. André, however, tells Sasha that their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would result in a tax being imposed twice.
Which of the following is true regarding André's and Sasha's quest to find the best form of business organization?

A) An S corporation provides the tax advantages of a partnership but does not avoid personal liability for shareholders.
B) A limited liability company combines the tax advantages of a partnership with the limited liability of a corporation.
C) A double sole proprietorship avoids corporate double taxation and also shields assets of the owners from tort claims of third parties although creditors may reach the personal assets of the owners.
D) An unincorporated cooperative combines the tax advantages of a partnership with the limited liability of a corporation.
E) A joint venture is a type of undertaking involving joint stock which is treated as a corporation in regard to double taxation and limited liability.

Question 73

A(n) ________ is created when members for an LLC decide to form and create their organization.

A) operating agreement
B) shareholders agreement
C) member contract
D) corporate agreement
E) partnership agreement

Question 74

Which of the following statements is correct about the requirements to form a limited liability company?

A) Members must execute an operating agreement, and the LLC must register in every additional state in which it will do business.
B) Members must execute an operating agreement, and articles of organization must be filed in the state in which members want to establish their LLC.
C) Members must execute an operating agreement, articles of organization must be filed in the state in which members want to establish their LLC, and the LLC must register in every additional state in which it will do business.
D) Articles of organization must be filed in the state in which members want to establish their LLC, but the LLC need not register in every additional state in which it will do business.
E) Articles of organization must be filed in the state in which members want to establish their LLC, and the LLC must register in every additional state in which it will do business.

Question 75

[Cookie Problems] Rashi makes great chocolate chip cookies and sells them in her café called Rashi's Famous Cookies. Some of her friends have expressed interest in selling her cookies. They want to use her name and identify the cookies as Rashi's Famous Cookies. Seeing a business opportunity, Rashi agrees to bake the cookies and provide them frozen to her friends who will open other cafés under her café's name. Rashi strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers, pursuant to her agreements with them. Lola, one of Rashi's friends who entered into an agreement with Rashi to open a café and sell the cookies, was not being careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Jonah, becoming ill. Jonah threatens to sue both Lola and Rashi. Rashi is so exasperated that she cancels all the franchise contracts. Although the franchise agreements provide that,as long as requirements are met, the franchise agreements will continue for a period of two years, Rashi takes the position that the cookies involve a personal service using a trade secret, and that she cannot be held liable to her franchisees for discontinuation of the franchises.
What type of arrangement did Rashi make with her friends?

A) A franchise that was a chain-style business operation.
B) A franchise that was a distributorship.
C) A franchise that was a manufacturing agreement.
D) A joint partnership.
E) A joint venture.

Question 76

Which types of business organizations are terminated upon death of the owners?

A) Sole proprietorships, partnerships, and corporations.
B) Sole proprietorships and partnerships, but not corporations.
C) Sole proprietorships and corporations, but not partnerships.
D) Corporations and partnerships, but not sole proprietorships.
E) Sole proprietorships, partnerships, and corporations continue to exist after the death of any owner.

Question 77

When a court is assessing joint ventures, they frequently apply ________ to their decisions.

A) the Uniform Commercial Code
B) the common laws of agency
C) the laws governing sole-proprietorship
D) partnership laws
E) the federal laws governing corporations

Question 78

Which of the following statements is correct about the requirements of an LLP?

A) The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must execute a Partnership Agreement.
B) The parties must execute a Partnership Agreement identifying itself with the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must file a form with the secretary of the state.
C) The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, the parties must execute a Partnership Agreement, and the parties must file a form with the secretary of the state.
D) The business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase, and the parties must file a form with the secretary of the state.
E) The parties only need to file a form with the secretary of the state.

Question 79

[Heart surgery invention] Winston and Noe patented a mechanism that will change open heart surgery forever. They are setting up a business to produce and sell their invention to hospitals and will take advantage of Noe's non-U.S. citizenship to help with sales in international markets. They hire Lenita, a corporate lawyer, to assist in setting up their business. Winston's largest concern is taxes. Noe, on the other hand, doesn't want to bother keeping corporate minutes and having board meetings as he is too busy. Both are concerned about being sued personally for products liability.
Which of the following business organizations would best address Winston and Noe's concerns?

A) General Partnership, as it is only taxed once, and has no requirement to hold meetings or follow corporate formalities.
B) Corporation, because shareholders are not double taxed, are not required to follow corporate formalities, and are generally shielded from liability.
C) S Corporation, because shareholders are not double taxed, are not required to follow corporate formalities, and are generally shielded from liability.
D) LLC, because it is not double taxed, members are not required to follow corporate formalities or hold annual meetings, and members have only limited liability.
E) S Corporation or Corporation

Question 80

Elias and his rich friends want to purchase a professional baseball team and need to raise a large amount of money in a short time. Which of the following forms of business organization is often used in Elias' situation?

A) Cooperative.
B) Syndicate.
C) Sole proprietorship.
D) Joint stock company.
E) Limited Liability Partnership.