Deck 19: The Entrepreneurs Options

Question 1

A limited liability company can be held liable for any loss or injury caused by the wrongful acts or omissions of its members in the course of business.

Answer 1

True

Question 2

Traditionally, the three major forms entrepreneurs have used to structure their business enterprises are the sole proprietorship, partnership and corporation.

Answer 2

True

Question 3

Like the shareholders of a corporation, the owners of a limited liability company enjoy limited liability.

Answer 3

True

Question 4

In most states, a limited liability company must have at least two members.

Question 5

No state requires franchisors to provide presale disclosures to prospective franchisees.

Question 6

State deceptive trade practices acts may apply to actions by franchisors.

Question 7

A partner is liable to the partnership for honest errors in judgment in conducting partnership business.

Question 8

The franchise agreement is not likely to set out standards for the franchise to meet.

Question 9

The day-to-day operation of the franchise business normally is under the control of the franchisor.

Question 10

A suit against a business or its employees may never lead to unlimited personal liability for the owner of a sole proprietorship.

Question 11

Generally, if a member dissociates form a limited liability company (LLC), the other members cannot continue to carry on the LLC's business.

Question 12

A sole proprietorship offers less flexibility than does a partnership or a corporation.

Question 13

The courts have tended to regard a limited liability company is a citizen of every state of which its members are citizens.

Question 14

The duration of a franchise is a matter determined by federal or state statutes.

Question 15

On dissolution, the creditors of the partnership and the creditors of the individual partners can make claims on the partnership's assets.

Question 16

In a limited liability company, the management may consist of members or nonmembers, but not both.

Question 17

In choosing a form of business organization for a new enterprise, one factor to be considered is the ability to raise capital.

Question 18

In a limited partnership, no partner has full responsibility for the partnership and for all its debts.

Question 19

A partnership is a voluntary association of individuals.

Question 20

A joint stock company is usually treated like a partnership.

Question 21

A partnership is a pass-through entity and a taxpaying entity.

Question 22

A sole proprietor pays personal and business income taxes on the business's profits.

Question 23

Oliana is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Oliana does not participate in, know about, or ratify, Oliana would be liable for

A)none of the obligations.
B)all of the obligations, jointly and severally.
C)all of the obligations, jointly but not severally.
D)only the contractual obligations.

Question 24

A partner always has the power but he or she may not have the right to dissociate from the partnership.

Question 25

​A cooperative cannot be incorporated.

Question 26

A sole proprietor does not own the entire business.

Question 27

Limited liability companies are entities apart from their owners.

Question 28

Most courts apply the same principles to joint ventures as they apply to partnerships.

Question 29

A partner may pursue his or her own interests so long as his or her actions do not violate the duty of loyalty or care to the partnership.

Question 30

Members of a limited liability company can stipulate in their operating agreement provisions relating to dissolution.

Question 31

Generally, LLP statutes limit the personal liability of partners in a limited liability partnership in some way.

Question 32

For federal income tax purposes, one-member limited liability companies are never taxed as corporations.

Question 33

In a limited partnership, limited partners have essentially the same rights as general partners to participate in management.

Question 34

A limited liability partnership must be formed in compliance with state statutes.

Question 35

Lebron, Michael, Nolan, and O'Neill combine to buy a professional basketball franchise. Their selected form of business organization is an investment group, which is also known as

A)a business trust.
B)a joint stock company.
C)a joint venture.
D)a syndicate.

Question 36

Global Shipping Corporation and Harbor Warehouse Company transfer their property to Investment Managers, Inc., which manages and owns the property and distributes the profits to Global Shipping and Harbor Warehouse. This form of a business organization is

A)a business trust.
B)a joint stock company.
C)a joint venture.
D)a syndicate.

Question 37

Most franchise contracts provide that notice of termination must be given.

Question 38

Fong contracts to buy a franchise from Genuine Asian Sushi House Company. Typically, the determination of the territory to be served is made by

A)other Genuine Asian franchisees within the same state.
B)Fong.
C)Genuine Asian Sushi House.
D)the Federal Trade Commission.

Question 39

StartUp Investors, LLC, is a limited liability company without a written operating agreement. Among the members, a dispute arises concerning the division of profits. Under most LLC statutes, the profits will be

A)distributed according to members' proportionate ownership in the firm.
B)divided equally among the members.
C)forfeited to the state.
D)reinvested in the business until the dispute is resolved.

Question 40

In a general partnership, the senior partner manages the partnership.

Question 41

Without creating a separate business organization, Reynold starts up, and assumes the financial risk of, Sole Savers, a new, pre-owned auto sales enterprise. Reynold is

A)a partner
B)a franchisor.
C)a franchisee.
D)a sole proprietor.

Question 42

​Nora and Owen do business as Profit & Property, a real estate investment partnership. In acting on the firm's behalf in a deal with Quaint Village Mall, Nora takes advantage of an opportunity to make a secret profit on her own behalf. To her firm, Nora is liable for

A)breach of the duty of care.
B)breach of contract.
C)breach of the duty of loyalty.
D)nothing.

Question 43

IT Apps, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is governed by

A)the applicable state LLC statute.
B)the Uniform Limited Liability Company Act.
C)the principles of partnership law.
D)the federal LLC statutes.

Question 44

In a manager-managed LLC, the company is managed by

A)the LLC's CEO.
B)the LLC's majority owners.
C)all of the LLC's members.
D)those designated by the members.

Question 45

Rosalee is a general partner in Silver Dragon, a partnership consisting of the owners of a Chinese and American restaurant. Silver Dragon incurs debt for new dining tables and chairs. With respect to this debt, Rosalee is

A)not liable.
B)only liable to the amount of her capital contribution.
C)only liable in proportion to the number of partners in the firm.
D)personally liable to the full extent.

Question 46

Corbin organized, and owns and operates, Corbin's Deep Sea Fishing Tours in the simplest form of business organization. This is

A)a franchise.
B)a partnership.
C)a corporation.
D)a sole proprietorship.

Question 47

Smith & Jones, Accountants, is a limited liability partnership (LLP). The major features of an LLP are that it limits the personal liability of the partners and

A)it allows the partnership to continue as a pass-through tax entity.
B)LLP statutes do not vary from state to state.
C)it can only do business in the state in which it was formed.
D)only a few states have enacted LLP statutes.

Question 48

Narib and Olivia are limited partners in Physicians Medical Center, a limited partnership. As in a general partnership, in terms of the firm's books and information regarding partnership business, Narib and Olivia are entitled to

A)access in proportion to their participation in management of the firm.
B)access to the parts that directly relate to their capital contributions.
C)no access.
D)complete access.

Question 49

Greenway Corporation and Happy Trails, Inc., combine their efforts to build a network of biking and hiking trails along an unused railroad spur. Their form of business organization is

A)a business trust.
B)a joint stock company.
C)a joint venture.
D)a syndicate.

Question 50

Dana is a member of Earthground Coffee, LLC, a limited liability company. Dana is liable for Earthground's debts

A)in proportion to the total number of members.
B)to the extent of her investment in the company.
C)in proportion to her profit derived from the company.
D)to the full extent.

Question 51

Orlando is a limited partner in Port of Call Exports, a limited partnership. By participating in the firm's management, Orlando is liable for its obligations

A)in proportion to the number of partners in the firm.
B)to no extent.
C)to the extent of his capital contribution to the firm.
D)to the full extent.

Question 52

Wren owns and operates Yoga Center without creating a separate business organization. She receives all the profits from the fees for the classes and the sales of the center's merchandise. Yoga Center is most likely

A)a partnership.
B)a franchise.
C)a sole proprietorship.
D)none of the choices.

Question 53

Jeremy is considering forms of business organizations, including the limited liability company (LLC), for his concessions business-Kettle Popt-Korn. Most states require that an LLC have

A)no minimum number of participants.
B)at least one member.
C)at least two members.
D)at least one non-member manager.

Question 54

All of the following are reasons a franchisor may wish to maintain some degree of control and supervision over the franchisee, except

A)to protect the franchise's name and reputation.
B)to maintain a certain level of food quality.
C)to establish certain standards for a facility.
D)to avoid liability under the doctrine of respondeat superior.

Question 55

Bob is the sole proprietor of ClamBooks, an electronic book subscription service. As a sole proprietor, on the business's profits, Bob pays

A)no income taxes.
B)only personal income taxes.
C)only business income taxes.
D)both personal and business income taxes.

Question 56

Custom Auto Body & Detailing, LLC, is a limited liability company. Its members include Dennis and Estelle. Like other LLCs with more than one member, unless indicated otherwise, the firm will automatically be taxed as

A)a person.
B)a corporation.
C)a proprietorship.
D)a partnership.

Question 57

Graham buys from Hook, Line & Sinker Corporation the exclusive right to sell Hook, Line & Sinker fishing gear in a certain area. Their franchise agreement requires Graham to pay certain administrative expenses. Their agreement may also require Graham to pay a percentage of the franchisor's

A)advertising costs.
B)personal expenses.
C)retirement income.
D)none of the choices.

Question 58

Craig, Donna, and Eve do business as FasTrak Career Consultants. Eve's relationship to FasTrak ends, but the firm continues to do business. The termination of Eve's relationship to FasTrak is

A)dissociation.
B)dissolution.
C)disestablishment.
D)disrespectful.

Question 59

Teresa buys a franchise from Urgent Medical Clinics, LLC. If their agreement is like most franchise agreements, it will specify that Urgent Medical can terminate the franchise

A)at will.
B)for any reason.
C)for cause.
D)for no reason.

Question 60

Rural Residential Development Company and Suburban Real Estate Corporation form a joint stock company. The longest duration a joint stock company can be formed for is

A)an implied duration of not more than six months.
B)a perpetual existence.
C)a single activity or transaction.
D)a stated duration of not more than one year.

Question 61

Riki, the owner of Simply Sushi, is a sole proprietor. What are the chief characteristics, advantages, and disadvantages of this form of business organization? Riki wants to obtain additional capital to expand Simply Sushi, but she does not want to lose control of the firm. As a sole proprietor, what is her best option to attain these goals?

Question 62

Colin, Demi, and Erin agree to be partners in Fajita Pizza, splitting the profits equally. Colin contributes 65 percent of the capital. When Fajita Pizza is dissolved, its liabilities are greater than its assets. In the absence of a contrary agreement, the losses are paid by

A)all of the partners in proportion to their capital contributions.
B)all of the partners in proportion to their shares of the profits.
C)Colin because he contributed most of the capital.
D)Demi and Erin because they contributed the least of the capital.

Question 63

Mucho Tacos, Inc., sells franchises. Mucho Tacos imposes on its franchisees standards of operation and personnel training methods. What is the potential pitfall to Mucho Tacos if it exercises too much control over its franchisees?

Question 64

Jeri and Knute are members of Lighthouse Tours LLC, a limited liability company. With respect to Lighthouse Tours's liabilities, as members, Jeri and Knute are shielded from

A)all liability.
B)no liability.
C)personal liability.
D)"alter ego" liability.

Question 65

Tax Accounting, LLC, is a member-managed limited liability company. If the law in Tax Accounting's state is like the law in most states, unless the members have agreed otherwise, decisions are made according to

A)majority vote.
B)participation in management.
C)the number of members.
D)members' seniority.

Question 66

Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether a franchisor has acted in good faith when terminating a franchise agreement, a court will generally

A)balance the rights of both parties.
B)emphasize the right of Pro Club to its business operation.
C)focus on the right of Oberon to be dealt with fairly.
D)underscore the interest of consumers in affordability.

Question 67

Restful Inn Motel Corporation wants to terminate its franchise arrangement with Steve's Cabins. Their contract does not specify a set time for termination. Because no set time is specified, the following is implied

A)has a reasonable time, with notice.
B)has whatever time Restful Inn determines, with or without notice.
C)notice, but nothing more.
D)Steve's must close immediately.

Question 68

Sweet Selections, a general partnership, operates as a gift shop. Sweet Selections has ten partners. Jill and Amy each have a 25 percent interest in the partnership. All the other members have a 10 percent interest. Unless the partners otherwise agree, with respect to management decisions

A)a majority of the partners must agree.
B)both Jill and Amy must agree.
C)the senior partner decides.
D)30 percent of the partners must agree.

Question 69

Licensed fishing outfits in Bayou City form a business organization to provide an economic service to its members. This is

A)a business trust.
B)a cooperative.
C)a corporation.
D)a joint stock company.

Question 70

Outreach Security & Rescue, LLC, is a limited liability company. Under most LLC statutes, unless the members have agreed otherwise, participants in the firm's management will be considered to include

A)all members.
B)no member.
C)one member.
D)one non-member manager.

Question 71

Faye is interested in buying a franchise from Gas n' Snax Stores Inc. This transaction, like other franchise deals, is regulated to protect

A)certain types of anticompetitive agreements.
B)franchisors from dishonest prospective franchisees.
C)prospective franchisees from dishonest franchisors.
D)the government's power to restrict freedom of contract.

Question 72

Natural Gas, LP, is a limited partnership to which its partners have contributed capital. Natural Gas's creditors include Precision Piping, Inc. On Natural Gas's dissolution, its assets will be distributed to pay

A)the partners and Precision Piping proportionately.
B)the partners before Precision Piping.
C)Precision Piping before the partners.
D)none of the choices.