Deck 35: Forms of Business Organization

Question 1

A limited partnership is one 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.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

In which of the following, if any, may investors share in profits but not in management responsibilities while avoiding personal liability?

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

Answer 3

Limited partnership

Question 4

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

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

Question 5

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 6

The joint venture is not automatically terminated when one of the members dies.

Question 7

Which of the following 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 8

Which of the following is a voluntary association between two or more persons who co-own a business for a profit?

A) Co-owned business
B) Partnership
C) Joint proprietorship
D) Joint corporation
E) Joint entity

Question 9

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 10

A sole proprietor is considered a separate legal entity.

Question 11

Officers of a corporation are hired by the shareholders.

Question 12

Which of the following isfalse regarding limited liability partnerships in Japan?

A) The limited liability partnership has been recognized in Japan since the 1950s.
B) Japan's limited liability partnership law limits the liability of its members by their capital contribution.
C) In regard to profits, the Japan's limited liability partnership law requires that the members manage the business and negotiate among each other to determine how profits and losses should be distributed among individual members.
D) When members are establishing the rules of the limited liability partnership, Japan requires either the agreement of all members or a majority of at least two-thirds of the members.
E) Japan's limited liability partnership law puts restrictions on the distribution of partnership assets.

Question 13

A person who decides to go into business on his or her own without further formality forms a[n] _____.

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

Question 14

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

Question 15

For purposes of jurisdiction, an LLC is considered a citizen of every state in which its members reside.

Question 16

Which of the following 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 on 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 17

Which of the following 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 18

Cooperatives must be incorporated.

Question 19

Which of the following governs partnerships in most states in the absence of an express agreement?

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 20

An S corporation cannot have more than 75 shareholders.

Question 21

Which of the following offers tax advantages of a partnership and liability advantages similar to a corporation, but allows for unlimited shareholders?

A) A limited partnership
B) A joint partnership
C) A corporate partnership
D) A limited liability company
E) A cooperative

Question 22

Which of the following is responsible for running the day-to-day business of a corporation?

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

Question 23

Investor-owners of a corporation are called which of the following?

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

Question 24

Which of the following 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 25

Which of the following 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 26

Which of the following 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 27

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 28

Assuming requirements are met, which of the following, if any, is a way that a corporation can avoid double taxation?

A) By forming a C corporation.
B) By forming a D corporation.
C) By forming an S corporation.
D) By forming an F corporation.
E) A corporation cannot avoid double taxation.

Question 29

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 30

Which of the following is a relationship between two or more persons or corporations created for a specific business undertaking?

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

Question 31

Which of the following 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 32

Which of the following 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 federal law.
E) Income is taxed only when distributed to the shareholders, who must not report the income on their personal income tax forms.

Question 33

Which of the following was the result in Cousins Subs Systems Inc., v. Michael R. McKinney, the case in the text involving whether the defendant wrongfully terminated a franchise agreement with the plaintiff?

A) That the defendant rightfully terminated the franchise agreement because the plaintiff made false representations in violation of state statutory law regarding how much money the defendant would make.
B) That the defendant rightfully terminated the franchise agreement because the plaintiff made false representations in violation of state statutory law regarding the amount of advertising that would be done.
C) That the defendant rightfully terminated the franchise agreement because the plaintiff made false representations in violation of state statutory law regarding efforts at recruitment of other franchisees.
D) That the plaintiff did not violate the franchise agreement because the written documents did not contain untrue statements of material facts or omissions of material facts.
E) That while the plaintiff violated the franchise agreement, the defendant also violated the agreement, and that no damages would therefore be awarded to either party.

Question 34

The Mexican limited liability company is derived from the model in which of the following countries?

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

Question 35

Which of the following is an organization formed by individuals, who usually pool their resources, to market products?

A) A cooperative
B) A consortium
C) A corporation
D) A universe
E) An enterprise

Question 36

Which of the following was the result in the case in the text Mary Kay Inc., v. Janet Isbell involving whether the defendant had a franchise that was wrongfully terminated?

A) That under federal law, no franchise existed.
B) That under state law, no franchise existed.
C) That under federal law a franchise existed; but that under applicable law, the franchise was not wrongfully terminated.
D) That under state law a franchise existed; but that under applicable law, the franchise was not wrongfully terminated.
E) That under state law a franchise existed that was wrongfully terminated.

Question 37

Which of the following is distinguishable from other forms of partnerships 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 38

Which of the following 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 39

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 40

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 41

"Chocolate Chips." Molly makes great chocolate chip cookies and sells them in her café called "Molly's Famous Chocolate Chips." Some of her friends express interest in selling her cookies. They want to use her name and identify the cookies as "Molly's Famous Chocolate Chips." Seeing a business opportunity, Molly agrees to bake the cookies and provide them in a frozen state to her friends who will open other cafés under her café's name. Molly strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers pursuant to her agreements with them. Suzette, one of Molly's friends who entered into an agreement with Molly to open a café and sell the cookies, was not being sufficiently careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Fred, becoming ill. Fred threatens to sue both Suzette and Molly. Molly is so exasperated that she cancels all the franchise contracts on the basis of aggravation. Although the franchise agreements provide that so long as requirements are met, the franchise agreements are good for a period of two years, Molly takes the position that the cookies involve a personal service using a trade secret and that she cannot be held liable for discontinuation.

-Will Molly likely be held liable to Fred?

A) Yes, but only if Suzette has officially filed for bankruptcy protection.
B) Yes, but only if Suzette 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 Suzette's business.

Question 42

"Peanut Allergy." Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty's Baking. Bobby came in to order some cookies for his girlfriend, Bitsy. Unfortunately, Bitsy was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers including Bobby and told her to leave out the peanuts in Bobby's batch because of the allergy. Cathy, however, forgot about the peanut allergy and proceeded to make Bobby's cookies with peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby'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 Bobby and Bitsy, Kitty discusses her problems with the bakery with her parents. Kitty'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 true regarding Kitty'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 43

"Peanut Allergy." Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty's Baking. Bobby came in to order some cookies for his girlfriend, Bitsy. Unfortunately, Bitsy was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers including Bobby and told her to leave out the peanuts in Bobby's batch because of the allergy. Cathy, however, forgot about the peanut allergy and proceeded to make Bobby's cookies with peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby'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 Bobby and Bitsy, Kitty discusses her problems with the bakery with her parents. Kitty'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.

-What type of business had Kitty initially set up?

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

Question 44

"Chocolate Chips." Molly makes great chocolate chip cookies and sells them in her café called "Molly's Famous Chocolate Chips." Some of her friends express interest in selling her cookies. They want to use her name and identify the cookies as "Molly's Famous Chocolate Chips." Seeing a business opportunity, Molly agrees to bake the cookies and provide them in a frozen state to her friends who will open other cafés under her café's name. Molly strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers pursuant to her agreements with them. Suzette, one of Molly's friends who entered into an agreement with Molly to open a café and sell the cookies, was not being sufficiently careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Fred, becoming ill. Fred threatens to sue both Suzette and Molly. Molly is so exasperated that she cancels all the franchise contracts on the basis of aggravation. Although the franchise agreements provide that so long as requirements are met, the franchise agreements are good for a period of two years, Molly takes the position that the cookies involve a personal service using a trade secret and that she cannot be held liable for discontinuation.

-Which of the following is true regarding Molly's inspections of 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) Molly had the right to do so only if she can establish the existence of customer complaints.
D) Molly had the right to do so only if workers' compensation claims had been filed against the franchisees involved.
E) Molly had the right to inspect the kitchens.

Question 45

"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 their 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, tells their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would even result in tax being imposed twice.

-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?

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 46

Which of the following is false regarding cooperatives?

A) Unincorporated cooperatives are treated like partnerships.
B) In unincorporated cooperatives, members share joint liability for the cooperative's actions.
C) Members of incorporated cooperatives enjoy limited liability just as do the shareholders of a corporation.
D) Cooperatives are usually formed as syndicates.
E) A cooperative is usually formed to market products.

Question 47

Which of the following is false regarding franchises?

A) The franchisor can set sales quotas and record-keeping requirements.
B) The franchisor has the legal authority to ensure that the franchisee maintains the quality of goods and services associated with the franchise.
C) The UCC does not apply in the realm of disputes between franchisors and franchisees.
D) A franchise is a contractual relationship between the franchisor and the franchisee.
E) If a franchisor exercises too much authority in the day-to-day affairs of the franchisee's business, the franchisor could be held liable for the torts of the franchisee's employees.

Question 48

Syndicates are usually considered a type of ______, thus they are almost always governed by ______ law.

A) Limited liability company; corporate
B) Joint venture; partnership
C) Cooperative; corporate
D) Business trust; corporate
E) Joint stock company; partnership

Question 49

"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 their 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, tells their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would even result in tax being imposed twice.

-Which of the following is true regarding Wally's assertion regarding tax?

A) Wally 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) Wally is incorrect because all businesses are taxed in the same manner.
C) Wally is incorrect but only because the law involving taxation of corporations does not apply until there are at least 10 shareholders.
D) Wally is incorrect but only because the law involving taxation of corporations does not apply until there are at least 75 shareholders.
E) Wally is correct but only because his proposal does not involve a writing and the filing of paperwork with the secretary of their state.

Question 50

"Chocolate Chips." Molly makes great chocolate chip cookies and sells them in her café called "Molly's Famous Chocolate Chips." Some of her friends express interest in selling her cookies. They want to use her name and identify the cookies as "Molly's Famous Chocolate Chips." Seeing a business opportunity, Molly agrees to bake the cookies and provide them in a frozen state to her friends who will open other cafés under her café's name. Molly strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers pursuant to her agreements with them. Suzette, one of Molly's friends who entered into an agreement with Molly to open a café and sell the cookies, was not being sufficiently careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Fred, becoming ill. Fred threatens to sue both Suzette and Molly. Molly is so exasperated that she cancels all the franchise contracts on the basis of aggravation. Although the franchise agreements provide that so long as requirements are met, the franchise agreements are good for a period of two years, Molly takes the position that the cookies involve a personal service using a trade secret and that she cannot be held liable for discontinuation.

-What type of arrangement did Molly 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 51

"Chocolate Chips." Molly makes great chocolate chip cookies and sells them in her café called "Molly's Famous Chocolate Chips." Some of her friends express interest in selling her cookies. They want to use her name and identify the cookies as "Molly's Famous Chocolate Chips." Seeing a business opportunity, Molly agrees to bake the cookies and provide them in a frozen state to her friends who will open other cafés under her café's name. Molly strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers pursuant to her agreements with them. Suzette, one of Molly's friends who entered into an agreement with Molly to open a café and sell the cookies, was not being sufficiently careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Fred, becoming ill. Fred threatens to sue both Suzette and Molly. Molly is so exasperated that she cancels all the franchise contracts on the basis of aggravation. Although the franchise agreements provide that so long as requirements are met, the franchise agreements are good for a period of two years, Molly takes the position that the cookies involve a personal service using a trade secret and that she cannot be held liable for discontinuation.

-Is Molly 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 Suzette'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 52

Which of the following are franchises in which the franchisor manufactures a product and licenses a dealer to sell the product in an exclusive territory?

A) Distributorship
B) Manufacturing arrangement
C) Chain-style business operation
D) Approved business franchise
E) Acknowledged standards operation

Question 53

"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 their 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, tells their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would even result in tax being imposed twice.

-What type of arrangement did Wally propose with his suggestion 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 54

"Peanut Allergy." Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty's Baking. Bobby came in to order some cookies for his girlfriend, Bitsy. Unfortunately, Bitsy was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers including Bobby and told her to leave out the peanuts in Bobby's batch because of the allergy. Cathy, however, forgot about the peanut allergy and proceeded to make Bobby's cookies with peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby'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 Bobby and Bitsy, Kitty discusses her problems with the bakery with her parents. Kitty'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 Kitty 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 55

Which of the following would likely be formed by farmers who want to pool certain crops together to ensure that they get a high market price for their crops?

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

Question 56

"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 their 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, tells their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would even result in tax being imposed twice.

-In regard to the quest of Wally and Sally to find the best form of business organization, which of the following is true?

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 57

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

A) Distributorship
B) Manufacturing arrangement
C) Chain-style business operation
D) Approved business franchise
E) Acknowledged standards operation

Question 58

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 59

In which of the following does 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) Approved business franchise
E) Acknowledged standards operation

Question 60

Which of the following is a business that exists because of an arrangement between the owner of a trade name or trademark and a person who sells goods or services under the trade name or trademark?

A) Joint venture
B) Franchise
C) Joint partnership
D) Consensual seller
E) Approved arrangement

Question 61

Set forth the advantages and disadvantages of forming a general corporation.

Question 62

Brice just finished a residence in internal medicine and wants to go into practice with Horace and Joyce. Brice tells you that while he needs to practice with other physicians for call coverage and for other reasons, he does not want to be liable should the other physicians be found guilty of malpractice. You discuss various incorporation options with him, but he tells you that he would like to form a partnership. What business form would you recommend to him and why?

Question 63

Define a joint venture and set forth two differences under the law between a joint venture and a partnership.

Question 64

Describe a franchise that is a distributorship and give an example of a distributorship.

Question 65

List the advantages and disadvantages of a sole proprietorship form of business.