Question 1

Which one of the following statements is correct with respect to sole proprietorships?

Accepted Answer

A) The sole proprietor has the same extent of liability as a shareholder. 
B) The sole proprietor must consult with the other owners before making any major decisions regarding the business. 
C) The sole proprietor is responsible for the torts committed by an employee that take place within the scope of employment. 
D) The sole proprietor need not adhere to any licensing and government regulations. 
E) The sole proprietor has limited liability.

Question 2

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

Accepted Answer

A) the officers of a corporation to the shareholders 
B) the director of a corporation to the corporation 
C) the director of a corporation to the shareholders 
D) a principal to his agent 
E) an employer to his or her employees

Question 3

Which one of the following statements is correct with respect to the liability of partners?

Accepted Answer

A) A general partner is responsible,independent of what she has invested,for any losses caused to outsiders through the partnership business if the assets of the partnership are not enough to cover the claim. 
B) If a third party is injured because of an activity carried on by the partnership,that third party can only go after the personal assets of a partner if the assets of the partnership are not enough to provide compensation and the damage was actually caused by the conduct of that partner. 
C) When a partner enters into a partnership arrangement,she can only lose what she has invested in that partnership. 
D) If there are three equal partners in a partnership,an injured third party can only collect one-third of the claim from any one partner. 
E) A partner can protect herself from any liability beyond her investment if one of the other partners specifically agrees in the partnership agreement to be responsible for all such liability.

Question 4

A sole proprietor is responsible not only for his own conduct but also for the wrongful conduct of any employee done in the course of employment.

Accepted Answer

A) True 
 B)False

Question 5

Three men decided to form a partnership to look for buried treasure.Luke and Mark had expensive equipment,experience,and expertise.The third partner,Cyrus,had an old treasure map.The three men agreed to meet on Monday on an island in the Caribbean.Cyrus had his holiday start a few days earlier so he went ahead "to set up camp." Before the others arrived Cyrus found the treasure.When they stepped off the plane,Cyrus handed them a dissolution of partnership notice and claimed the entire treasure for himself.Do Luke and Mark have any legal claim to the treasure?

Accepted Answer

A) Yes,they have an equitable claim for specific performance to the treasure. 
B) No,Luke and Mark's assets and experience were not used to find the treasure. 
C) Yes,the treasure was found before the partnership was dissolved; therefore,Cyrus must account for the profit he made. 
D) No,the partnership was dissolved before the full value of the treasure was determined. 
E) No,but they can claim all of the out-of-pocket expenses associated with the aborted trip to the Caribbean.

Question 6

Explain what is meant by a preferred share.

Accepted Answer

The answer of Explain what is meant by a preferred...

Question 7

Shareholders in a closely held corporation are entitled to sell their shares to whomever they want without restriction.

Accepted Answer

A) True 
 B)False

Question 8

Changes to the Criminal Code in response to the Westray mining disaster in Nova Scotia make partnerships and corporations more responsible for the negligence of their employees when the negligence results in injury or death.

Accepted Answer

A) True 
 B)False

Question 9

"As in other forms of business,when decisions are to be taken,the majority of the partners must approve the decision." Discuss the accuracy of this statement.

Accepted Answer

The answer of "As in other forms of business,when decisions...

Question 10

Which of the following is correct with respect to the law of partnership?

Accepted Answer

A) A partnership cannot be created inadvertently. 
B) Each partner is vicariously liable for the wrongful acts of their partners committed in the course of the partnership business. 
C) Partners are only liable for the torts of their partners if they in fact knew that the wrongful conduct was taking place. 
D) Joint and several liability means that each partner can be sued several times. 
E) Partners have unlimited liability,meaning that they can lose up to the amount they have invested in the business.

Question 11

Indicate three significant results of a corporation being classed as a separate legal personality.

Accepted Answer

The answer of Indicate three significant results of a corporation...

Question 12

Fred and Carole were trying to create a list of the pros and cons of sole proprietorship,partnership,and corporation to determine the best structure for carrying on business.Which of the following is true with regard to being a general partner?

Accepted Answer

A) Each partner is an agent for every other partner and for the firm itself,so a partner may be liable for the contracts made by an incompetent partner. 
B) Every general partner faces limited liability for the debts of the partnership. 
C) A partner is liable for only the amount that he or she invested in the partnership firm. 
D) Retiring from a partnership by giving notice to the partners frees a partner from the liabilities he or she faced while being a partner of the firm. 
E) A partner is liable to pay from his or her personal assets only when the partner has committed a criminal act.

Question 13

Discuss the advantages and disadvantages of partnership as a method of carrying on business compared to incorporation.

Accepted Answer

The answer of Discuss the advantages and disadvantages of partnership...

Question 14

Discuss appropriate measures that a business might take to prevent and detect corporate fraud.

Accepted Answer

The answer of Discuss appropriate measures that a business might...

Question 15

Danny applied for and received a grant of licence to operate a popular franchise known as "Paul Coffey's Coffee".As part of the application he was required to pay a significant franchise fee that was loaned to him by his rich uncle.The building was "custom built" in accordance with the franchisor's requirements.Danny also agreed as part of the franchise agreement to make ongoing payments for management services and contributions to the cost of advertising campaigns.Danny has a friend in Venezuela who agrees to ship him coffee beans at a bargain-basement price.During the first day of operations,Danny receives a call from a representative of the franchisor that there is a problem.As one might expect in these circumstances,the problem is most likely:

Accepted Answer

A) his friend's coffee beans do not meet the requirements of food and drug regulations. 
B) the coffee Danny is serving tastes slightly different than the brand usually served at "Paul Coffey's Coffee". 
C) Danny's friend was not named on the application for franchise as a potential supplier. 
D) Danny's franchise agreement includes an exclusive supply agreement requiring Danny to purchase coffee beans solely from the franchisor. 
E) the coffee bean bags from Venezuela do the match the franchisor's colours.

Question 16

Explain what must be done to create a limited partnership.

Accepted Answer

The answer of Explain what must be done to create...

Question 17

Norma and Janet decide to form a partnership to sell gourmet picnic baskets.To raise sufficient capital,they convince their mothers to invest $5000 each as limited partners.Norma's mother is an experienced restaurateur and watches the new business with great interest.On several occasions,she advises Norma and Janet on the business and contacts former business associates to buy surplus stock.She even fills in by taking orders in the office when needed.A customer who was made ill by eating contaminated food from a tin can supplied in one picnic basket sues.What would be the liability,if any,of the mothers?

Accepted Answer

A) Janet's mother would be liable for $10 000,twice the amount invested,because she failed to take part in the management of the business. 
B) A limited partner has her liability limited to the amount of her initial investment; therefore,neither mother has any further liability. 
C) Because one mother lost her limited liability status,they both do. 
D) Norma's mother would have unlimited liability because she took part in the management of the business and thus becomes a general partner. 
E) Both mothers would have unlimited liability because they contributed money but not services as required.

Question 18

A corporation is a fiction that does not exist in reality.

Accepted Answer

A) True 
 B)False

Question 19

Explain the nature of the director's duties to the corporation.

Accepted Answer

The answer of Explain the nature of the director's duties...

Question 20

Directors owe a fiduciary duty to the corporation.

Accepted Answer

A) True 
 B)False

Exam 7: Methods of Carrying on Business

Which one of the following statements is correct with respect to sole proprietorships?

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

Which one of the following statements is correct with respect to the liability of partners?

A sole proprietor is responsible not only for his own conduct but also for the wrongful conduct of any employee done in the course of employment.

Explain what is meant by a preferred share.

Shareholders in a closely held corporation are entitled to sell their shares to whomever they want without restriction.

Changes to the Criminal Code in response to the Westray mining disaster in Nova Scotia make partnerships and corporations more responsible for the negligence of their employees when the negligence results in injury or death.

"As in other forms of business,when decisions are to be taken,the majority of the partners must approve the decision." Discuss the accuracy of this statement.

Which of the following is correct with respect to the law of partnership?

Indicate three significant results of a corporation being classed as a separate legal personality.

Fred and Carole were trying to create a list of the pros and cons of sole proprietorship,partnership,and corporation to determine the best structure for carrying on business.Which of the following is true with regard to being a general partner?

Discuss the advantages and disadvantages of partnership as a method of carrying on business compared to incorporation.

Discuss appropriate measures that a business might take to prevent and detect corporate fraud.

Explain what must be done to create a limited partnership.

A corporation is a fiction that does not exist in reality.

Explain the nature of the director's duties to the corporation.

Directors owe a fiduciary duty to the corporation.