Question 1

The liabilities and obligations of the partners do not end at dissolution.

Accepted Answer

A) True 
 B)False

Question 2

If the owners of a limited liability entity are active in the operation of the business,they can be held directly liable for their own tortious acts.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following requirements is not required by a corporation to qualify for S corporation status?

Accepted Answer

A) The corporation must have only one class of stock. 
B) The corporation must file a timely election to be treated as an S corporation. 
C) The corporation must have no more than twenty-five shareholders. 
D) The corporation generally may not own more than 80 percent of another corporation. 
A) The corporation must have only one class of stock. 
B) The corporation must file a timely election to be treated as an S corporation. 
C) The corporation must have no more than twenty-five shareholders. 
D) The corporation generally may not own more than 80 percent of another corporation.

Question 4

Cumulative voting allows a greater control by the management interests of a corporation.

Accepted Answer

A) True 
 B)False

Question 5

An outside director is a director who lives outside the state of incorporation.

Accepted Answer

A) True 
 B)False

Question 6

A general partnership is characterized by

Accepted Answer

A) a centralized board of directors. 
B) a governing board of shareholders. 
C) direct control by executive and audit committees. 
D) direct owner management and control. 
A) a centralized board of directors. 
B) a governing board of shareholders. 
C) direct control by executive and audit committees. 
D) direct owner management and control.

Question 7

Which of the following statements is not true regarding the advantages and disadvantages of a sole proprietorship?

Accepted Answer

A) A sole proprietorship can be created without formal agreements or state filings. 
B) The proprietor reports income from the business on a personal tax return. 
C) The proprietor alone bears liability for the losses. 
D) It is usually easy for sole proprietorships to raise capital. 
A) A sole proprietorship can be created without formal agreements or state filings. 
B) The proprietor reports income from the business on a personal tax return. 
C) The proprietor alone bears liability for the losses. 
D) It is usually easy for sole proprietorships to raise capital.

Question 8

A partnership requires a minimum amount of capital in order to be formed.

Accepted Answer

A) True 
 B)False

Question 9

Fact pattern 20-1
Joan decides to enter into a franchise agreement with Great Burgers to sell their burgers in her town.The franchise agreement she entered into with Great Burgers did not prohibit Great Burgers from granting other franchises in the area,but that did not concern Joan because she thought Great Burgers would treat her fairly.She did not bother to read the franchise papers,contracts,and disclosures she was provided.Joan's business went very well for the six months.Then,however,another Great Burgers franchise opened just down the street from Joan's restaurant.She was very upset and called Great Burgers to complain.They brushed off her concerns and told her that there was enough business for everyone.Joan,however,is interested in suing Great Burgers.
-Refer to fact pattern 20-1.Which of the following is the term used when a franchisor sells a franchisee an outlet in a certain location,and then a few months later,sells another outlet a few blocks away to someone else?

Accepted Answer

A) Encroachment 
B) Fair trace 
C) False competition 
D) Crowding 
A) Encroachment 
B) Fair trace 
C) False competition 
D) Crowding

Question 10

If incorporators cannot show substantial compliance with statutes regarding incorporation but can show that they were unaware of any defect and acted in good faith,a court may treat the entity as a(n)________.

Accepted Answer

A) de jure corporation 
B) real corporation 
C) de facto corporation 
D) equitable corporation 
A) de jure corporation 
B) real corporation 
C) de facto corporation 
D) equitable corporation

Question 11

Fact pattern 20-2
Maxine and Vince verbally agree to form a dog grooming partnership called "Groomers R Us." They file nothing with the state.Maxine puts up 80% of the capital needed for the partnership,and Vince supplies 20%.Maxine assumed that Vince would do extra work to account for the small amount of capital contributed by him,but that did not occur.Maxine found herself grooming more than 60% of the animals on her own.Maxine told Vince that he was only entitled to 40% of the profits because he was only doing 40% of the work.Vince disagreed,and a heated argument occurred.Not surprisingly,Maxine and Vince decided to end the partnership.While winding up affairs,Maxine discovers that Vince paid an excessive amount for some dog shampoo.She thought he bought it from a certain supplier,just so he could flirt with the receptionist there.She told him that paying for the shampoo was entirely his responsibility because she had not agreed to the purchase.Maxine and Vince also became aware of a lawsuit filed by the owner of a Welsh Pembroke Corgi complaining that the dog developed a skin rash following bathing by Vince in the expensive shampoo he had purchased,and that the owner lost money because the dog could not be entered into shows.Maxine told Vince that the litigation was entirely his responsibility and that she disavowed any liability to the plaintiff.
-Refer to fact pattern 20-2.Which of the following is true regarding Vince's entitlement,if any,to share in profits of the business?

Accepted Answer

A) Because he was not doing his share of the work,he was not entitled to any profits. 
B) He was entitled to 20% of the profits. 
C) He was entitled to 40% of the profits. 
D) He was entitled to 50% of the profits. 
A) Because he was not doing his share of the work,he was not entitled to any profits. 
B) He was entitled to 20% of the profits. 
C) He was entitled to 40% of the profits. 
D) He was entitled to 50% of the profits.

Question 12

The ________ set forth the steps that must be taken to establish a corporation in that state.

Accepted Answer

A) Uniform Federal Rules 
B) corporate statutes of each state 
C) corporate bylaws 
D) none of the responses are correct 
A) Uniform Federal Rules 
B) corporate statutes of each state 
C) corporate bylaws 
D) none of the responses are correct

Question 13

A member of the board who also serves as an officer is a(n)________ director.

Accepted Answer

A) inside 
B) interested 
C) outside 
D) employed 
A) inside 
B) interested 
C) outside 
D) employed

Question 14

The ________ doctrine prevents a third party who acts as if it were doing business with a corporation is from later claiming that the corporation is not really a corporation.

Accepted Answer

A) de jure corporation 
B) de facto corporation 
C) corporation by estoppel 
D) alter ego 
A) de jure corporation 
B) de facto corporation 
C) corporation by estoppel 
D) alter ego

Question 15

After the corporation is formed,the new directors have a meeting at which they

Accepted Answer

A) ratify the adoption of the bylaws. 
B) appoint officers. 
C) authorize the sale of stock to the initial shareholders. 
D) all of the responses are correct 
A) ratify the adoption of the bylaws. 
B) appoint officers. 
C) authorize the sale of stock to the initial shareholders. 
D) all of the responses are correct

Question 16

In the absence of an agreement to the contrary,partners share both profits and losses according to their capital contributions.

Accepted Answer

A) True 
 B)False

Question 17

The general partners hold the partnership's property as joint tenants.

Accepted Answer

A) True 
 B)False

Question 18

A partnership is not automatically dissolved upon a partner's ________,and the partners holding a majority of the partnership interests may elect to continue the general partnership.

Accepted Answer

A) death 
B) bankruptcy 
C) withdrawal 
D) all of the responses are correct 
A) death 
B) bankruptcy 
C) withdrawal 
D) all of the responses are correct

Question 19

Which of the following statements is not true regarding the characteristics of a corporation?

Accepted Answer

A) A corporation is a legal entity distinct from its owners. 
B) A corporation is owned by shareholders. 
C) The corporation itself is responsible for its liabilities. 
D) The board of directors implements the decisions of the officers. 
A) A corporation is a legal entity distinct from its owners. 
B) A corporation is owned by shareholders. 
C) The corporation itself is responsible for its liabilities. 
D) The board of directors implements the decisions of the officers.

Question 20

Define class voting.Why would a group of investors be interested in a guarantee of class voting?

Accepted Answer

Class voting occurs when the charter or

Exam 20: Forms of business organizations

The liabilities and obligations of the partners do not end at dissolution.

If the owners of a limited liability entity are active in the operation of the business,they can be held directly liable for their own tortious acts.

Which of the following requirements is not required by a corporation to qualify for S corporation status?

Cumulative voting allows a greater control by the management interests of a corporation.

An outside director is a director who lives outside the state of incorporation.

A general partnership is characterized by

Which of the following statements is not true regarding the advantages and disadvantages of a sole proprietorship?

A partnership requires a minimum amount of capital in order to be formed.

If incorporators cannot show substantial compliance with statutes regarding incorporation but can show that they were unaware of any defect and acted in good faith,a court may treat the entity as a(n)________.

The ________ set forth the steps that must be taken to establish a corporation in that state.

A member of the board who also serves as an officer is a(n)________ director.

The ________ doctrine prevents a third party who acts as if it were doing business with a corporation is from later claiming that the corporation is not really a corporation.

After the corporation is formed,the new directors have a meeting at which they

In the absence of an agreement to the contrary,partners share both profits and losses according to their capital contributions.

The general partners hold the partnership's property as joint tenants.

A partnership is not automatically dissolved upon a partner's ________,and the partners holding a majority of the partnership interests may elect to continue the general partnership.

Which of the following statements is not true regarding the characteristics of a corporation?

Define class voting.Why would a group of investors be interested in a guarantee of class voting?

law, value creation, and risk management

Ethics ant the law

Courts, sources of law, and dispute resolution

Constitutional bases for business regulation

Agency

Administrative Law

Contracts

sales, licensing, and e-commerce

Torts and Privacy protection

product liability

Intellectual property

The employment agreement

civil rights and employment discrimination

executive compensation and employee benefits

Criminal law

Environmental law

Antitrust

Consumer Protection

real property and land use

Directors, Officers, and Controlling Shareholders

Public and Private Offerings of Securities

Securities Fraud and insider trading

Debtor-Creditor Relations and Bankruptcy

International Business

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