Question 1

Franchise fees can be costly,but they are usually payable over a number of years,after profits are generated from the business.

Accepted Answer

A) True 
 B)False

Question 2

James was a partner in a large firm.He died unexpectedly.His son,Frank,wanted to take over for his father in the partnership and was well qualified to do the work his father had done.Which statement best describes Frank's rights in the partnership if he inherits the interest?

Accepted Answer

A)  Frank has a right to take over for his father in the partnership. 
B)  Frank is entitled to the value in the partnership,but not to become a full partner. 
C)  Frank has no rights to his father's partnership interest. 
D)  None of the above. 
A)  Frank has a right to take over for his father in the partnership. 
B)  Frank is entitled to the value in the partnership,but not to become a full partner. 
C)  Frank has no rights to his father's partnership interest. 
D)  None of the above.

Question 3

Shareholders of S corps have the tax status and advantage of a corporation but non of the protection from liability.

Accepted Answer

A) True 
 B)False

Question 4

When can shareholders of a corporation be held personally liable for the liabilities of the corporation.

Accepted Answer

A)  if corporate shareholders do not comply with the technicalities of corporation law. 
B)  If they are corporate officers 
C)  If they are corporate stockholders 
D)  If they form an S corporation 
A)  if corporate shareholders do not comply with the technicalities of corporation law. 
B)  If they are corporate officers 
C)  If they are corporate stockholders 
D)  If they form an S corporation

Question 5

An S Corporation cannot have more than ____ shareholders.

Accepted Answer

A)  100 
B)  75 
C)  50 
D)  25 
A)  100 
B)  75 
C)  50 
D)  25

Question 6

LLC's have legal uncertainty because

Accepted Answer

A)  they are relatively new forms of business 
B)  There is not a widely developed body of law to look to for legal guidance in setting them up and enforcing them. 
C)  There is no defined duty of managers to members of the LLC. 
D)  all of the above 
A)  they are relatively new forms of business 
B)  There is not a widely developed body of law to look to for legal guidance in setting them up and enforcing them. 
C)  There is no defined duty of managers to members of the LLC. 
D)  all of the above

Question 7

Which of the following forms of organization would a Lawyer most likely form to avoid liability?

Accepted Answer

A)  Partnership 
B)  LLC 
C)  Close corporation. 
D)  Professional corporation. 
A)  Partnership 
B)  LLC 
C)  Close corporation. 
D)  Professional corporation.

Question 8

Rachel and Cyndi started a retail business called Zebra Toy Company.The business is operated as a partnership.Under partnership law:

Accepted Answer

A)  Rachel is personally liable for any business contracts entered into by Cyndi. 
B)  Rachel is personally liable for any business debts,regardless of whether she or Cyndi created the obligation. 
C)  Rachel is personally liable for any negligent act committed by Cyndi in the scope of the business activity. 
D)  All the above. 
A)  Rachel is personally liable for any business contracts entered into by Cyndi. 
B)  Rachel is personally liable for any business debts,regardless of whether she or Cyndi created the obligation. 
C)  Rachel is personally liable for any negligent act committed by Cyndi in the scope of the business activity. 
D)  All the above.

Question 9

A partnership is a taxable entity,separate from the partners.

Accepted Answer

A) True 
 B)False

Question 10

Alicia and Ted have a written agreement wherein they will share the losses of their joint business.This agreement is strong evidence they are partners.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following transactions would be considered by the IRS to be a taxable sale of assets? Changing the form of business from:

Accepted Answer

A)  a corporation to an LLC. 
B)  a partnership to an LLC. 
C)  an LLC to a corporation. 
D)  All of the above. 
A)  a corporation to an LLC. 
B)  a partnership to an LLC. 
C)  an LLC to a corporation. 
D)  All of the above.

Question 12

Limited liability is a major advantage of a partnership as compared to a corporation.

Accepted Answer

A) True 
 B)False

Question 13

Jackie and Robert own an apartment building as partners.Cyndi,one of their tenants,gives Robert written notice she will be moving out at the end of the following month.Robert did not tell Jackie that Cyndi was moving.Has Cyndi properly given notice to the partnership?

Accepted Answer

A)  Yes.Notice to Robert was notice to the partnership. 
B)  Yes,if it is determined that Robert acted negligently in failing to notify Jackie. 
C)  No.Cyndi has an obligation to notify both Robert and Jackie. 
D)  No.Jackie was not notified since Robert never told her Cyndi was moving. 
A)  Yes.Notice to Robert was notice to the partnership. 
B)  Yes,if it is determined that Robert acted negligently in failing to notify Jackie. 
C)  No.Cyndi has an obligation to notify both Robert and Jackie. 
D)  No.Jackie was not notified since Robert never told her Cyndi was moving.

Question 14

Jack and Jill were living together.Jack wanted to start a small retail store,but did not have good credit.Jill,whose credit was excellent,signed loan agreements with Jack so he could borrow the money to start the business.Jack used business cards that stated he was the "owner" of the business.He and Jill filed separate tax returns.Jack stated he was self-employed and claimed the business was a sole proprietorship.The money that was earned from the store was placed into a joint checking account owned and used by Jack and Jill.When there were significant decisions to be made about the business,such as deciding to franchise the business,the decision was made jointly by Jack and Jill.
Five years after the business was started,Jill left Jack.She claimed she was entitled to one-half the business's profits since she and Jack were partners.Jack disagreed and claimed they never had a partnership.Discuss Jill's claim.

Accepted Answer

Participants in an enterprise cannot be

Question 15

The dissolution of a partnership means the same as its termination.

Accepted Answer

A) True 
 B)False

Question 16

Jill was a limited partner in a retail business that was sued by a customer who fell in the store.The customer claimed the business was negligent in caring for its floors.Which statement best describes Jill's potential liability?

Accepted Answer

A)  Jill has no potential liability to the customer. 
B)  Jill can be held personally liable to the customer since she is a partner. 
C)  Jill can only be liable to the amount of her investment. 
D)  Jill is personally liable,but the woman must first collect from the general partners before collecting from Jill. 
A)  Jill has no potential liability to the customer. 
B)  Jill can be held personally liable to the customer since she is a partner. 
C)  Jill can only be liable to the amount of her investment. 
D)  Jill is personally liable,but the woman must first collect from the general partners before collecting from Jill.

Question 17

Briefly discuss the limitations on a corporation electing Subchapter "S" status.

Accepted Answer

For a corporation to elect Subchapter "S

Question 18

Filings are required to form and operate a limited liability partnership.

Accepted Answer

A) True 
 B)False

Question 19

Nicholas and Holly are partners in a toymaking shop.If Rudolph obtains a judgment against Nicholas for injuring Rudolph while Nicholas was on partnership business,Rudolph must try to collect from the partnership before going after Nicholas' personal assets.

Accepted Answer

A) True 
 B)False

Question 20

What federal agency requires that the seller of a franchise give the potential buyer an offering circular and audited financial statements?

Accepted Answer

A)  The Securities and Exchange Commission (SE
C) . 
B)  The Interstate Commerce Commission (IC
C) . 
C)  The Federal Trade Commission (FT
C) . 
D)  The Franchise Sales Commission (FS
C) . 
A)  The Securities and Exchange Commission (SE
C) . 
B)  The Interstate Commerce Commission (IC
C) . 
C)  The Federal Trade Commission (FT
C) . 
D)  The Franchise Sales Commission (FS
C) .

Exam 21: Starting a Business: Llcs and Other Option

Franchise fees can be costly,but they are usually payable over a number of years,after profits are generated from the business.

James was a partner in a large firm.He died unexpectedly.His son,Frank,wanted to take over for his father in the partnership and was well qualified to do the work his father had done.Which statement best describes Frank's rights in the partnership if he inherits the interest?

Shareholders of S corps have the tax status and advantage of a corporation but non of the protection from liability.

When can shareholders of a corporation be held personally liable for the liabilities of the corporation.

An S Corporation cannot have more than ____ shareholders.

LLC's have legal uncertainty because

Which of the following forms of organization would a Lawyer most likely form to avoid liability?

Rachel and Cyndi started a retail business called Zebra Toy Company.The business is operated as a partnership.Under partnership law:

A partnership is a taxable entity,separate from the partners.

Alicia and Ted have a written agreement wherein they will share the losses of their joint business.This agreement is strong evidence they are partners.

Which of the following transactions would be considered by the IRS to be a taxable sale of assets? Changing the form of business from:

Limited liability is a major advantage of a partnership as compared to a corporation.

Jackie and Robert own an apartment building as partners.Cyndi,one of their tenants,gives Robert written notice she will be moving out at the end of the following month.Robert did not tell Jackie that Cyndi was moving.Has Cyndi properly given notice to the partnership?

The dissolution of a partnership means the same as its termination.

Jill was a limited partner in a retail business that was sued by a customer who fell in the store.The customer claimed the business was negligent in caring for its floors.Which statement best describes Jill's potential liability?

Briefly discuss the limitations on a corporation electing Subchapter "S" status.

Filings are required to form and operate a limited liability partnership.

Nicholas and Holly are partners in a toymaking shop.If Rudolph obtains a judgment against Nicholas for injuring Rudolph while Nicholas was on partnership business,Rudolph must try to collect from the partnership before going after Nicholas' personal assets.

What federal agency requires that the seller of a franchise give the potential buyer an offering circular and audited financial statements?

Introduction to Law

Business Ethics and Social Responsibility

Courts,Litigation and Alterntive Dispute Resolution

Constitutional, Statutory, Administrative, and Common Law

Intentional Torts and Business Torts

Negligence and Strict Liability

Crime

International Law

Introduction to Contracts

Contract Impediments

Conclusion to Contracts

Practical Contracts

Introduction to Sales

Negotiable Instruments

Secured Transactions

Bankruptcy

Agency Law

Employment Law

Employment Discrimination

Labor Law

Life and Death of a Corporation

Government Regulation: Securities and Antitrust

Accountants' Liability

Consumer Law

Environmental Law

Cyberlaw

Intellectual Property

Real Property and Tenant: Landlord Law

Personal Property and Bailment

Estate Planning

Insurance

Filters