Question 1

The owner of a sole proprietorship pays federal income taxes at the corporate income tax rate, based on the net earnings of the sole proprietorship.

Accepted Answer

A) True 
 B)False  False

Question 2

Franchise agreements frequently contain an arbitration provision under which a neutral party is to make a final and binding determination whether there has been a breach of the contract sufficient to justify cancellation of the franchise.

Accepted Answer

A) True 
 B)False  True

Question 3

A sole proprietor is subject to unlimited personal liability for the debts of the business.

Accepted Answer

A) True 
 B)False  True

Question 4

A corporation must have at least two shareholders.

Accepted Answer

A) True 
 B)False

Question 5

A franchisor is the person to whom the franchise is granted.

Accepted Answer

A) True 
 B)False

Question 6

A rule requiring that a franchisor provide a disclosure statement to all prospective franchisees was adopted by the: ______.

Accepted Answer

A)  UCC. 
B)  Franchise Tax Board. 
C)  Securities and Exchange Commission. 
D)  Federal Trade Commission. 
A)  UCC. 
B)  Franchise Tax Board. 
C)  Securities and Exchange Commission. 
D)  Federal Trade Commission.

Question 7

The major disadvantage to investors in a corporation is nearly unlimited personal liability.

Accepted Answer

A) True 
 B)False

Question 8

Business corporations exist to make a profit.

Accepted Answer

A) True 
 B)False

Question 9

A(n) _______ allows the owners to be taxed like a partnership but with limited liability.

Accepted Answer

A)  corporation. 
B)  franchise. 
C)  limited liability company. 
D)  joint venture. 
A)  corporation. 
B)  franchise. 
C)  limited liability company. 
D)  joint venture.

Question 10

The people in a corporation responsible for the management of the business are the: ______.

Accepted Answer

A)  partners. 
B)  shareholders. 
C)  board of directors. 
D)  licensees. 
A)  partners. 
B)  shareholders. 
C)  board of directors. 
D)  licensees.

Question 11

Who serve as agents of the corporation and run the "day-to-day" operations of the business?

Accepted Answer

A)  officers 
B)  directors 
C)  shareholders 
D)  employees 
A)  officers 
B)  directors 
C)  shareholders 
D)  employees

Question 12

A business that complies with FTC franchise requirements meets all of the following criteria except: ______.

Accepted Answer

A)  the franchisor must promise to provide a trademark or other commercial symbol. 
B)  the franchisor must promise to exercise significant control or provide significant assistance in the operation of the business; any current and past litigation against the franchisor. 
C)  the franchise must require a minimum payment of at least $540 during the first six months of operations. 
D)  the franchise must require a minimum payment of at least $5,400 during the first six months of operations. 
A)  the franchisor must promise to provide a trademark or other commercial symbol. 
B)  the franchisor must promise to exercise significant control or provide significant assistance in the operation of the business; any current and past litigation against the franchisor. 
C)  the franchise must require a minimum payment of at least $540 during the first six months of operations. 
D)  the franchise must require a minimum payment of at least $5,400 during the first six months of operations.

Question 13

A major disadvantage of the sole proprietorship is: ______.

Accepted Answer

A)  no organizational fees. 
B)  the sole proprietor obtains all of the profits. 
C)  the sole proprietor is personally liable for the debts of the sole proprietorship. 
D)  the sole proprietor is free to make all business decisions concerning operation of the sole proprietorship. 
A)  no organizational fees. 
B)  the sole proprietor obtains all of the profits. 
C)  the sole proprietor is personally liable for the debts of the sole proprietorship. 
D)  the sole proprietor is free to make all business decisions concerning operation of the sole proprietorship.

Question 14

If the negligence of the franchisee causes harm to a third person, the franchisor is not liable because the franchisee is an independent contractor.

Accepted Answer

A) True 
 B)False

Question 15

A limited liability company is treated like a partnership under federal tax law and has the limited liability feature of corporations.

Accepted Answer

A) True 
 B)False

Question 16

If Farmer Bill and Farmer Sue decide to pool their farm products and sell them, they have probably created a cooperative.

Accepted Answer

A) True 
 B)False

Question 17

In the event a joint venture is sued, the negligence of one joint venturer will be imputed to the other venturers.

Accepted Answer

A) True 
 B)False

Question 18

A corporation has perpetual life, until one of its shareholder dies.

Accepted Answer

A) True 
 B)False

Question 19

Theoretically, the relationship between a franchisor and a franchisee is one of: ______.

Accepted Answer

A)  parent and subsidiary. 
B)  an "arm's-length" relationship between two (2) independent contractors. 
C)  an "arm's-length" relationship between two (2) partners. 
D)  an "arm's-length" relationship between two (2) joint tenants. 
A)  parent and subsidiary. 
B)  an "arm's-length" relationship between two (2) independent contractors. 
C)  an "arm's-length" relationship between two (2) partners. 
D)  an "arm's-length" relationship between two (2) joint tenants.

Question 20

In a joint venture, the parties: ______.

Accepted Answer

A)  combine their labor or property for a single undertaking and share profits and losses equally. 
B)  combine their labor or property for a continuing business and share profits and losses equally. 
C)  assume no personal liability beyond the risk of losing their initial investment. 
D)  have unlimited personal liability for debts of the venture. 
A)  combine their labor or property for a single undertaking and share profits and losses equally. 
B)  combine their labor or property for a continuing business and share profits and losses equally. 
C)  assume no personal liability beyond the risk of losing their initial investment. 
D)  have unlimited personal liability for debts of the venture.

Exam 40: Types of Business Organizations

The owner of a sole proprietorship pays federal income taxes at the corporate income tax rate, based on the net earnings of the sole proprietorship.

Franchise agreements frequently contain an arbitration provision under which a neutral party is to make a final and binding determination whether there has been a breach of the contract sufficient to justify cancellation of the franchise.

A sole proprietor is subject to unlimited personal liability for the debts of the business.

A corporation must have at least two shareholders.

A franchisor is the person to whom the franchise is granted.

A rule requiring that a franchisor provide a disclosure statement to all prospective franchisees was adopted by the: ______.

The major disadvantage to investors in a corporation is nearly unlimited personal liability.

Business corporations exist to make a profit.

A(n) _______ allows the owners to be taxed like a partnership but with limited liability.

The people in a corporation responsible for the management of the business are the: ______.

Who serve as agents of the corporation and run the "day-to-day" operations of the business?

A business that complies with FTC franchise requirements meets all of the following criteria except: ______.

A major disadvantage of the sole proprietorship is: ______.

If the negligence of the franchisee causes harm to a third person, the franchisor is not liable because the franchisee is an independent contractor.

A limited liability company is treated like a partnership under federal tax law and has the limited liability feature of corporations.

If Farmer Bill and Farmer Sue decide to pool their farm products and sell them, they have probably created a cooperative.

In the event a joint venture is sued, the negligence of one joint venturer will be imputed to the other venturers.

A corporation has perpetual life, until one of its shareholder dies.

Theoretically, the relationship between a franchisor and a franchisee is one of: ______.

In a joint venture, the parties: ______.

The Nature and Sources of Law

The Court System and Dispute Resolution

Business Ethics, Social Forces, and the Law

The Constitution As the Foundation of the Legal Environment

Government Regulation of Competition and Prices

Administrative Agencies

Crimes

Torts

Intellectual Property Rights and the Internet

The Legal Environment of International Trade

Nature and Classes of Contracts: Contracting on the Internet

Formation of Contracts: Offer and Acceptance

Capacity and Genuine Assent

Consideration

Legality and Public Policy

Writing, Electronic Forms, and Interpretation of Contracts

Third Persons and Contracts

Discharge of Contracts

Breach of Contract and Remedies

Personal Property and Bailments

Legal Aspects of Supply Chain Management

Nature and Form of Sales

Title and Risk of Loss

Product Liability: Warranties and Torts

Obligations and Performance

Remedies for Breach of Sales Contracts

Kinds of Negotiable Instruments and Negotiability

Transfers of Negotiable Instruments and Warranties of Parties

Liability of the Parties Under Negotiable Instruments

Checks and Funds Transfers

Nature of the Debtor Creditor Relationship

Consumer Protection

Secured Transactions in Personal Property

Bankruptcy

Insurance

Agency

Third Persons in Agency

Regulation of Employment

Equal Employment Opportunity Law

Partnerships

LPs, LLCs, and LLPs

Corporate Formation

Shareholder Rights in Corporations

Securities Regulation

Accountants Liability and Malpractice

Management of Corporations

Real Property

Environmental Law and Land Use Controls

Leases

Decedents Estates and Trusts

Filters