Exam 36: Small Businesses and Franchises

The law considers all new businesses to be sole proprietorships regardless of the number of owners.

A sole proprietor pays personal and business income taxes on the business's profits.​

Restful Inn Motel Corporation wants to terminate its franchise arrangement with Steve's Cabins. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Steve's

The day-to-day operation of the franchise business normally is under the control of the franchisor.

A sole proprietorship offers less flexibility than does a partnership or a corporation.

The federal government regulates franchising in part through the Franchise Rule.

The duration of a franchise is determined by federal or state statutes.

Mai-Lin's Martial Arts, Inc., grants a franchise to Naomi to operate a Mai-Lin's school. Mai-Lin's may require Naomi to pay the franchisor a percentage of her

Gary buys from Hook, Line & Sinker Corporation the exclusive right to sell its trademarked fishing gear in a certain area. Their franchise agreement requires Gary to pay certain administrative expenses. Their agreement may also require the franchisee to pay a percentage of the franchisor's

Laura owns and operates Meditation Center without creating a separate business organization. She receives all the profits from the fees for the classes and the sales of the center's merchandise. This is most likely

Without creating a separate business organization, Roy starts up Sole Savers, a new, pre-owned auto sales enterprise. Roy is

Any suit against the business or its employees can lead to unlimited personal liability for the owner of a sole proprietorship.