Exam 41: Types of Business Organizations

Franchisors may be found liable for the wrongful conduct of their franchisees on an apparent authority theory when the conduct of the franchisor creates an appearance of authority.

Most courts hold that joint ventures are not subject to the same principles of law as partnerships.

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

Freedom from liability to third persons dealing with the franchise holder is one of the main reasons that franchisors grant franchises.

The Federal Trade Commission has adopted a franchise disclosure rule that requires franchisors to give prospective franchisees a full disclosure statement thirty (30)days before a franchisee signs a contract or pays any money for a franchise.

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

A sole proprietorship must pay,at the corporate income tax rate,income taxes based on the net earnings of the sole proprietorship.

A partnership is not dissolved by the death of a partner.

Franchise disclosures are not required under federal law.

In a corporation,a large number of investors may pool their assets to finance a large business enterprise.

To protect themselves against liability,franchisors often require individual franchisees to:

The death of a majority shareholder terminates a corporate enterprise.

Partnership agreements allow individuals to conduct their business without the requirement of a formal organizational structure.

In the absence of a fixed duration provision,a joint venture will ordinarily terminate:

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

Corporations are subject to a form of double taxation.

An unincorporated association:

The relationship between the franchisor and the franchisee is ordinarily an arm's-length employment relationship.