Question 1

A limited liability limited partnership offers limited liability to its limited, but not its general, partners.

Accepted Answer

A) True 
 B)False  False

Question 2

Explain the difference between a limited partnership and a limited liability limited partnership (LLLP).

Accepted Answer

The limited partnership, a variation of the ordinary or general partnership, was designed to combine the informalities of the partnership with the capital-raising advantages of the corporation. It permits investors (the limited partners) who do not engage in management to share in the profits of the business without becoming personally liable for its debts.
Many states now offer a popular variation to the limited partnership. This organization, called a limited liability limited partnership (LLLP), has all the attributes of a limited partnership except that it offers limited liability to both its limited and general partners. In all other ways, the two organizations are the same.

Question 3

Which of the following is true about franchising?

Accepted Answer

A)  It can be conducted as a sole proprietorship or a corporation but not as a partnership. 
B)  It typically involves a corporation as a franchisor. 
C)  It does not include the risk of violating federal and state antitrust laws under any circumstances. 
D)  It is not contractual. 
A)  It can be conducted as a sole proprietorship or a corporation but not as a partnership. 
B)  It typically involves a corporation as a franchisor. 
C)  It does not include the risk of violating federal and state antitrust laws under any circumstances. 
D)  It is not contractual. B

Question 4

Which of the following is true of the dissolution of a limited liability company (LLC)?

Accepted Answer

A)  The remaining members cannot avoid liquidation even by unanimously agreeing to continue the business operations. 
B)  Dissolution can only be caused by bankruptcy. 
C)  An LLC must be set up so that it can be easily dissolved. 
D)  The act of dissolution terminates an LLC's business. 
A)  The remaining members cannot avoid liquidation even by unanimously agreeing to continue the business operations. 
B)  Dissolution can only be caused by bankruptcy. 
C)  An LLC must be set up so that it can be easily dissolved. 
D)  The act of dissolution terminates an LLC's business.

Question 5

Partnerships:

Accepted Answer

A)  are not required to pay corporate franchise taxes. 
B)  need to pay privilege taxes to do intrastate business in another state. 
C)  are taxed on their operations at the same level as corporations. 
D)  cannot save income tax even if losses are anticipated in the early years of business. 
A)  are not required to pay corporate franchise taxes. 
B)  need to pay privilege taxes to do intrastate business in another state. 
C)  are taxed on their operations at the same level as corporations. 
D)  cannot save income tax even if losses are anticipated in the early years of business.

Question 6

A freeze-out:

Accepted Answer

A)  occurs when a majority shareholder is "frozen out" by the management regarding such issues as a reduction or elimination of dividends. 
B)  can be easily reversed in court. 
C)  results in the minority shareholder having little influence in important corporate issues such as loss of employment. 
D)  occurs mostly in S corporations. 
A)  occurs when a majority shareholder is "frozen out" by the management regarding such issues as a reduction or elimination of dividends. 
B)  can be easily reversed in court. 
C)  results in the minority shareholder having little influence in important corporate issues such as loss of employment. 
D)  occurs mostly in S corporations.

Question 7

In a general partnership, each partner is an owner and has a right to share in the profits of the business.

Accepted Answer

A) True 
 B)False

Question 8

A major advantage of franchising for the franchisor is the:

Accepted Answer

A)  absence of state or federal regulations governing this form of business conduct. 
B)  ability to gain considerable control over the distribution of its products without owning the retail outlets. 
C)  enhancement of competition among the retail outlets. 
D)  right to share a trade mark with the franchisee that is well known and/or highly advertised. 
A)  absence of state or federal regulations governing this form of business conduct. 
B)  ability to gain considerable control over the distribution of its products without owning the retail outlets. 
C)  enhancement of competition among the retail outlets. 
D)  right to share a trade mark with the franchisee that is well known and/or highly advertised.

Question 9

When a general business partnership fails, the partners:

Accepted Answer

A)  lose only their investment. 
B)  may be required to pay partnership debts from personal assets. 
C)  can waive their limited liability. 
D)  are liable for losses equivalent to their own individual contributions. 
A)  lose only their investment. 
B)  may be required to pay partnership debts from personal assets. 
C)  can waive their limited liability. 
D)  are liable for losses equivalent to their own individual contributions.

Question 10

William and Nigel decide to start a partnership business. They ask their friend Sophia to become a limited partner in order to help them with additional funds to get the business started. Which of the following statements about Sophia would be correct if she becomes and remains a limited partner in this scenario?

Accepted Answer

A)  She may be involved in management of the business but to a rather limited degree. 
B)  She cannot be entitled to any share in the profits of the business. 
C)  She may lose her investment if the business fails, but she will have no personal liability for partnership debts. 
D)  She may be considered an employee and therefore will be entitled to wages for the services she renders to the partnership. 
A)  She may be involved in management of the business but to a rather limited degree. 
B)  She cannot be entitled to any share in the profits of the business. 
C)  She may lose her investment if the business fails, but she will have no personal liability for partnership debts. 
D)  She may be considered an employee and therefore will be entitled to wages for the services she renders to the partnership.

Question 11

Which of the following is a taxable entity?

Accepted Answer

A)  Corporation 
B)  Sole proprietorship 
C)  General partnership 
D)  S Corporation 
A)  Corporation 
B)  Sole proprietorship 
C)  General partnership 
D)  S Corporation

Question 12

What are the advantages of franchising?

Accepted Answer

Franchising affords multiple advantages

Question 13

In order to create a general partnership, an express agreement is required.

Accepted Answer

A) True 
 B)False

Question 14

Each partner in a limited liability partnership (LLP) reports her share of the LLP's profits and losses on her personal tax return.

Accepted Answer

A) True 
 B)False

Question 15

The Federal Trade Commission:

Accepted Answer

A)  requires franchisors to explain the termination, cancellation, and renewal provisions of the franchise contract. 
B)  requires franchisors to disclose the number of franchisees terminated in the last five years. 
C)  prohibits certain contract provisions and franchisee practices thought to be unfair to franchisors. 
D)  prohibits the inclusion of restrictions on franchisees in the agreement. 
A)  requires franchisors to explain the termination, cancellation, and renewal provisions of the franchise contract. 
B)  requires franchisors to disclose the number of franchisees terminated in the last five years. 
C)  prohibits certain contract provisions and franchisee practices thought to be unfair to franchisors. 
D)  prohibits the inclusion of restrictions on franchisees in the agreement.

Question 16

The _____ form of business organization most limits personal liability for its shareholders.

Accepted Answer

A)  sole proprietorship 
B)  cooperative society 
C)  corporation 
D)  general partnership 
A)  sole proprietorship 
B)  cooperative society 
C)  corporation 
D)  general partnership

Question 17

A sole proprietorship is a business operated by a person as his own personal property.

Accepted Answer

A) True 
 B)False

Question 18

States generally permit limited liability companies to have an indefinite duration.

Accepted Answer

A) True 
 B)False

Question 19

The formation of a general partnership requires:

Accepted Answer

A)  filing appropriate paperwork with the secretary of state. 
B)  a formal certificate of cancellation when the partnership is terminated. 
C)  no express agreement. 
D)  that each partner be liable for losses depending on the individual partner's contribution to the enterprise. 
A)  filing appropriate paperwork with the secretary of state. 
B)  a formal certificate of cancellation when the partnership is terminated. 
C)  no express agreement. 
D)  that each partner be liable for losses depending on the individual partner's contribution to the enterprise.

Question 20

Pelican Inc., a multinational oil corporation headquartered in Denmark, conducts its operations in various nations by establishing an outlet in different locations. Each outlet creates a separate corporation to own and perform the functions of Pelican Inc. Given this scenario, we can conclude that Pelican Inc. operates through _____.

Accepted Answer

A)  joint venture 
B)  merger 
C)  strategic alliance 
D)  franchising 
A)  joint venture 
B)  merger 
C)  strategic alliance 
D)  franchising

Exam 26: Which Form of Business Organization

A limited liability limited partnership offers limited liability to its limited, but not its general, partners.

Explain the difference between a limited partnership and a limited liability limited partnership (LLLP).

Which of the following is true about franchising?

Which of the following is true of the dissolution of a limited liability company (LLC)?

Partnerships:

A freeze-out:

In a general partnership, each partner is an owner and has a right to share in the profits of the business.

A major advantage of franchising for the franchisor is the:

When a general business partnership fails, the partners:

Which of the following is a taxable entity?

What are the advantages of franchising?

In order to create a general partnership, an express agreement is required.

Each partner in a limited liability partnership (LLP) reports her share of the LLP's profits and losses on her personal tax return.

The Federal Trade Commission:

The _____ form of business organization most limits personal liability for its shareholders.

A sole proprietorship is a business operated by a person as his own personal property.

States generally permit limited liability companies to have an indefinite duration.

The formation of a general partnership requires:

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Property

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers

Introduction to Security

Security Interests in Personal Property

Bankruptcy

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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