Question 1

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.

Question 2

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

Accepted Answer

The answer of Briefly discuss the limitations on a corporation...

Question 3

Harold and Zack have pooled their money together to buy real estate but have filed no formal papers to form a business.Harold,a lawyer,handles all the legal matters and Zack,a real estate broker,finds buyers for the property they have subdivided.Harold and Zack are engaged in a:

Accepted Answer

A) partnership. 
B) close corporation. 
C) joint venture. 
D) business trust.

Question 4

To form an LLC,a charter and an operating agreement must be filed with the Secretary of State in the jurisdiction where the business will operate.

Accepted Answer

A) True 
 B)False

Question 5

Generally,a joint venture is a partnership created for one limited purpose.

Accepted Answer

A) True 
 B)False

Question 6

Alan,a dentist,and his wife Martha,an attorney,can protect their personal assets with limited liability from their business dealings by creating and operating a professional corporation together.

Accepted Answer

A) True 
 B)False

Question 7

The most common form of business ownership is the corporation.

Accepted Answer

A) True 
 B)False

Question 8

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) .

Question 9

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) Frank may become a partner only if his father's will specified such action.

Question 10

E.I.James is a writer with a best selling novel.He wishes to create a corporation called "James,Inc." He will be the only shareholder.Can James incorporate his business of writing?

Accepted Answer

A) Yes,this would be the incorporation of a sole proprietorship. 
B) No,the law requires at least two people to be shareholders of a corporation. 
C) No,the law does not permit a person to,in effect,incorporate himself. 
D) Only if he forms an S Corporation.

Question 11

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Accepted Answer

A) sole proprietorship. 
B) partnership. 
C) joint venture. 
D) limited liability company.

Question 12

Compare and contrast the following forms of business organization:sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Accepted Answer

The answer of Compare and contrast the following forms of...

Question 13

Trudy wishes to buy a national franchise.What information is the seller legally required to provide before she buys the franchise?

Accepted Answer

The answer of Trudy wishes to buy a national franchise.What...

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

Corporations have a distinct advantage over other forms of business organization in the area of taxation.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

Accepted Answer

A) Limited liability company. 
B) Business trust. 
C) Close corporation. 
D) Franchise.

Question 18

The term "S Corporation" comes from:

Accepted Answer

A) the Internal Revenue Code. 
B) the FTC rules. 
C) the U.S.Constitution. 
D) state corporation law.

Question 19

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) Cyndi is personally liable for any negligent act committed by Rachel in the scope of the business activity. 
D) All the above.

Question 20

All the business forms listed below have limited liability except the:

Accepted Answer

A) limited liability company. 
B) general partnership. 
C) Subchapter "S" corporation. 
D) corporation.

Exam 28: Starting a Business

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.

Harold and Zack have pooled their money together to buy real estate but have filed no formal papers to form a business.Harold,a lawyer,handles all the legal matters and Zack,a real estate broker,finds buyers for the property they have subdivided.Harold and Zack are engaged in a:

To form an LLC,a charter and an operating agreement must be filed with the Secretary of State in the jurisdiction where the business will operate.

Generally,a joint venture is a partnership created for one limited purpose.

Alan,a dentist,and his wife Martha,an attorney,can protect their personal assets with limited liability from their business dealings by creating and operating a professional corporation together.

The most common form of business ownership is the corporation.

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

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?

E.I.James is a writer with a best selling novel.He wishes to create a corporation called "James,Inc." He will be the only shareholder.Can James incorporate his business of writing?

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Compare and contrast the following forms of business organization:sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Trudy wishes to buy a national franchise.What information is the seller legally required to provide before she buys the franchise?

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

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

Corporations have a distinct advantage over other forms of business organization in the area of taxation.

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

The term "S Corporation" comes from:

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

All the business forms listed below have limited liability except the: