Question 1

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by

Accepted Answer

A) a bank loan. 
B) a Small Business Administration Loan. 
C) an infusion of Nina's personal funds. 
D) any of the choices.

Question 2

Any business-except a sole proprietorship-must comply with state tax registration requirements.

Accepted Answer

A) True 
 B)False

Question 3

The proprietor pays only personal income taxes on a sole proprietorship's profits.

Accepted Answer

A) True 
 B)False

Question 4

Anyone who does business must create a separate business organization.

Accepted Answer

A) True 
 B)False

Question 5

Raceway LLC licenses the trademarks to its products to Stadium Markets Inc. to reproduce on clothing and other goods for sale. This is

Accepted Answer

A) a franchise. 
B) none of the choices. 
C) a partnership. 
D) a sole proprietorship.

Question 6

Among the factors an entrepreneur will consider in selecting an organizational form for a business is the liability of the owners for the acts of the firm.

Accepted Answer

A) True 
 B)False

Question 7

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

Accepted Answer

A) a chain-style franchise. 
B) a distributorship franchise. 
C) a manufacturing franchise. 
D) not a franchise.

Question 8

Carl starts up, and assumes the financial risk of, DataWorks, a new marketing enterprise. As a sole proprietorship, the enterprise must meet legal requirements relating to

Accepted Answer

A) none of the choices. 
B) licensing and registration. 
C) intellectual property laws. 
D) all of the choices.

Question 9

A franchisee's breach of the duty of honesty and fidelity is not enough to allow a franchisor to terminate a franchise if their contract contains a notice-and-cure provision.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) advertising costs. 
B) personal expenses. 
C) retirement income. 
D) all of the choices.

Question 11

Tasty Wings LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which the franchisor must comply, prospective franchisees must

Accepted Answer

A) agree to settle any lawsuits that may arise over the documents. 
B) be able to download or save all electronic documents. 
C) provide e-mail addresses for Savory Wraps to verify users' authenticity. 
D) register with the Federal Trade Commission via Savory Wraps' website.

Question 12

Without creating a separate business organization, Rey starts up Street Cruisers, a pre-owned auto sales enterprise. This enterprise is

Accepted Answer

A) none of the choices. 
B) a corporation. 
C) a franchisee. 
D) a sole proprietorship.

Question 13

Del owns Everlast Painting, a sole proprietorship. Del's liability is

Accepted Answer

A) limited by state statute and varies from state to state. 
B) limited to the extent of capital expenditures. 
C) limited to the extent of his or her original investment. 
D) unlimited.

Question 14

Maeve sells New Energy, a sole proprietorship that makes and sells solar panels, to Olaf. This is

Accepted Answer

A) the establishment of a franchise. 
B) the creation of a partnership. 
C) none of the choices-a sole proprietorship cannot be sold. 
D) a transfer of the ownership of the business.

Question 15

A franchise contract cannot give exclusive territorial rights to a certain geographic area to a franchisee, due to antitrust laws.

Accepted Answer

A) True 
 B)False

Question 16

Riki contracts to buy a franchise from Sushi Inc. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

Accepted Answer

A) other Sushi franchisees within the same state. 
B) Riki. 
C) Sushi. 
D) Sushi customers.

Question 17

Sean buys a franchise from Taco Mission Inc. This relationship, like all other franchise relationships, is governed by

Accepted Answer

A) contract law. 
B) all of the choices. 
C) the federal Franchise Rule. 
D) applicable state law.

Question 18

Case law governing franchising emphasizes the importance of good faith and fair dealing.

Accepted Answer

A) True 
 B)False

Question 19

Bob buys a Club Fitness Inc. franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

Accepted Answer

A) balance the rights of both parties. 
B) emphasize the right of Club Fitness to its business operation. 
C) focus on the right of Bob to be dealt with fairly. 
D) underscore the interest of consumers in affordability.

Question 20

Flynn is interested in buying a franchise from Gas Up Inc. The franchisor must disclose material facts that Flynn needs to make an informed decision concerning this purchase, according to

Accepted Answer

A) no law. 
B) federal antitrust laws. 
C) the Federal Trade Commission's Franchise Rule. 
D) the Petroleum Marketing Practices Act.

Exam 34: Small Businesses and Franchapterises

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by

Any business-except a sole proprietorship-must comply with state tax registration requirements.

The proprietor pays only personal income taxes on a sole proprietorship's profits.

Anyone who does business must create a separate business organization.

Raceway LLC licenses the trademarks to its products to Stadium Markets Inc. to reproduce on clothing and other goods for sale. This is

Among the factors an entrepreneur will consider in selecting an organizational form for a business is the liability of the owners for the acts of the firm.

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

Carl starts up, and assumes the financial risk of, DataWorks, a new marketing enterprise. As a sole proprietorship, the enterprise must meet legal requirements relating to

A franchisee's breach of the duty of honesty and fidelity is not enough to allow a franchisor to terminate a franchise if their contract contains a notice-and-cure provision.

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

Tasty Wings LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which the franchisor must comply, prospective franchisees must

Without creating a separate business organization, Rey starts up Street Cruisers, a pre-owned auto sales enterprise. This enterprise is

Del owns Everlast Painting, a sole proprietorship. Del's liability is

Maeve sells New Energy, a sole proprietorship that makes and sells solar panels, to Olaf. This is

A franchise contract cannot give exclusive territorial rights to a certain geographic area to a franchisee, due to antitrust laws.

Riki contracts to buy a franchise from Sushi Inc. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

Sean buys a franchise from Taco Mission Inc. This relationship, like all other franchise relationships, is governed by

Case law governing franchising emphasizes the importance of good faith and fair dealing.

Bob buys a Club Fitness Inc. franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

Flynn is interested in buying a franchise from Gas Up Inc. The franchisor must disclose material facts that Flynn needs to make an informed decision concerning this purchase, according to