Chapter 14 BULE 302 – Flashcards
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In choosing a form of business organization for a new enterprise, important factors include the ease of creation.
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A sole proprietor may own and manage any type of business.
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One of the advantages of a sole proprietorship is that the owner is not liable for the losses of the business.
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A sole proprietorship is a separate legal entity for tax pur¬poses
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A sole proprietorship automatically dissolves on the death of the owner.
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Joint ownership of property in and of itself creates a partnership
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For most purposes, the law recognizes a partnership as an aggregate of its members.
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An association cannot be a partnership without an express agreement
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A partner may pursue his or her own interest without automatically vio-lating the fiduciary duties that he or she owes to the firm
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In most states, a general partner is jointly and severally liable for all partnership obligations.
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On a partner's dissociation, his or her right to participate in the management and conduct of the business terminates.
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A partnership for a definite term cannot be dissolved before the expiration of the term.
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In a limited liability partnership, a partner can be exempt from personal liability for partnership obligations.
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With a few exceptions, all of the rules that govern partnerships apply to limited liability partnerships.
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In a family limited liability partnership, only persons related to each other may be partners
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A general partner has the power to dissociate from a limited partnership regardless of what the partnership agreement specifies.
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In a limited partnership, the liability of a general part¬ner is the same as the liability of a limited partner.
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A limited partner who participates in the management of the partner¬ship may be personally liable to the firm's creditors.
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In winding up a limited partnership, non-partner creditors are paid be¬fore the partners receive their capital contributions.
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In a limited liability limited partnership, the liability of a general part¬ner is the same as the liability of a limited partner
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A limited liability company offers the limited liability of a corporation
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Forming a limited liability company requires filing articles of organization in a federal office.
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Most states require a limited liability company to have at least two members
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A limited liability company is not a "citizen" of any state
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An operating agreement is not required to form a limited liability company.
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A limited liability company cannot be taxed as a corporation.
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For some purposes, a limited liability company can be seen as a legal entity apart from its owners
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The members, managers, and agents of a limited liability company are liable for its obligations by virtue of their status.
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In a limited liability company, members must participate in its management
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The dissociation of a mem¬ber of a limited liability company in violation of the operating agreement is legally wrongful.
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If a party to a franchise contract fails to perform, he or she may be subject to a suit for breach of contract.
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Most states have adopted a uniform franchise law.
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A franchisee may be required to pay certain of the franchisor's administrative expenses.
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A franchisor is never liable for the act of a fran¬chisee's employee
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In determining whether a franchisor acted in good faith in terminating a franchise relationship, a court would balance the rights of both parties.
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Leigh wants to go into the business of construction contracting. Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be a. its greater organizational flexibility. b. its limited liability. c. its perpetual existence. d. the ease of transferring the business to other family members.
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Clive sells Direct Marketing Enterprises, a sole proprietorship, to Edwina. This is a transfer of a. a license. b. a trade name. c. the formula to make a product. d. the ownership of the business.
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D
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Jim organized, and owns and operates, Jim's Landscaping Service in the simplest form of business organization. This is a. a franchise. b. a limited liability company. c. a partnership. d. a sole proprietorship.
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D
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Juli owns KuppaJava Kiosks, a sole proprietorship. Juli's liability is a. limited by state statute and varies from state to state. b. limited to the extent of her capital expenditures. c. limited to the extent of her original investment. d. unlimited.
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Noah and Orin do business as Personnel Partners. In most states, for purposes of suing and being sued, Personnel Partners would be treated as a. an aggregate of the individual partners. b. a natural person. c. an entity. d. a non-existent party.
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Grady and Hedy do business as Island Tours. For federal income tax purposes, Island Tours would be treated as a. an aggregate of the individual partners. b. a natural person. c. an entity. d. a non-existent party.
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Sabin and Tyler agree while talking on the phone to form a partner¬ship. Their partnership agreement is legally binding a. only if a third person knows of the agreement. b. only if the agreement is reduced to writing. c. only if the parties exchange valid consideration. d. without more.
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Bo and Clancy decide to do business as Marketing & Promotion Services. To be a partnership, this association can result from an agreement that is a. express, but not from an agreement that is implied. b. implied, but not from an agreement that is express. c. oral, written, or implied by conduct. d. written, but not from an agreement that is oral or implied.
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C
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Dave and Eiger are partners in First-Place Athletic Supplies, which sells sports equipment. Dave manages the business. Unless the partnership agreement states otherwise, Dave is a. entitled to compensation in proportion to its effect on the business. b. entitled to compensation in proportion to the effort expended. c. entitled to compensation in proportion to the effort required. d. not entitled to compensation for his effort.
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D
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Mabel and Nicol do business as One World Realty. Mabel acts on the firm's behalf in a deal with Property Acquisition Company, but fails to account to One World for the profit. To her firm, Mabel is a. liable for breach of the duty of care. b. liable for breach of the duty of economic sense. c. liable for breach of the duty of loyalty. d. not liable.
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C
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Fay is admitted to Global Associates, an existing partnership. A partnership debt incurred before the date of her admission comes due. Fay is a. not liable for the debt. b. only liable for the debt up to the amount of his capital contribution. c. personally liable only to the extent the other partners do not pay. d. personally liable to the full extent of the debt
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B
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Clu, Dolf, and Elton do business as Fertile Valley Farm, a partnership. Clu's relationship to the firm ends, but it continues to do business. Clu's ceasing to be involved with the farm is termed a. dissociation. b. dissolution. c. winding up. d. wrongful.
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Maury, Neil, and Ogden want to form a limited partnership to manage their Picture This photo studio. Their firm must have a. at least one general partner and one limited partner. b. at least two general partners. c. at least two limited partners. d. no general partners.
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Daisy is considering forms of business organization for Daisy's Designs, an ar¬chitectural firm. An advantage of a limited liability partnership is that partners can avoid personal liability for a. all partnership obligations that exceed capital contributions. b. any partnership obligation. c. only partnership obligations that fall within capital contributions. d. other partners' wrongdoing.
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D
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Gallop Western Ranch is a family limited liability partnership (FLLP). In an FLLP, all of the partners must be a. natural persons only. b. natural persons or persons acting as fiduciaries for natural persons. c. persons acting as fiduciaries for natural persons only. d. related
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B
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Fact Pattern 17-1 Brad is a general partner, and Carlos and Dora are limited partners, in Eastside Physicians, a medical clinic and limited partnership. Refer to Fact Pattern 17-1. Carlos's assignment of his interest in Eastside to Good Credit Corporation results in a. nothing with respect to Eastside's existence. b. the maturity of Eastside's debts. c. the suspension of Eastside's business. d. the termination of Eastside's legal existence.
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A
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Fact Pattern 17-1 Brad is a general partner, and Carlos and Dora are limited partners, in Eastside Physicians, a medical clinic and limited partnership. Refer to Fact Pattern 17-1. Brad's dissociation from the firm results in a. nothing with respect to Eastside's existence. b. the maturity of Eastside's debts. c. the suspension of Eastside's business. d. the termination of Eastside's legal existence
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D
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Fact Pattern 17-1 Brad is a general partner, and Carlos and Dora are limited partners, in Eastside Physicians, a medical clinic and limited partnership. Refer to Fact Pattern 17-1. Eastside is dissolved and its assets are collected, liquidated, and distributed. This results in a. nothing with respect to Eastside's existence. b. the maturity of Eastside's debts. c. the suspension of Eastside's business. d. the termination of Eastside's legal existence.
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D
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Bruce is a general partner in Capitol Realty, LLLP, a limited liability lim-ited partnership, which cannot pay its debts. Bruce is personally li¬able for the debts a. in proportion to the number of partners in the firm. b. to no extent. c. to the extent of his capital contribution. d. to the full extent.
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C
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Bluto is considering forms of business organization for Consult Me!, his Web site consult¬ing firm. Most states require that a limited liability com¬pany have at least a. no members. b. one member. c. two members. d. three members, including at least one general partner.
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B
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Dan is considering forms of business organization for his financial advisory firm. Like most states, Dan's state requires that to form a limited liabil¬ity company, he must file with a central state agency a. articles of certification. b. articles of formation. c. articles of organization. d. no specific documents.
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C
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QuikBooks LLC is a limited liability company. Like any other LLC, unless QuikBooks chooses otherwise, the firm will be taxed as a. a corporation. b. a franchise. c. a partnership. d. a sole proprietorship.
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C
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Energy Resources, LLC, is a limited liability company. Rather than dis-tribute its profits to its members, Energy wants to reinvest the profits in its business. For this reason, Energy may choose to be taxed as a. a corporation. b. a franchise. c. a partnership. d. a sole proprietorship
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A
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Mit-E Mart LLC was formed in New Jersey. Mit-E Mart's members are Odel, who is a citizen of New Jersey, and Pola, who is a citizen of New York. For federal jurisdictional purposes, Mit-E is a citizen of a. all states. b. New Jersey and New York. c. New Jersey only. d. no state.
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B
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Vijay is a member of Watchit, LLC, a limited liability company. Vijay is li-able for Watchit's debts a. in proportion to the total number of members. b. to the extent of his capital contribution. c. to the extent that the other members do not pay the debts. d. to the full extent.
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B
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B2B, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is gov¬erned by a. the applicable state LLC statute. b. a federal Uniform LLC Law. c. the principles of partnership law. d. a state corporation statute.
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A
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Waste Management Services, LLC, is a member-managed limited liability company. If the law in Waste's state is like the law in most states, unless the members have agreed otherwise, voting rights are apportioned accord¬ing to a. capital contributions. b. participation in management. c. seniority. d. transactions with the firm.
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A
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CPA Accounting, LLC, is a limited liability company. If the law in CPA's state is like the law in most states, unless the members have agreed other-wise, participants in the firm's management will be considered to include a. all members. b. no member. c. one member. d. two members, including at least one general partner.
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A
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Flip is a member of Great States Trucking LLC. Flip's relationship to Great States ends, but the firm continues to do business. Flip's ending his relationship with the firm is termed a. dissociation. b. dissolution. c. required. d. wrongful.
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A
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Fritz is interested in buying a franchise from Good n' Plentiful Inc. This transaction, like other franchise deals, is regulated to protect a. certain types of anticompetitive agreements. b. franchisors from dishonest prospective franchisees. c. prospective franchisees from dishonest franchisors. d. the government's power to restrict freedom of contract.
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C
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Nico is interested in buying a franchise from Oz Inc. For Nico to make an informed decision concerning this purchase, Oz must disclose in writing or online a. general estimates of costs and sales, but not the basis for them. b. material facts such as the basis of projected earnings figures. c. no information. d. start-up requirements, but not renewal conditions.
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B
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Opie buys a franchise from Paradise Clothing Corporation. Because this franchise relationship is, like all other franchise relationships, primarily of a certain type, it is governed by a. contract law. b. the federal service-station franchise termination law. c. the Federal Trade Commission's Franchise Rule. d. the Illinois Franchise Disclosure Act
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A
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Fern contracts to buy a franchise from Green Grocery Company. The contract is silent on the issue of territorial rights. Green allows a competing franchise to be established near Fern's store, which suffers a significant loss in profits. This is most likely a violation of a. no law. b. the ban on certain types of anticompetitive agreements. c. the Federal Trade Commission's Franchise Rule. d. the implied covenant of good faith and fair dealing.
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D
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Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony a. has a reasonable time, with notice. b. has whatever time Star determines, with or without notice. c. is entitled to notice, but nothing more. d. must close immediately.
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A
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Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agree¬ments, it will specify that Comida can ter¬minate the franchise a. at will. b. for any reason. c. for cause only. d. for no reason.
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C
