Question 1

Any suit against the business or its employees does not lead to unlimited personal liability for the owner of a sole proprietorship.

Accepted Answer

False

Question 2

Clive, Domina, and Elgar are the first directors on the board of Face x Face Corporation, a social media host. Subsequent directors are elected by a majority vote of Face x Face\'s

Accepted Answer

shareholders

Question 3

The corporation is a creature of the common law.

Accepted Answer

False

Question 4

Stocks represent the borrowing of funds by firms.

Accepted Answer

False

Question 5

A receiver is always appointed by a court if the dissolution of a corporation is involuntary.

Accepted Answer

True

Question 6

Global Shipping Corporation and Harbor Warehouse Company transfer their property to Investment Managers, Inc., which manages the property and distributes the profits to Global Shipping and Harbor Warehouse. This form of a business organization is

Accepted Answer

business trust

Question 7

Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm\'s behalf.      Refer to Fact Pattern 20-1. Any damages recovered by Ray\'s suit will go to

Accepted Answer

SBC

Question 8

If a corporation has S corporation status, it can avoid the imposition of income taxes at the corporate level.

Accepted Answer

True

Question 9

To pierce the corporate veil means to shield the shareholders from personal liability.

Accepted Answer

False

Question 10

Rita and Susan want to form and do business as Trips & Travel Agency, Inc. They will serve as the firm\'s directors and officers, and will initially hold all of the stock in the company. A corporation is owned by

Accepted Answer

the shareholders

Question 11

Qatar Global Investments is a foreign entityâa firm owned and operated by investors in a foreign country. With respect to a limited liability company in the United States, Qatar Global can

Accepted Answer

become a member

Question 12

Doris wants to go into business as eBeats to market a new fitness app. Organizational fees are required to form all of the following business organizations except

Accepted Answer

?a sole proprietorship.

Question 13

Fong contracts to buy a franchise from Genuine Asian Sushi House Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

Accepted Answer

Genuine Asian Sushi House.

Question 14

Smoke & Mirrors Inc. can be compelled to dissolve by

Accepted Answer

a court order.

Question 15

Holly is a director of International Gourmet Spices, Inc. As a director, with respect to the corporation, Holly is

Accepted Answer

a fiduciary.

Question 16

Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is

Accepted Answer

an artificial being

Question 17

As a general rule, shareholders make daily business decisions for a corporation.

Accepted Answer

False

Question 18

A court will pierce the corporate veil of a corporation that is formed to accomplish an illegitimate objective.

Accepted Answer

True

Question 19

Craig, Donna, and Eve do business as FasTrak Career Consultants. Eve\'s relationship to FasTrak ends, but the firm continues to do business. This is

Accepted Answer

dissociation.

Question 20

Sweet Selections, a general partnership, operates as a gift shop. Sweet Selections has ten partners. Jill and Amy each have a 25 percent interest in the partnership. All the other members have a 10 percent interest. With respect to management decisions

Accepted Answer

a majority of the partners must agree.

Question 21

A new position on a board of directors can be created by an amendment to the articles of incorporation.

Accepted Answer

True

Question 22

A limited liability company can be held liable for any loss or injury caused by the wrongful acts or omissions of its members.

Accepted Answer

True

Question 23

Most courts apply the same principles to joint ventures as they apply to partnerships.

Accepted Answer

True

Question 24

Corbin organized, and owns and operates, Corbin\'s Deep Sea Fishing Tours in the simplest form of business organization. This is

Accepted Answer

a sole proprietorship.

Question 25

The duration of a franchise is a matter determined by federal or state statutes.

Accepted Answer

False

Question 26

A director or officer must exercise due care in performing their duties, including acting in good faith.

Accepted Answer

True

Question 27

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

Accepted Answer

?balance the rights of both parties.

Question 28

Like the shareholders of a corporation, the owners of a limited liability company enjoy limited liability.

Accepted Answer

True

Question 29

A partner may pursue his or her own interests without automatically violating the partner\'s fiduciary duties to the partnership and the other partners.

Accepted Answer

True

Question 30

Directors must refrain from self-dealing.

Accepted Answer

True

Question 31

Wren owns and operates Yoga Center without creating a separate business organization. She receives all the profits from the fees for the classes and the sales of the center\'s merchandise. Yoga Center is most likely

Accepted Answer

a sole proprietorship.

Question 32

Ida, Jerzy, and Kit are the directors of Liberty Convenience Stores, Inc. Liberty has nine officers and forty-six shareholders. Dividends are ordered by the firm\'s

Accepted Answer

board of directors

Question 33

Ernst is a director of Fine Art Dealers, Inc. Ernst is trained in art valuation. Fine Art makes several purchases in which it pays too much for artwork. Ernst approves all the transactions without reading the details. Ernst is most likely liable for breach of

Accepted Answer

the duty of care

Question 34

Greenway Corporation and Happy Trails, Inc., combine their efforts to build a network of biking and hiking trails along an unused railroad spur. Their form of business organization is

Accepted Answer

a joint venture

Question 35

IT Apps, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is governed by

Accepted Answer

the applicable state LLC statute.

Question 36

Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm\'s behalf.      Brandi is a shareholder of Cloud Servers & Routers Inc.. Brandi will be deemed to have a fiduciary duty to Cloud and its minority shareholders if she has a sufficient number of shares to

Accepted Answer

exercise de facto control.

Question 37

Shannon is an officer for Turista Shirts Corporation. Due to a bad business decision on Shannon\'s part, the company\'s sales decrease. Shannon is most likely liable for breach of

Accepted Answer

none of the choices

Question 38

Tech Talent & Personnel, Inc., is a corporation. Tech Talent\'s implied powers enable it to

Accepted Answer

borrow and lend funds.

Question 39

Jeri and Knute are members of Lighthouse Tours LLC, a limited liability company. With respect to Lighthouse Tours\'s liability, as members, Jeri and Knute are shielded from

Accepted Answer

a personal liability

Question 40

Wiley incorporates his business as Wiley Wire Corporation in Texas. He and his group of shareholders intend to make a profit from their sales of fencing wire. Wiley Wire Corporation is

Accepted Answer

a private corporation

Question 41

Nora is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nora\'s decisions must be informed and

Accepted Answer

reasonable

Question 42

The articles of incorporation serve as a primary source of authority for the corporation\'s future organization and business operations.

Accepted Answer

True

Question 43

Dana is a member of Earthground Coffee, LLC, a limited liability company. Dana is liable for Earthground\'s debts

Accepted Answer

?to the extent of her investment in the firm.

Question 44

A partnership is a pass-through entity and a taxpaying entity.

Accepted Answer

False

Question 45

A partner is liable to the partnership for honest errors in judgment in conducting partnership business.

Accepted Answer

False

Question 46

Limited liability companies are entities apart from their owners.

Accepted Answer

True

Question 47

Miracle Mobile Devices, Inc., is a private, for-profit corporation that is owned by five shareholders who are members of the same family. Miracle is

Accepted Answer

?a close corporation.

Question 48

In choosing a form of business organization for a new enterprise, important factors include the ability to raise capital.

Accepted Answer

True

Question 49

A partner always has the power but he or she may not have the right to dissociate from the partnership.

Accepted Answer

True

Question 50

Orlando is a limited partner in Port of Call Exports, a limited partnership. By participating in the firm\'s management, Orlando is liable for its obligations

Accepted Answer

to the full extent

Question 51

For a defendant to be convicted in a criminal prosecution under the securities laws, there can be no reasonable doubt that the defendant knew he or she was acting wrongfully.?

Accepted Answer

true

Question 52

World Metals, Inc., a U.S. firm, wants to file a suit in the United States against a Venezuela government agency, alleging a violation of certain international laws. Under the Foreign Sovereign Immunities Act, the agency is?

Accepted Answer

not immune from the jurisdiction of U.S. courts.

Question 53

The definition of security in the Securities Act of 1933 does not include instruments commonly known as securities.?

Accepted Answer

false

Question 54

Monopoly power may be proved by evidence that a firm used its power to control prices.

Accepted Answer

true

Question 55

Bonds & Stocks Corporation, and its officers, directors, and shareholders, buy and sell securities. SEC Rule 10b-5 applies to the purchase or sale of

Accepted Answer

any security

Question 56

Optima Medico Corporation, a U.S. firm, signs a contract with Pharma Beneficial, Ltd., a Canadian firm, to give Pharma the right to sell Optima\'s products in Canada. This is?

Accepted Answer

a distribution agreement

Question 57

The basis for Mexico to give effect to the laws and court decisions of the United States is primarily?

Accepted Answer

courtesy and respect

Question 58

A party to a licensing agreement generally agrees to pay royalties on some basis.?

Accepted Answer

true

Question 59

U.S. laws that prohibit discrimination in employment apply to U.S. employees working for U.S. firms located abroad.?

Accepted Answer

true

Question 60

NuTrend Clothing Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933, a security is

Accepted Answer

almost any stake in the ownership or debt of a company.

Question 61

To acquire monopoly power in its market, Global Condiments, Inc., sets its prices substantially below the normal costs of production. Under antitrust law, this is

Accepted Answer

a violation if the firm thereby acquires monopoly power.?

Question 62

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries, Inc., has assets of more than $50 mil-lion and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to

Accepted Answer

Gourmand Pastries only.

Question 63

Telfonix Corporation, a U.S. firm, and Adex, Inc., a British firm, are parties to a contract with a choice-of-forum clause. The forum specified in the clause must be within the geographic boundaries of

Accepted Answer

neither the United States nor Britain.

Question 64

OnSpec, Inc., and its officers, directors, and shareholders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving

Accepted Answer

short-swing profits

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