BUL-4310 Final, Ch. 17 – Flashcards
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A sole proprietor does not own the entire business
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FALSE
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In choosing a form of business organization for a new enterprise, impor¬tant factors include the ability to raise capital.
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TRUE
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A sole proprietor is free to make any decision he or she wishes concerning the business.
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TRUE
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The intent to associate is a key element of a partnership.
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TRUE
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One can join a partnership even if all other partners do not consent
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FALSE
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The partnership is a pass-through entity and a taxpaying entity.
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FALSE
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The majority rule controls decisions that significantly affect the nature of the partnership or that are outside the ordinary course of the partnership business.
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FALSE
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A partner may pursue his or her own interests without automatically violating the partner's fiduciary duties to the partnership and the other partners.
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TRUE
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Limits on a partner's authority normally are effective only with respect to third parties who are notified of the limitation
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TRUE
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Dissociation normally entitles the partner to buy his or her interest from the partnership.
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FALSE
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On a partner's dissociation, the partner's duty of loyalty ends
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TRUE
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After a partner dissociates from a continuing partnership, the partnership is no longer bound by the acts of the dissociated partner, even on a theory of apparent authority.
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FALSE
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On dissolution, the creditors of the partnership, but not the creditors of the individual partners, can make claims on the partnership's assets
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FALSE
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A franchisee is generally legally independent of the franchisor
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TRUE
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No state requires franchisors to provide presale disclosures to prospective franchisees.
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FALSE
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A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise).
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FALSE
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The franchisor may require that the business use a particular organizational form and capital structure.
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TRUE
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The franchise agreement is not likely to set out standards such as sales quotas and record-keeping requirements.
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FALSE
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The duration of a franchise is a matter determined by federal or state statutes.
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FALSE
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If a franchisor's decision to terminate a franchise is made in the normal course of business and reasonable notice is given, it is less likely that the termination will be considered wrongful
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TRUE
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Kari is the sole proprietor of Living Earth Garden Shop. As a sole proprietor, on the business's profits, Kari pays
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only personal income taxes.
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Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically
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dissolve
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Noah and Orin do business as Personnel Providers, an employment agency. In most states, for purposes of suing and being sued, Personnel Providers, which is a partnership, would be treated as
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an entity
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Luke and Maya form Northwest Air Express, a general partnership. The essential elements of this partnership do not include
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goodwill
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Bayside Marina Company and Canoes & Kayaks Inc., share officers, directors, employees, property, and equipment. In reliance on Bayside Marina's reputation, Delivery Transport Inc. contracts to perform services for Canoes & Kayaks, but the firm does not pay. In terms of liability to Delivery Transport, a court is most likely to treat Bayside Marina and Canoes & Kayaks as
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a partnership by estoppel.
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Sable and Rex agree while talking on the phone to form a partner¬ship—The Home Source—to deal in transfers of real property. To be enforceable, their agreement must
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be in writing
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Pualani and Quentin do business as partners in Rio Vista Builders, a residential construction firm. For federal income tax purposes, Rio Vista would be treated as
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a pass-through entity.
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Sweet Selections is a general partnership that sells candy, cards and flowers. 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. To pass a management decision
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a majority of the partners must agree to the decision.
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Corbin, a partner in Dentists & Orthodontists Clinic, applies for a loan with Evermore Bank allegedly on Doctors' behalf but without the authorization of the other partners. Evermore knows that Corbin is not authorized to take out the loan. If Corbin defaults on the loan, liability for its unpaid amount will be imposed on
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Corbin only
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Oliana is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Oliana does not participate in, know about, or ratify, Oliana would be liable for
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all of the obligations, jointly and severally
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Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Bryn's dissociation from the firm results in
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the partnership's buyout of Bryn's interest in the firm.
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Edgar, Jon, and Phoebe do business as Reliable Movers. Phoebe develops a debilitating illness and can no longer work. Phoebe
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may dissociate from the partnership.
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Paradise Footwear buys a franchise from Quadrangle Athletic Shoes Inc. This rela¬tionship, like all other franchise relationships, is governed by
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contract law.
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Ralph is interested in buying a franchise from Sparkle Beverages Inc. For Ralph to make an informed decision concerning this purchase, Sparkle Beverages must disclose in writ¬ing or online
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material facts such as the basis of projected earnings figures
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Eudora is interested in buying a franchise from First Home Realty Company. In this transaction, the Federal Trade Commission's Franchise Rule
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enables Eudora to weigh the deal's risks and benefits
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Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. Refer to Fact Pattern 17-1. To potential investors, Jumbo Juice must provide
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none of the choices
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Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. Refer to Fact Pattern 17-1. Jumbo Juice makes earnings claims to potential investors. For those claims, the franchisor
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must have a reasonable basis
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FreezE Yogurt Corporation provides its prospective franchisees with projected earnings figures based on actual data. FreezE Yogurt must also disclose
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the number and percentage of franchisees that achieved the figures.
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Sasha contracts to buy a franchise from TrustMe Financial Consultants Inc. The contract is silent on the issue of territorial rights. When TrustMe allows a competing franchise to be established near Sasha's office, she suffers a significant loss in profits. This is most likely a violation of
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the implied covenant of good faith and fair dealing
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Fletcher buys a Great Big Burgers, Inc., franchise. Great Big Burgers requires that its fran¬chi¬sees buy its products exclusively for every phase of their op-erations. Be¬cause Fletcher wishes to buy less expensive products, he challenges the re¬quirement. His best argument is probably that the re-quirement violates
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federal antitrust laws
