Question 1

In choosing a form of business organization for a new enterprise, important factors include the ease of creation.

Accepted Answer

True

Question 2

In choosing a form of business organization for a new enterprise, important factors include the liability of the owner.

Accepted Answer

True

Question 3

In a sole proprietorship, the proprietor shares the burden of any losses or liabilities incurred by the business enterprise with the government.

Accepted Answer

False

Question 4

A sole proprietor must create a separate business organization to create a sole proprietorship.

Accepted Answer

False

Question 5

A sole proprietor has unlimited liability for all obligations that arise in doing business.

Accepted Answer

True

Question 6

A sole proprietorship lacks continuity on the death of the proprietor.

Accepted Answer

True

Question 7

In a general partnership, all partners have equal rights in managing the partnership.

Accepted Answer

True

Question 8

Each partner in a partnership has the right to inspect the partnership books and records.

Accepted Answer

True

Question 9

Partnership profits must be shared in the same proportion as the partners\' investment of capital in the firm.

Accepted Answer

False

Question 10

A sharing of profits and losses is the only requirement of a partnership.

Accepted Answer

False

Question 11

A partner\'s profit from a partnership is taxed as income to the firm.

Accepted Answer

False

Question 12

A partner owes to the partnership and the other partners a duty of loyalty.

Accepted Answer

True

Question 13

A partner is entitled to make secret profits from the partnership\'s business or the use of its property.

Accepted Answer

False

Question 14

In a general partnership, the acts of one partner in the ordinary course of business can subject the other partners and the firm to liability.

Accepted Answer

True

Question 15

A third party cannot sue one of the partners of a partnership without suing all of the partners.

Accepted Answer

False

Question 16

In a limited liability partnership, a partner can be exempt from personal liability for the malpractice of other partners.

Accepted Answer

True

Question 17

In a limited partnership, a limited partner is liable for all partnership debts.

Accepted Answer

False

Question 18

State limited liability company statutes are uniform.

Accepted Answer

False

Question 19

The members of a limited liability company enjoy limited liability.

Accepted Answer

True

Question 20

A limited liability company is not a citizen of any state.

Accepted Answer

False

Question 21

A limited liability company is a citizen of every state in which it does business.

Accepted Answer

False

Question 22

A limited liability company can be taxed as a corporation.

Accepted Answer

True

Question 23

In many states, an operating agreement is not required for a limited liability company to exist

Accepted Answer

True

Question 24

A member of a limited liability company (LLC) has the power and the right to dissociate from the LLC at any time.

Accepted Answer

False

Question 25

Generally, a dissociated member of a limited liability company (LLC) has the right to have his or her interest in the LLC bought out by the other members.

Accepted Answer

True

Question 26

When a member dissociates form a limited liability company, the member\'s duty of loyalty continues.

Accepted Answer

False

Question 27

Joint venturers have the authority to enter into contracts that will bind the joint venture.

Accepted Answer

True

Question 28

A business trust resembles a corporation.

Accepted Answer

True

Question 29

A cooperative must be incorporated.

Accepted Answer

False

Question 30

Laws governing franchising are designed in part to prevent franchisors from terminating franchises without good cause.

Accepted Answer

True

Question 31

The laws governing franchising are primarily designed to protect franchisors from dishonest franchisees.

Accepted Answer

False

Question 32

Some states require franchisors to provide presale disclosures to prospective franchisees.

Accepted Answer

True

Question 33

Normally, a franchisee determines the territory that it will serve.

Accepted Answer

False

Question 34

The validity of a provision permitting the franchisor to establish and enforce certain quality standards is questionable.

Accepted Answer

False

Question 35

In determining whether a franchisor acted in good faith in terminating a franchise relationship, a court would balance the rights of both parties.

Accepted Answer

True

Question 36

Cal sells \"DownSize,\" a weight-reduction program, from a Web site, in competition with Eat-Less Inc.\'s product \"Fit \'n Trim.\" Eat-Less files a suit against Cal, alleging in part that he is a sole proprietor, but his enterprise should be deemed a different form of business. Cal\'s enterprise should most likely be considered    a. a corporation because DownSize is sold online.  b. a franchisee because DownSize is sold in competition to Fit \'n Trim.  c. a sole proprietorship because Cal is a sole proprietor.  d. no form of business entity because Cal has no formal organization.

Accepted Answer

c.  a sole proprietorship because Cal is a sole proprietor.

Question 37

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.

Accepted Answer

a.  its greater organizational flexibility.

Question 38

Phillipa is the sole proprietor of Incredible Floral Arrangements. As a sole proprietor, on Incredible\'s profits, Phillipa    a. does not pay income taxes.  b. pays only personal income taxes.  c. is taxed twice.  d. pays both personal and sole proprietor income taxes.

Accepted Answer

b.  pays only personal income taxes.

Question 39

Julia owns and operates Collectable Dolls without creating a separate business organization. She receives all the profits from the doll sales. Collectable Dolls is most likely a    a. corporation.  b. limited liability company.  c. partnership.  d. sole proprietorship.

Accepted Answer

d.  sole proprietorship.

Question 40

Robert owns Textbooks Plus, a sole proprietorship that sells textbooks. When Robert dies, Textbooks Plus will    a. be automatically dissolved.  b. pass directly to his oldest child.  c. pass directly to the state.  d.be evenly divided among all Robert\'s heirs.

Accepted Answer

a.  be automatically dissolved

Question 41

Jody owns KuppaJava Kiosks, a sole proprietorship. Jody\'s liability is    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.

Accepted Answer

d.  unlimited.

Question 42

Ben, who runs a livestock breeding business, owes the Circle C Ranch $40,000. Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid. Because of this agreement, the Circle C is Ben\'s    a. partner.  b. creditor.  c. agent.  d. joint venturer.

Accepted Answer

b.  creditor.

Question 43

Will and Jay form Northwest Air Express, a general partnership. The essential elements of this partnership do not include    a. a sharing of profits and losses.  b. a joint ownership of the business.  c. an equal right to management in the business.  d. goodwill.

Accepted Answer

d.  goodwill.

Question 44

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. express or implied.  d. written, but not otherwise express or implied.

Accepted Answer

c.  express or implied.

Question 45

Sweet Stuff is a general partnership that sells candy, cards, and flowers. Sweet Stuff has ten partners. Jill and Amy each have a 25 percent interest in the firm. The other partners each have a 10 percent interest. In management matters    a. each partner has one equal vote.  b. each partner votes in proportion to his or her interest.  c. only the two partners with the largest interests have votes.  d. only a partner charged with managing the firm has a vote.

Accepted Answer

a.  each partner has one equal vote.

Question 46

Cody is a partner in Delta Accounting Service. Cody can inspect    a. all of Delta\'s books and records.  b. Delta\'s books and records only as the firm\'s management permits.  c. Delta\'s books and records only for a reasonable purpose.  d. Delta\'s books and records relating to Cody\'s capital contribution only.

Accepted Answer

a.  all of Delta\'s books and records.

Question 47

Mabel and Nicol do business as One World Realty. In acting on the firm\'s behalf in a deal with Property Acquisition Company, Mabel fails to account 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.

Accepted Answer

c.  liable for breach of the duty of loyalty.

Question 48

Hollister and Gladys do business as partners in Frothy Confections. For federal income tax purposes, Frothy Confections would be treated as    a. a pass-through entity.  b. a natural person.  c. a tax-paying entity.  d. a partnership by estoppel.

Accepted Answer

a.  a pass-through entity.

Question 49

Newt is considering forms of business organization for Newton Design, an architectural firm. An advantage of a limited liability partnership is that partners can avoid personal liability for    a. their own wrongful acts.  b. only other partners\' malpractice.  c. only partnership obligations that exceed capital contributions.  d. only partnership obligations that fall within capital contributions

Accepted Answer

b.  only other partners\' malpractice.

Question 50

Fern and Gray want to form a limited partnership to manage two restaurants, CafÃ© Latte and Deli Delite. In most states, a limited partnership will be created when    a. a certificate of limited partnership is filed.  b. a partnership agreement is executed.  c. the business for which the firm is formed actually begins.  d. the partners make their capital contributions.

Accepted Answer

a.  a certificate of limited partnership is filed.

Question 51

Lucy is a limited partner in Metro Contractors, a limited partnership, which cannot pay its debts. Lucy is personally liable for the debts    a. in proportion to the number of partners in the firm.  b. to no extent.  c. to the extent of her capital contribution.  d. to the full extent.

Accepted Answer

c.  to the extent of her capital contribution.

Question 52

Venture Capital, LP, is a limited partnership. Its limited partners include more than 150 sophisticated investors and investment professionals. A Venture limited partner loses his or her limited liability if he or she    a. acts as the firm\'s manager.  b. does not participate in the firm\'s management.  c. invests in Unified Fund, one of Venture\'s competitors.  d. votes on the firm\'s sale or dissolution.

Accepted Answer

a.  acts as the firm\'s manager.

Question 53

Dani is considering forms of business organization for her financial advisory firm. Like most states, Dani\'s state requires that to form a limited liability company, she must file with a central state agency    a. articles of certification.  b. articles of formation.  c. articles of organization.  d. no specific documents.

Accepted Answer

c.  articles of organization.

Question 54

Coco is considering forms of business organization for her concessions business?Coco\'s Cupcakes. Most states require that a limited liability company have    a. no minimum number of members.  b. at least one member.  c. at least two members.  d. at least three members, including at least one general partner.

Accepted Answer

b.  at least one member.

Question 55

Location! Realty LLC is a limited liability company. Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of    a. all states.  b. every state in which its members are citizens.  c. no state.  d. only the state in which it was formed.

Accepted Answer

b.  every state in which its members are citizens.

Question 56

Jordana is a member of Klondike Coffee, LLC, a limited liability company. Jordana is liable for Klondike\'s debts    a. in proportion to the total number of members.  b. to the extent of her capital contribution.  c. to the extent that the other members do not pay the debts.  d. to the full extent.

Accepted Answer

b.  to the extent of her capital contribution.

Question 57

Jumbo Jumpin\' Jelly Beans, LLC, is a limited liability company. Unless indicated otherwise on Jumbo\'s federal tax form, the firm will be taxed as    a. a cooperative.  b. a corporation.  c. a joint venture.  d. a partnership.

Accepted Answer

d.  a partnership.

Question 58

Homer\'s Remodeling, LLC, is a limited liability company. Among the members, a dispute arises that their operating agreement does not cover. No statute applies. The dispute is most likely governed by the principles of    a. corporate law.  b. partnership law.  c. sole proprietorship law.  d. joint venture law.

Accepted Answer

b.  partnership law.

Question 59

Kristal is a member of Laboratory CSI Services, LLC, a limited liability company. Kristal can participate in the firm\'s management    a. only to the extent that she assumes liability for the firm\'s debts.  b. only to the extent of her investment in the firm.  c. to any extent.  d. to no extent.

Accepted Answer

c.  to any extent.

Question 60

Flip is a member of Great States Trucking LLC. Flip ceases to be associated with the carrying on of the firm\'s business, but not in violation of the operating agreement. This is    a. dissociation.  b. dissolution.  c. winding up.  d. wrongful.

Accepted Answer

a.  dissociation.

Question 61

Chocolate Sundry LLC\'s members and managers are Devlin, Effie, and Flavia. After Devlin\'s relationship to the firm ends, Effie and Flavia agree to discontinue the business. This is    a. illegal.  b. optional.  c. required.  d. wrongful.

Accepted Answer

b.  optional.

Question 62

Peyton, Qiana, and River form a syndicate to buy a professional basketball franchise. This syndicate could be set up as    a. a joint venture.  b. a corporation.  c. a sole proprietorship.  d. a limited liability company.

Accepted Answer

b.  a corporation.

Question 63

Exotic Stuff Company and First Pier, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This business organization is    a. a business trust.  b. a joint stock company.  c. a joint venture.  d. a syndicate.

Accepted Answer

b.  a joint stock company.

Question 64

Jin, Karlo, and other consumers form Metro Purchasing Cooperative. This form of business organization makes it possible for these individuals to    a. avoid personal liability for the acts of the cooperative.  b. obtain an exemption from state laws governing corporations.  c. pay no taxes on their business income.  d. pool their resources to gain an advantage in the market.

Accepted Answer

d.  pool their resources to gain an advantage in the market.

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