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Exam 3 Review True/False Questions

question

A sole proprietor does not own the entire business.
answer

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

True
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The franchise is not strictly speaking a business organizational form.
answer

True
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A sole proprietor is free to make any decision he or she wishes concerning the business.
answer

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

False
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A franchisee is generally legally independent of the franchisor
answer

True
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A franchisee is generally economically independent of the franchisor’s integrated business system
answer

False
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In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product
answer

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

False
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No state requires franchisors to provide pre-sale disclosures to prospective franchisees.
answer

False
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Some states require that a franchisor submit advertising aimed at prospective franchisees to the state for approval
answer

True
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Some state require the termination of a franchise when there is no “good cause” for it to continue
answer

False
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If a franchisee is induced to enter into a franchise contract by the franchisor’s fraudulent misrepresentation, the franchisor may be liable for damages
answer

True
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A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise)
answer

False
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The franchisor may require that the business use a particular organizational form and capital structure
answer

True
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The franchise agreement is not likely to set out standards such as sales quotas and record-keeping requirements
answer

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

False
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A franchisor can suggest retail prices for the goods that a franchisee sells but cannot mandate them
answer

True
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When a franchise agreement contains a notice-and-cure provision, a franchisee’s breach of duty of honesty and fidelity is not enough to allow the franchisor to terminate the franchise
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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
answer

True
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No partner is deemed to be an agent of the other partners and of the partnership
answer

False
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A majority of the states treat a partnership as an entity for most purposes
answer

True
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The intent to associate is a key element of a partnership
answer

True
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One can join a partnership even if all other partners do not consent
answer

False
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The partnership is pass-through entity and a taxpaying entity
answer

False
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If no fixed duration of the partnership is specified, the partnership is a partnership in perpetuity, which means that the partnership cannot be dissolved
answer

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
answer

False
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Devoting time, energy, and skill to partnership business is a partner’s duty and is not a compensable service
answer

True
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Every act of the partner concerning partnerships business and “business of the kind” and every contract signed in the partnership’s name bind the partner, but not the firm
answer

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
answer

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
answer

True
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Dissociation normally entitles the partner to buy his of her interest from the partnership
answer

False
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On a partner’s dissociation, the partner’s duty of loyalty ends
answer

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
answer

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 partnerships’s assets
answer

False
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A limited liability partnership may exempt its partners from personal liability for any partnership obligation
answer

True
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In a limited partnership, a limited partner has full responsibility for the partnership and for all its debts
answer

False
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In a limited partnership, a general partner’s dissociation from the firm normally will lead to dissolution unless all partners agree to continue the business.
answer

True
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A limited partnership cannot be dissolved by court decree
answer

False
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A limited liability limited partnership is a type of limited partnership
answer

True
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The corporation is a creature of the common law
answer

False
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One of the key advantages of the corporate form is the unlimited liability of its owners
answer

False
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The state can suspend the entity’s corporate status until the taxes are paid or even dissolve the corporation for failing to pay taxes
answer

True
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When a corporation earns profits, it must pass them on the shareholders in the form of dividends
answer

False
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A publicity held corporation is any corporation whose shares are publicly trades in a securities market
answer

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

True
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The articles of incorporation serve as a primary source of authority for the corporation’s future organization and business functions
answer

True
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The registered agent is the person who can receive legal punishment and behalf of the corporation
answer

False
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A corporation has perpetual existence unless the articles of incorporation state otherwise
answer

True
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A court will pierce the corporate veil of a corporation that is formed to evade an existing legal obligation
answer

True
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Voting rights in a corporation apply only to the election of the firm’s board of directors
answer

False
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Normally, a corporate board of directors appoints itself as the first board at the time the corporation is created
answer

False
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The board of directors normally can remove a corporate officer at any time with or without cause
answer

True
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A director or officer is liable to the corporation or its shareholders for honest mistakes of judgement and bad business decisions
answer

False
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Shareholders own the corporation, and they have legal title to corporate property
answer

False
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Shareholders have the power to vote to elect or remove members of the board of directors
answer

True