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WorksheetsFinal Exam Review- Business Law
Total questions: 50
Worksheet time: 30mins
Grace is the sole proprietor of Living Earth Garden Shop. As a sole proprietor, on the business’s profits, Grace pays
no income taxes
only business income taxes
only person income taxes
both personal and business income taxes
Haute Dogs, Inc. sells a franchise to Izzy. Izzy is
a franchisor
a franchisee
an agent
a principal
Haute Dogs, Inc. sells a franchise to Izzy. Haute Dogs, Inc. is
a franchisor
a franchisee
an agent
a principal
In a distributorship franchise arrangement:
franchisor transmits to a franchisee the essential ingredients or formula to make particular product;
is a chain-business operation;
manufacturer licenses a dealer to sell its product;
none of the choices.
Peter buys the exclusive right to the System Tech trademark and sells and leases System Tech brand products in a certain area from the System Tech Corporation. Their franchise agreement requires Peter to pay certain administrative expenses. Their agreement may also require Peter to pay a certain percentage of the franchisor’s
advertising costs;
personal expenses;
retirement income;
None of the choices.
A franchise is generally
legally independent of the franchisor.
economically dependent of the franchisor’s integrated business system.
both A and B
neither A nor B.
Rob is opening a business which he will call Rob’s Sporting Goods. He plans to operate his business as a sole proprietorship. Which of the following statements is true:
The main advantage of a sole proprietorship is that it has limited liability for the tort and contractual obligations of the sole proprietorship;
The sole proprietorship will cease to exist when Rob dies;
Rob must obtain a certificate from the government in order to operate his business as a sole proprietorship;
The profits earned by Rob’s Sporting Goods will be subject to double taxation
In a manufacturing franchise agreement
a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product;
a franchisor licenses a dealer to sell its product;
is a chain-style business operation;
None of the choices
A franchisor may include in the franchise agreement
specific goals and quotas;
franchisee’s territorial rights;
quality control
All of the choices
Betty owns Heart & Soil, a franchise that sells garden supplies, plants and seeds. One day, Amara, an employee, forgets to mop up after watering the plants, resulting in Calvin, a customer, falling and injuring himself. Which statement is true concerning the franchisor’s liability to Calvin:
The franchisor is never liable for the acts/omissions of the franchisee’s employees;
The franchisor is always liable for the acts/omissions of the franchisee’s employees;
The franchisor is liable if they exerted extensive control over the franchisee’s day-to-day operations;
None of the choices.
Joe and Ed are partners in J & E, LLP (Limited Liability Partnership). Joe and Ed are engineers. Which of the following is true?
If Joe designs a bridge which collapses (negligence), Ed will not be liable
If Joe designs a bridge which collapses (negligence), neither Ed nor Joe will be liable;
Joe and Ed do not have to file any documents with the Secretary of State in order to operate their business as an LLP;
J & E, LLP is a tax paying entity.
Luke and Maya form Northwest Air Express, a general partnership. The essential elements of this partnership do not include
sharing of profits and losses;
joint ownership of the business;
an equal right to management;
goodwill.
Paul and Quentin do business as partners in Rio Vista Builders, a residential construction business. For federal income tax purposes, Rio Vista would be treated as
a natural person;
a pass-through entity;
a tax paying entity;
partnership by estoppel.
Bill and Ted are partners in Excellent Adventure Rafting, a general partnership. The rafting company earned a profit of 250,000 in 2016 which Bill and Ted split evenly. How are Federal income taxes determined in their partnership?
Excellent Adventures pays taxes on $250,000
Bill and Ted pay personal taxes on their share of the profits;
Only the general partner pays income taxes on profits;
None of the choices.
Neil and Oliver are limited partners in Port City Exports, a Limited Partnership. To avoid personal liability for partnership obligations, they must not
acquire an interest in the firm;
contribute to property to the firm;
engage in activities independent of the firm’s business;
participate in the firm’s management.
Stephen, Jimmy, Seth and James are partners in Laugh Central Comedy Club, a limited partnership. Jimmy is the general partner, Stephen, Seth and James are limited partners.
Which statement is true?
Jimmy has unlimited liability as the general partner, which includes his personal property;
Stephen, Seth and James are liable to creditors up to the amount of their capital contribution to the partnership;
Jimmy oversees management of the club; the others do not have a say in management and operations;
All of the choices.
Melanie and Natasha form Orchids, Inc. Ultimate responsibility for policy decisions necessary to the management of corporate affairs rest with Orchids
Board of Directors
incorporators
officers
shareholders
Frank is an officer of Pond Event Ticketing, Inc. As an officer, with respect to the corporation, Frank is
a proxy
a forum
a fiduciary
a quorum
Shares of Home Mortgage Corporation are publicly traded in securities markets. Home Mortgage Corporation is
a close corporation;
an online corporation;
a publicly-held corporation;
a de jure corporation.
Dollars and Sense, Inc., is incorporated in Texas and is doing business in the state of New York. In New York Dollars & Sense is properly referred to as
a fancy corporation;
a public corporation;
a foreign corporation;
an alien corporation
George and Evander want to form and do business as a corporation. A corporation is
A natural being
an artificial being
a tangible thing
ultra vires
Which of the following statements is true?
The shareholders of the corporation run the day-to-day operations of the corporation;
The officers of the corporation elect the directors of the corporation;
The shareholders of the corporation elect the officers of the corporation;
The shareholders are the owners of the corporation.
Dividends are:
compensation paid to the directors of a corporation;
penalties imposed by the federal government for self-dealing by a director of the corporation;
a distribution to corporate shareholders of corporate profits or income;
bonus money paid to the directors of a corporation.
Eli and Serena are shareholders in GoGetEm, Inc., a sporting goods company. Eli and Serena received dividends from GoGetEm at the end of the fiscal year. For purposes of Federal income taxes, what taxes are owed by GoGetEm and the shareholders?
GoGetEm, the corporation owes federal income taxes;
Eli and Serena must pay taxes on the dividends as part of their personal income taxes;
Both A & B;
Neither A nor B.
Buckley is a limited partner in Cut-Rate Shipping, LLP, a limited liability partnership
which cannot pay its debts. Buckley is personally liable for the debts
to the extent of his capital contribution;
to no extent;
in proportion to the number of partners in the firm;
to the full extent.
Jay, Scott, and Brad are members of Brothers Business Consulting, a LLC formed in the state of Texas. Jay is a citizen of Texas, Brad is a citizen of Kansas, and Scott is a citizen of Maryland. The LLC for business purposes is a citizen of:
Texas
Maryland
Kansas
All of the choices
Bee Hive Honey, LLC’s members include Lenny, Mason, and others. For the purposes of suing and being sued, Bee Hive Honey is
a legal entity apart from the owner;
an aggregate of Lenny, Mason, and the other members;
a non-participating third party;
a natural person in the members’ “family”.
The members of a LLC are liable
for all obligations and liabilities;
only the managing member is liable;
only to the amount of their investments;
for no obligations or liabilities.
William is considering forms of business organization for Drone Photo Service, his new business. Like most states, William’s state requires that to form a limited liability company, he must file with a central state agency
articles of certification;
articles of agreement;
certificate of formation;
no specific documents
Upon formation of ABC Building Blocks, LLC, the members decide how to operate the business and draft the LLC Operating Agreement. The provisions may include
the apportionment of voting rights;
management;
division of profits;
All of the choice
Roger is a holder of preferred stock in Rio Grande Irrigation & Development, Inc. Roger has priority over holders of Rio common stock as to
nothing
voting
payments of dividends
parking
Members of limited liability companies are shielded from personal liability in many situations.
True
False
One of the key advantages of the corporate form is the unlimited liability of the owners.
True
False
A court will pierce the corporate veil of a corporation that is formed to evade an existing legal obligation.
True
False
A sole proprietor is free to make any decisions he or she wishes concerning the business.
True
False
A sole proprietor owns the entire business.
True
False
One can join a partnership even if all the other partners do not consent.
True
False
In a limited partnership, a limited partner has full responsibility for the partnership and all its debts.
True
False
A franchisee normally pays an initial fee for the right to use the trademark, trade name or copyright.
True
False
A LLC can be member-managed or manager-managed.
True
False
Apple is an example of a corporation.
True
False
A limited liability company can elect to be taxed as a partnership or a
(a)
Unless a limited liability company indicates otherwise, the IRS automatically taxes it as a
(a)
When a corporation earns profits, it may pass them on to the shareholders in the form of
(a)
A partner owes the partnership a fiduciary duty, which is a duty of
(Two answers)
(a)
A ______________________________ ___________________________________ defines the terms of the partnership.
(a)
With what agency does one file to incorporate or form an LLP in the state of Texas?
(a)
Board of Directors may be selected by the incorporators or voted onto the Board by the
(a)
Which type of stock comes with voting rights?
(a)
What is the business judgment rule? Be as specific as possible. I am looking for 6 elements.
(a)
