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80 Cards in this Set

  • Front
  • Back
Starting a sole proprietorship is easier and less costly than starting any other form of business.
True
In choosing a form of business organization for a new enterprise, important factors include the titles of the organization’s officers.
False
In choosing a form of business organization for a new enterprise, important factors include the ambiance of the home office
False
A sole proprietor may own and manage any type of business.
True
One of the advantages of a sole proprietorship is that the owner is not liable for the actions of the business
False
In choosing a form of business organization for a new enterprise, important factors include the ease of creation.
True
A sole proprietorship is a separate legal entity for tax pur¬poses
False
One of the disadvantages of a sole proprietorship is that the owner is liable for the losses of the business
True
A franchisee is a party who sells a franchise
False
A sole proprietorship automatically dissolves on the death of the owner.
True
If a party to a franchise contract fails to perform, he or she may be subject to a suit for breach of contract.
True
Contract law applies to franchise relationships
True
A franchisee normally does not pay a fee for a franchise license until after the first year of using it.
False
Most states have adopted a model uniform franchise law.
False
Under no circumstances may a franchisor establish an additional fran¬chise in a territory allotted to a franchisee
False
A franchisee may be required to pay for certain of the franchisor’s administrative expenses.
True
In some circumstances, a franchisor may be liable for the act of a fran¬chisee’s employee
True
A franchisee normally pays an initial lump sum for a franchise license.
True
An agreement that requires a franchisee to buy materials exclusively from the franchisor may violate antitrust laws.
True
A franchisor is never liable for the act of a fran¬chisee’s employee.
False
State law determines the duration of a franchise.
False
In determining whether a franchisor acted in good faith in terminating a franchise relationship, a court would balance the rights of both parties.
True
Much franchise litigation involves claims of wrongful termination.
True
Joint ownership of property in and of itself creates a partnership.
False
An association cannot be a partnership without an express agreement.
False
For most purposes, the law recognizes a partnership as an aggregate of its members.
False
A sharing of profits from the sale of the goodwill of a business creates a presumption that a partnership exists.
False
A partner may pursue his or her own interest without automatically vio-lating the fiduciary duties that he or she owes to the firm.
True
A corporation can be a partner
True
A partner’s fiduciary duties may be waived or eliminated in the partnership agreement.
False
A partner may use and possess partnership property for any purpose
False
General principles of agency law pertain to a partner’s authority to bind a part¬nership in contract.
True
A partner owes a partnership and its partners a duty of gross negligence and reckless conduct.
False
Any limit on a partner’s capacity to act on the partnership’s behalf does not affect a third party who does not know about it
True
The extent of implied authority is generally broader for agents than for partners.
False
In most states, a general partner is jointly and severally liable for all partnership obligations.
True
A partner can “wrongfully” dissociate from a partnership
True
On a partner’s dissociation, his or her interest in the partnership must be purchased.
True
On a partner’s dissociation, his or her right to participate in the management and conduct of the business terminates.
True
A partnership for a definite term cannot be dissolved before the expiration of the term.
False
Clive sells Direct Marketing Enterprises, a sole proprietorship, to Edwina. This is a transfer of
the ownership of the business
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
its greater organizational flexibility.
Jody owns KuppaJava Kiosks, a sole proprietorship. Jody’s liability is
unlimited
Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional busi¬ness capital but to maintain control. This can best be accomplished by
borrowing funds
Jim organized, and owns and operates, Jim’s Landscaping Service in the simplest form of business organization. This is
a sole proprietorship.
Worldwide Realtors, Inc., sells a franchise to XL Sales Company. XL is
a franchisee
Riley is interested in buying a franchise from Soft Shoe Corporation. Soft Shoe must disclose material facts that Riley needs to make an informed decision concerning this purchase, according to
the Federal Trade Commission’s Franchise Rule
Darko Chocolate Shops, Inc., sells a franchise to Emma’s Frothy Treats, a mall store. Darko is
a franshisor
Otis is interested in buying a franchise from Plentiful Inc. This transaction, like other franchise deals, is regulated to protect
prospective franchisees from dishonest franchisors
Opie buys a franchise from Paradise Clothing Corporation. Because this franchise relationship is, like all other franchise relationships, primarily of a certain type, it is governed by
contract law
Burger Heaven, Inc., conducts a chain-style franchise. This involves the transfer to Chip, one of its franchisees, of
a trade name
Nico is interested in buying a franchise from Oz Inc. For Nico to make an informed decision concerning this purchase, Oz must disclose in writing or online
material facts such as the basis of projected earnings figures
Stacy contracts to buy a franchise from Tender Steak House Company. Under this contract, as in most franchise contracts, the determination of the territory to be served is made by
Tender Steak House
Rafe is interested in buying a franchise from Sportz Rulez Company. In this transaction, the Federal Trade Commission’s Franchise Rule
enables Rafe to weigh the deal’s risks and benefits
Sportz Street, Inc., a franchisor of shoe stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent rem¬edy might be for Sportz Street to
suggest the prices at which its franchisees sell their products
Instead of setting up a business to market her own products, Krissy con¬sid-ers entering into a distributorship franchise with Little Breweries Corporation. This involves the transfer of
a license
Guy and Hanna do business as G-H Associates. If G-H is a partnership, it is governed by the Uniform Partnership Act
in the absence of an express agreement.
Frooty Drinx, Inc., and Gert have a processing-plant franchise arrange¬ment. This involves the transfer of
the formula to make a certain product
Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony
has a reasonable time, with notice.
Euro Autos & Trucks, Inc., licenses Fancy Vehicles Corporation, an auto-mobile dealership, to sell its products. This is
a distributorship franchise
Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agree¬ments, it will specify that Comida can ter¬minate the franchise
for cause only.
Fern contracts to buy a franchise from Green Grocery Company. The contract is silent on the issue of territorial rights. Green allows a competing franchise to be established near Fern’s store, which suffers a significant loss in profits. This is most likely a violation of
the implied covenant of good faith and fair dealing
Noah and Orin do business as Personnel Partners. In most states, for purposes of suing and being sued, Personnel Partners would be treated as
an entity
Tasty Ice Cream Company is a franchisor. Uri operates a Tasty fran¬chise. Vela is one of Uri’s employees. As a franchisor, if Tasty controls the day-to-day operations of the business to a significant degree, it may be liable for intentional acts of discrimination by
Tasty, Uri, or Vela
Sabin and Tyler agree while talking on the phone to form a partner-ship. Their partnership agreement is legally binding
without more
Pricey Auto Corporation gives notice to Quint that Pricey is terminating their franchise arrangement. Winding up the business requires
returning Pricey’s property.
Rona and Stiv do business as Treasure Island Traders. In acting on the firm’s behalf in a deal with Unlimited Potential, Inc., Rona makes an honest error in overestimating the profit. To her firm, Rona is
not liable
Denise and Elke do business as Final Curtain Decorators. In most states, for purposes of holding title to property, this partnership would be treated as
an entity
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
liable for breach of the duty of loyalty
Bo and Clancy decide to do business as Marketing & Promotion Services. To be a partnership, this association can result from an agreement that is
oral, written, or implied by conduct
Erte, a partner in Fluoride Dental Associates, applies for a loan with Great State Bank allegedly on Fluoride’s behalf but without the authorization of the other partners. Great State knows that Erte is not authorized to take out the loan. Erte’s default on the loan results in
Erte’s sole liability for the amount
Grady and Hedy do business as Island Tours. For federal income tax purposes, Island Tours would be treated as
an aggregate of the individual partners
Clu, Dolf, and Elton do business as Fertile Valley Farm. Clu’s relationship to the firm ends, but it continues to do business. This is
dissociation
Dave and Eiger are partners in First-Place Athletic Supplies, which sells sports equipment. Dave manages the business. Unless the partnership agreement states otherwise, Dave is
not entitled to compensation for his effort
Fay is admitted to Global Associates, an existing partnership. A partnership debt incurred before the date of her admission comes due. Fay is
only liable for the debt up to the amount of his capital contribution.
Trina and Uri do business as Value Gems. In acting on the firm’s behalf in a deal with World Diamond Exchange, Trina recklessly exceeds what Value Gems can afford to pay, causing damage to the firm. Trina is
liable for breach of the duty of care.
Kelly, Lars, and Mona agree to be partners in Neighborhood Delivery Service (NDS), splitting the profits equally. Kelly contributes 67 percent of the capital. When NDS is dissolved, its liabilities are greater than its assets. The losses are paid by
all of the partners in proportion to their shares of the profits
Tundi is a partner in YooHoo! Amusement, a new partnership. A YooHoo! debt comes due. Tundi is
personally liable to the full extent of the debt.
Jim and Kyle are partners in J&K Sales, which exports technical equip¬ment under a three-year partnership agreement. The U.S. gov¬ernment declares that the equipment can no longer be ex¬ported. J&K
dissolves immediately unless the partners change its business
Mead, Nero, and Olen do business as Pipe & Plumbing Services, a partnership. After Mead’s relationship to the firm ends, Nero and Olen agree to discontinue the business. This is
dissolution