Legal Bus Ch16

Front 1

Starting a sole proprietorship is easier and less costly than starting any other form of business.

Back 1

True

Front 2

In choosing a form of business organization for a new enterprise, important factors include the titles of the organization’s officers.

Back 2

False

Front 3

In choosing a form of business organization for a new enterprise, important factors include the ambiance of the home office

Back 3

False

Front 4

A sole proprietor may own and manage any type of business.

Back 4

True

Front 5

One of the advantages of a sole proprietorship is that the owner is not liable for the actions of the business

Back 5

False

Front 6

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

Back 6

True

Front 7

A sole proprietorship is a separate legal entity for tax pur¬poses

Back 7

False

Front 8

One of the disadvantages of a sole proprietorship is that the owner is liable for the losses of the business

Back 8

True

Front 9

A franchisee is a party who sells a franchise

Back 9

False

Front 10

A sole proprietorship automatically dissolves on the death of the owner.

Back 10

True

Front 11

If a party to a franchise contract fails to perform, he or she may be subject to a suit for breach of contract.

Back 11

True

Front 12

Contract law applies to franchise relationships

Back 12

True

Front 13

A franchisee normally does not pay a fee for a franchise license until after the first year of using it.

Back 13

False

Front 14

Most states have adopted a model uniform franchise law.

Back 14

False

Front 15

Under no circumstances may a franchisor establish an additional fran¬chise in a territory allotted to a franchisee

Back 15

False

Front 16

A franchisee may be required to pay for certain of the franchisor’s administrative expenses.

Back 16

True

Front 17

In some circumstances, a franchisor may be liable for the act of a fran¬chisee’s employee

Back 17

True

Front 18

A franchisee normally pays an initial lump sum for a franchise license.

Back 18

True

Front 19

An agreement that requires a franchisee to buy materials exclusively from the franchisor may violate antitrust laws.

Back 19

True

Front 20

A franchisor is never liable for the act of a fran¬chisee’s employee.

Back 20

False

Front 21

State law determines the duration of a franchise.

Back 21

False

Front 22

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

Back 22

True

Front 23

Much franchise litigation involves claims of wrongful termination.

Back 23

True

Front 24

Joint ownership of property in and of itself creates a partnership.

Back 24

False

Front 25

An association cannot be a partnership without an express agreement.

Back 25

False

Front 26

For most purposes, the law recognizes a partnership as an aggregate of its members.

Back 26

False

Front 27

A sharing of profits from the sale of the goodwill of a business creates a presumption that a partnership exists.

Back 27

False

Front 28

A partner may pursue his or her own interest without automatically vio-lating the fiduciary duties that he or she owes to the firm.

Back 28

True

Front 29

A corporation can be a partner

Back 29

True

Front 30

A partner’s fiduciary duties may be waived or eliminated in the partnership agreement.

Back 30

False

Front 31

A partner may use and possess partnership property for any purpose

Back 31

False

Front 32

General principles of agency law pertain to a partner’s authority to bind a part¬nership in contract.

Back 32

True

Front 33

A partner owes a partnership and its partners a duty of gross negligence and reckless conduct.

Back 33

False

Front 34

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

Back 34

True

Front 35

The extent of implied authority is generally broader for agents than for partners.

Back 35

False

Front 36

In most states, a general partner is jointly and severally liable for all partnership obligations.

Back 36

True

Front 37

A partner can “wrongfully” dissociate from a partnership

Back 37

True

Front 38

On a partner’s dissociation, his or her interest in the partnership must be purchased.

Back 38

True

Front 39

On a partner’s dissociation, his or her right to participate in the management and conduct of the business terminates.

Back 39

True

Front 40

A partnership for a definite term cannot be dissolved before the expiration of the term.

Back 40

False

Front 41

Clive sells Direct Marketing Enterprises, a sole proprietorship, to Edwina. This is a transfer of

Back 41

the ownership of the business

Front 42

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

Back 42

its greater organizational flexibility.

Front 43

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

Back 43

unlimited

Front 44

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

Back 44

borrowing funds

Front 45

Jim organized, and owns and operates, Jim’s Landscaping Service in the simplest form of business organization. This is

Back 45

a sole proprietorship.

Front 46

Worldwide Realtors, Inc., sells a franchise to XL Sales Company. XL is

Back 46

a franchisee

Front 47

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

Back 47

the Federal Trade Commission’s Franchise Rule

Front 48

Darko Chocolate Shops, Inc., sells a franchise to Emma’s Frothy Treats, a mall store. Darko is

Back 48

a franshisor

Front 49

Otis is interested in buying a franchise from Plentiful Inc. This transaction, like other franchise deals, is regulated to protect

Back 49

prospective franchisees from dishonest franchisors

Front 50

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

Back 50

contract law

Front 51

Burger Heaven, Inc., conducts a chain-style franchise. This involves the transfer to Chip, one of its franchisees, of

Back 51

a trade name

Front 52

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

Back 52

material facts such as the basis of projected earnings figures

Front 53

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

Back 53

Tender Steak House

Front 54

Rafe is interested in buying a franchise from Sportz Rulez Company. In this transaction, the Federal Trade Commission’s Franchise Rule

Back 54

enables Rafe to weigh the deal’s risks and benefits

Front 55

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

Back 55

suggest the prices at which its franchisees sell their products

Front 56

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

Back 56

a license

Front 57

Guy and Hanna do business as G-H Associates. If G-H is a partnership, it is governed by the Uniform Partnership Act

Back 57

in the absence of an express agreement.

Front 58

Frooty Drinx, Inc., and Gert have a processing-plant franchise arrange¬ment. This involves the transfer of

Back 58

the formula to make a certain product

Front 59

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

Back 59

has a reasonable time, with notice.

Front 60

Euro Autos & Trucks, Inc., licenses Fancy Vehicles Corporation, an auto-mobile dealership, to sell its products. This is

Back 60

a distributorship franchise

Front 61

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

Back 61

for cause only.

Front 62

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

Back 62

the implied covenant of good faith and fair dealing

Front 63

Noah and Orin do business as Personnel Partners. In most states, for purposes of suing and being sued, Personnel Partners would be treated as

Back 63

an entity

Front 64

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

Back 64

Tasty, Uri, or Vela

Front 65

Sabin and Tyler agree while talking on the phone to form a partner-ship. Their partnership agreement is legally binding

Back 65

without more

Front 66

Pricey Auto Corporation gives notice to Quint that Pricey is terminating their franchise arrangement. Winding up the business requires

Back 66

returning Pricey’s property.

Front 67

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

Back 67

not liable

Front 68

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

Back 68

an entity

Front 69

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

Back 69

liable for breach of the duty of loyalty

Front 70

Bo and Clancy decide to do business as Marketing & Promotion Services. To be a partnership, this association can result from an agreement that is

Back 70

oral, written, or implied by conduct

Front 71

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

Back 71

Erte’s sole liability for the amount

Front 72

Grady and Hedy do business as Island Tours. For federal income tax purposes, Island Tours would be treated as

Back 72

an aggregate of the individual partners

Front 73

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

Back 73

dissociation

Front 74

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

Back 74

not entitled to compensation for his effort

Front 75

Fay is admitted to Global Associates, an existing partnership. A partnership debt incurred before the date of her admission comes due. Fay is

Back 75

only liable for the debt up to the amount of his capital contribution.

Front 76

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

Back 76

liable for breach of the duty of care.

Front 77

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

Back 77

all of the partners in proportion to their shares of the profits

Front 78

Tundi is a partner in YooHoo! Amusement, a new partnership. A YooHoo! debt comes due. Tundi is

Back 78

personally liable to the full extent of the debt.

Front 79

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

Back 79

dissolves immediately unless the partners change its business

Front 80

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

Back 80

dissolution