Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation.Lily and Moe are Kleen's officers.As in other corporations, the responsibility for the overall management of Kleen rests with

Accepted Answer

A)  the board of directors.
B)  the officers.
C)  the owners.
D)  the shareholders.E) A) and B)
F) A) and C)

Question 3

Corporate officers can usually be removed by the board of directors without cause.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

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.E) None of the above
F) B) and C)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A board of directors is the ultimate authority in every corporation.

Accepted Answer

A) True 
 B)False

Question 7

Pilar is interested in buying a franchise from Quixotic Travel & Tours Corporation.Quixotic must disclose material facts that Pilar needs to make an informed decision concerning this purchase, according to

Accepted Answer

A)  no law.
B)  the Petroleum Marketing Practices Act of 1979.
C)  the Federal Trade Commission's Franchise Rule.
D)  the Uniform Commercial Code.E) A) and C)
F) A) and D)

Question 8

Jordana is a member of Klondike Coffee, LLC, a limited liability company.Jordana is liable for Klondike's debts

Accepted Answer

A)  in proportion to the total number of members.
B)  to the extent of her investment in the firm.
C)  to the extent that the other members do not pay the debts.
D)  to the full extent.E) B) and C)
F) C) and D)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

A corporation does not possess the same right of access to the courts as natural persons.

Accepted Answer

A) True 
 B)False

Question 11

Phillipa is the sole proprietor of Incredible Floral Arrangements.As a sole proprietor, on Incredible's profits, Phillipa

Accepted Answer

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.E) None of the above
F) A) and D)

Question 12

Coast-to-Coast Distribution, Inc., is a direct-mail distribution company.Like most corporations, Coast-to-Coast's executive employees include its

Accepted Answer

A)  board of directors.
B)  incorporators.
C)  officers.
D)  shareholders.E) A) and D)
F) A) and B)

Question 13

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

Accepted Answer

A)  illegal.
B)  optional.
C)  required.
D)  wrongful.E) All of the above
F) None of the above

Question 14

A corporation whose shares are held by relatively few persons is a close corporation.

Accepted Answer

A) True 
 B)False

Question 15

Robert owns Textbooks Plus, a sole proprietorship that sells textbooks.When Robert dies, Textbooks Plus will

Accepted Answer

A)  automatically dissolve.
B)  pass directly to his oldest child.
C)  pass directly to the state.
D)  be evenly divided among all Robert's heirs.E) B) and D)
F) B) and C)

Question 16

Wiley incorporates his business as Wiley Wire Corporation in Texas to profit from sales of fencing wire.Wiley and the members of his family constitute the shareholders.Wiley Wire Corporation is

Accepted Answer

A)  a sole proprietorship.
B)  a limited liability company.
C)  a partnership.
D)  a close corporation.E) A) and D)
F) C) and D)

Question 17

A sole proprietorship continues after the death of the proprietor.

Accepted Answer

A) True 
 B)False

Question 18

Josh is a director of Sippy Soups, Inc.Josh opposes a contract that is in Sippy's best interest because Josh would like to enter into the contract for his personal benefit.Josh is liable for a breach of

Accepted Answer

A)  no duty or rule.
B)  the business judgment rule.
C)  the duty of care.
D)  the duty of loyalty.E) A) and B)
F) A) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Odell is a director of Price Rite, Inc.As a director, with respect to the corporation, Odell is

Accepted Answer

A)  a fiduciary.
B)  a forum.
C)  a proxy.
D)  a quorum.E) All of the above
F) A) and B)

Exam 12: Business Organizations

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

Correct AnswerverifiedShow Answer

Corporate officers can usually be removed by the board of directors without cause.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A sole proprietorship continues after the death of the proprietor.

Correct AnswerverifiedShow Answer

A board of directors is the ultimate authority in every corporation.

Correct AnswerverifiedShow Answer

Pilar is interested in buying a franchise from Quixotic Travel & Tours Corporation.Quixotic must disclose material facts that Pilar needs to make an informed decision concerning this purchase, according to

Correct AnswerverifiedShow Answer

Jordana is a member of Klondike Coffee, LLC, a limited liability company.Jordana is liable for Klondike's debts

Correct AnswerverifiedShow Answer

Josh is a director of Sippy Soups, Inc.Josh opposes a contract that is in Sippy's best interest because Josh would like to enter into the contract for his personal benefit.Josh is liable for a breach of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Inez and Jason are the shareholders and directors of Kleen Kustodial Corporation.Lily and Moe are Kleen's officers.As in other corporations, the responsibility for the overall management of Kleen rests with

Correct AnswerverifiedShow Answer

Robert owns Textbooks Plus, a sole proprietorship that sells textbooks.When Robert dies, Textbooks Plus will

Correct AnswerverifiedShow Answer

A corporation does not possess the same right of access to the courts as natural persons.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Wiley incorporates his business as Wiley Wire Corporation in Texas to profit from sales of fencing wire.Wiley and the members of his family constitute the shareholders.Wiley Wire Corporation is

Correct AnswerverifiedShow Answer

A corporation whose shares are held by relatively few persons is a close corporation.

Correct AnswerverifiedShow Answer

Coast-to-Coast Distribution, Inc., is a direct-mail distribution company.Like most corporations, Coast-to-Coast's executive employees include its

Correct AnswerverifiedShow Answer

Odell is a director of Price Rite, Inc.As a director, with respect to the corporation, Odell is

Correct AnswerverifiedShow Answer

Phillipa is the sole proprietor of Incredible Floral Arrangements.As a sole proprietor, on Incredible's profits, Phillipa

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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