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Q:
Hollister and Gladys do business as partners in Frothy Confections. For federal income tax purposes, Frothy Confections would be treated as
a. a pass-through entity.
b. a natural person.
c. a tax-paying entity.
d. a partnership by estoppel.
Q:
Sable and Rex agree while talking on the phone to form a partnership to deal in transfers of real property. Their partnership agreement is legally binding
a. only if a copy of the agreement is filed in the appropriate state office.
b. only if the agreement is reduced to writing.
c. only if the parties exchange valid consideration.
d. without more.
Q:
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
a. an aggregate of the individual partners.
b. a natural person.
c. an entity.
d. a non-existent party.
Q:
Bo and Clancy decide to do business as Marketing & Promotion Services. To be a partnership, this association can result from an agreement that is
a. express, but not from an agreement that is implied.
b. implied, but not from an agreement that is express.
c. oral, written, or implied by conduct.
d. written, but not from an agreement that is oral or implied.
Q:
Kathy and John decide to form a partnership to sell fish food to local fish farms for the next five years. To be enforceable under the Statute of Frauds, the partnership agreement
a. must be signed by a notary public.
b. must be in writing.
c. must be oral.
d. cannot involve a third party.
Q:
Will and Jay form Northwest Air Express, a general partnership. The essential elements of this partnership do not include
a. a sharing of profits and losses.
b. a joint ownership of the business.
c. an equal right to management in the business.
d. goodwill.
Q:
Noah and Orin do business as Personnel Partners. In most states, for purposes of suing and being sued, Personnel Partners would be treated as
a. an aggregate of the individual partners.
b. a natural person.
c. an entity.
d. a non-existent party.
Q:
Ben, who runs a livestock breeding business, owes the Circle C Ranch $40,000. Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid. Because of this agreement, the Circle C is
a. Ben's creditor and partner.
b. Ben's creditor only.
c. Ben's partner only.
d. neither Ben's creditor nor his partner.
Q:
Guy and Hanna do business as G-H Associates. If G-H is a partnership, it is governed by the Uniform Partnership Act
a. in the absence of an express agreement.
b. in the absence of an implied agreement.
c. only in the presence of an express agreement.
d. under all circumstances.
Q:
In a limited partnership, a general partner's dissociation from the firm may lead to dissolution.
Q:
An assignment of the interest of a limited partner dissolves a limited partnership.
Q:
In a limited partnership, a general partner has full responsibility for the partnership and for all its debts.
Q:
In a limited partnership, a limited partner has full responsibility for the partnership and for all its debts.
Q:
In a limited partnership, a limited partner is liable for all partnership debts.
Q:
In a limited liability partnership, a partner can be exempt from personal liability for the malpractice of other partners.
Q:
A limited liability partnership allows its partners to avoid personal liability for the malpractice of other partners.
Q:
If a partnership's liabilities are greater than its assets, the partners bear the losses.
Q:
Any event that makes its unlawful for a partnership to continue its business will result in dissolution.
Q:
A partner may dissociate from a partnership by declaring bankruptcy.
Q:
On a partner's dissociation, his or her duty of loyalty to the partnership ends.
Q:
A partnership ends if one partner dissociates from the firm.
Q:
A partner always has the power and the right to dissociate from the partnership.
Q:
A third party cannot sue one of the partners of a partnership without suing all of the partners of the partnership.
Q:
In a general partnership, the partners are personally liable for the debts of the partnership.
Q:
In a general partnership, the acts of one partner in the ordinary course of business subjects both the partner and the firm to liability.
Q:
A partner is entitled to make secret profits or put self-interest before his or her duty to the interest of the partnership.
Q:
A partner owes to the partnership and the other partners a duty of care.
Q:
A partner owes to the partnership and the other partners a duty of loyalty.
Q:
A partner is a co-owner of partnership property.
Q:
Property acquired by the partnership is the property of the partners individually.
Q:
Each partner in a partnership has the right to full and complete information concerning the conduct of all aspects of partnership business.
Q:
The majority rule controls decisions on ordinary matters connected with partnership business.
Q:
In a general partnership, all partners have equal rights in managing the partnership.
Q:
Partnership profits must be shared in the same proportion as the partners' investment of capital in the firm.
Q:
Under no circumstances can a non-partner be regarded as an agent whose acts are binding on the partnership.
Q:
Withdrawal from a partnership for a term prematurely does not constitute a breach of the partnership agreement.
Q:
A partnership agreement can include almost any terms that the partners wish.
Q:
A partner's profit from a partnership is taxed as income to the firm.
Q:
An oral agreement to form a partnership can never be enforced.
Q:
For federal income tax purposes, a partnership is not a tax-paying entity.
Q:
A sharing of both profits and losses is the only requirement of a partnership.
Q:
For most purposes, the law recognizes a partnership as an independent entity.
Q:
Federal law permits a partnership to be treated as an entity in suits in federal courts.
Q:
Each partner is deemed to be an agent of the other partners and of the partnerships.
Q:
Jack buys a Kitchens, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally
a. balance the rights of both parties.
b. emphasize the right of Kitchens, Inc., to its business operation.
c. focus on the right of Jack to be dealt with fairly.
d. underscore the interest of consumers in affordability.
Q:
Bob operated a pet grooming shop under a franchise agreement with Clean Pets Corp (CPC). The agreement allowed CPC to terminate the franchise if Bob was fined for cruelty to animals. After an investigation initiated by a customer complaint, Bob was fined for cruelty. CPC terminated the franchise. Bob filed a suit against CPC for wrongful termination. The court will most likely rule in favor of
a. Bob, because CPC had no good cause to terminate the franchise.
b. Bob, because the fine for cruelty was based on a customer complaint.
c. CPC, because a franchisor can terminate a franchise at any time.
d. CPC, because the franchise was terminated for good cause.
Q:
Bret buys a franchise from Comida Mexicano Ltd. If their agreement is like most franchise agreements, it will specify that Comida can terminate the franchise
a. at will.
b. for any reason.
c. for cause only.
d. for no reason.
Q:
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
a. has a reasonable time, with notice.
b. has whatever time A determines, with or without notice.
c. is entitled to notice, but nothing more.
d. must close immediately.
Q:
A franchise agreement between Simple Software Company and Total Game, Inc., is silent on a time for termination of the franchise. Simple may
a. never terminate.
b. terminate at any time.
c. terminate on reasonable notice.
d. terminate on three days notice.
Q:
Pricey Auto Corporation gives notice to Quint that Pricey is terminating their franchise arrangement. Winding up the business requires
a. a new franchise agreement.
b. nothing more than closing immediately.
c. Quint's death, disability, or insolvency.
d. the return of Pricey's property.
Q:
Rita buys a Super Grill franchise. Super Grill requires that its franchisees buy its products for every phase of their operations. Because Rita wishes to buy less expensive products, she challenges the requirement. Her best argument is probably that the requirement violates
a. the commerce clause.
b. the Equal Protection Clause.
c. the federal antitrust laws.
d. the First Amendment.
Q:
Sweet Styles, Inc., a franchisor of clothing 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 action might be for Sweet to
a. mandate the prices at which its franchisees sell their products.
b. suggest the prices at which its franchisees sell their products.
c. require its franchisees to buy inventory exclusively from Sweet.
d. threaten its franchisees with a material breach of contract.
Q:
Fern contracts to buy a franchise from Gooseberry Grocers, Inc. The contract is silent on the issue of territorial rights. Gooseberry 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
a. no law.
b. the ban on certain types of anticompetitive agreements.
c. the Federal Trade Commission's Franchise Rule.
d. the implied covenant of good faith and fair dealing.
Q:
Echo enters into an agreement with Deep Pan Pies, Inc., to operate a franchise in Centre City. Later, Deep grants franchises to others within the city. Echo files a suit to close them. If the court rules in Echo's favor it will most likely be on the ground that
a. Deep violated the antitrust laws.
b. Deep violated the implied covenant of good faith and fair dealing.
c. Echo paid a franchise fee.
d. Echo was the first Deep franchisee in Centre City.
Q:
Pronto Tacos LLC grants a franchise to Omar to open and operate a Pronto Tacos restaurant. Pronto will likely charge Omar
a. an initial fee or lump sum price for the franchise license.
b. a percentage of Omar's weekly payroll expense.
c. an amount of Omar's monthly overhead savings, if any.
d. none of the choices.
Q:
Flip Gymnastics & Karate, Inc., grants a franchise to Gibby to operate a Flip gym. Flip may require Gibby to pay the franchisor a percentage of his
a. annual sales or volume of business.
b. weekly payroll expense.
c. monthly overhead savings.
d. none of the choices.
Q:
Gage buys from Fishing Guide Corporation the exclusive right to sell Fishing Guide rods and reels in a certain area. Their franchise agreement requires Gage to pay certain administrative expenses. Their agreement may also require Gage to pay a percentage of the franchisor's
a. advertising costs.
b. personal expenses.
c. retirement income.
d. none of the choices.
Q:
Cluckee Chick"n Corporation provides its prospective franchisees with projected earnings figures based on actual data. Cluckee Chick"n must also disclose
a. the number and percentage of franchisees that achieved the figures.
b. hypothetical examples of potential earnings.
c. an answer to the entrepreneur's question, "How much will I make?"
d. none of the choices.
Q:
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
a. no law.
b. the Petroleum Marketing Practices Act of 1979.
c. the Federal Trade Commission's Franchise Rule.
d. the Uniform Commercial Code.
Q:
In-Home Maid Service Company uses a Web site to provide downloadable information to prospective franchises. This online information is the equivalent of an offer that must comply with
a. the Automobile Dealers' Franchise Act of 1965.
b. no law.
c. the Federal Trade Commission's Franchise Rule.
d. the state Franchise Disclosure Document, or FDD.
Q:
Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales.
Jumbo Juice makes earnings claims to potential investors. For those claims, the franchisor must have
a. a hypothetical basis.
b. a reasonable basis.
c. an actual basis.
d. no basis.
Q:
Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales.
To potential investors, Jumbo Juice must provide
a. actual earnings figures.
b. hypothetical earnings figures.
c. projected earnings figures.
d. none of the choices.
Q:
Otis is interested in buying a franchise from Plentiful Inc. This transaction, like other franchise deals, is regulated to protect
a. certain types of anticompetitive agreements.
b. franchisors from dishonest prospective franchisees.
c. prospective franchisees from dishonest franchisors.
d. the government's power to restrict freedom of contract.
Q:
Frooty Drinks, Inc., and Great Gulp Bottling Company have a processing-plant franchise arrangement. This involves the transfer of
a. a license.
b. a trade name.
c. the formula to make a certain product.
d. the ownership of the business.
Q:
Pepsi-Cola Bottling Company is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. not a franchise.
Q:
Paradise Footwear buys a franchise from Reliant Athletic Shoes Inc. This relationship, like all other franchise relationships, is governed by
a. contract law.
b. no law.
c. the Franchise Disclosure Document, or FDD.
d. the rules of the National Collegiate Athletic Association.
Q:
Leo buys an exclusive territory in which he is authorized to set up a plant to make Midwest Dairy, Inc., products. After receiving the formula, Leo begins making Nice-brand ice cream and other Midwest products. This is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. no franchise.
Q:
CheezBurger Heaven, Inc., conducts a chain-style franchise. This involves the transfer to Clive, one of its franchisees, of
a. a license.
b. a trade name.
c. the formula to make a product.
d. the ownership of the business.
Q:
Instead of setting up a business to market her own products, Krissy considers entering into a distributorship franchise with Little Breweries Corporation. This involves the transfer of
a. a license.
b. a trade name.
c. the formula to make a certain product.
d. the ownership of the business.
Q:
Events Promotion Corporation licenses trademarks to Fandom Souvenirs, Inc., to use in selling caps, sweatshirts, and similar goods. This is
a. a franchise.
b. an entrepreneur.
c. a principal-agent relationship.
d. a sole proprietorship.
Q:
Mello Coffee Shops, Inc., sells a franchise to Noah's Arch, a caf. Mello is
a. a franchisee.
b. a franchisor.
c. an agent.
d. a principal.
Q:
Worldwide Realtors, Inc., sells a franchise to XL Sales Company. XL is
a. a franchisee.
b. a franchisor.
c. an agent.
d. a principal.
Q:
Jody owns KuppaJava Kiosks, a sole proprietorship. Jody's liability is
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.
Q:
Robert owns Textbooks Plus, a sole proprietorship that sells textbooks. When Robert dies, Textbooks Plus will
a. be automatically dissolved.
b. pass directly to his oldest child.
c. pass directly to the state.
d. be evenly divided among all Robert's heirs.
Q:
Phillipa is the sole proprietor of Fun Floral Arrangements. As a sole proprietor, on Fun Floral Arrangements' profits, Phillipa
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.
Q:
Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional business capital but to maintain control. This can best be accomplished by
a. borrowing funds.
b. bringing in partners.
c. issuing stock.
d. selling the business.
Q:
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
a. its greater organizational flexibility.
b. its limited liability.
c. its perpetual existence.
d. the ease of transferring the business to other family members.
Q:
Julia owns and operates Collectable Dolls without creating a separate business organization. She receives all the profits from the doll sales. Collectable Dolls is most likely a
a. a corporation.
b. a limited liability company.
c. a partnership.
d. a sole proprietorship.
Q:
Cal sells "DownSize," a weight-reduction program, from a Web site, in competition with Eat-Less Inc.'s product "Fit "˜n Trim." Eat-Less files a suit against Cal, alleging in part that he is a sole proprietor, but his enterprise should be deemed a different form of business. Cal's enterprise should most likely be considered
a. a corporation because DownSize is sold online.
b. a franchisee because DownSize is sold in competition to Fit "˜n Trim.
c. a sole proprietorship because Cal is a sole proprietor.
d. no form of business entity because Cal has no formal organization.
Q:
In determining whether a franchisor acted in good faith in terminating a franchise relationship, a court would balance the rights of both parties.