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Exam 17: Business Organizations

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Question 1

Multiple Choice

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Bea is one of three partners in Commercial Custodial Service.With respect to Bea's interest in the firm,when she dies,her heirs are most likely entitled to

A) nothing.
B) a payout of her capital contribution without more.
C) the buyout price paid by the firm for the interest.
D) one-third of the value of the interest.

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Question 2

Multiple Choice

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Brea and Colin do business as Dig Excavators.In acting on the firm's behalf,Brea makes an honest error in underestimating the cost of a certain project.In this situation,to her firm,Brea is liable for a breach of the duty of

A) care.
B) accounting.
C) loyalty.
D) none of the choices.

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D

Question 3

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Like a sole proprietorship or a partnership,the members of a limited liability company have unlimited liability for the firm's debts.

Olin is a partner in Precision Plumbing.When the partners decide to dissolve the firm,Olin collects and distributes the assets.This results in

Neva is a partner in Orchard Farm.Neva gives notice to quit the firm,which otherwise continues to do business.This is

In some states,limited partners cannot withdraw from a limited partnership.

When the owner of a sole proprietorship dies,the business does not dissolve-it is automatically transferred to family members or other heirs.

The members of a limited liability company have considerable flexibility in managing the business of the firm.

A business organizational form that limits its owners' liability allows the firm to lawfully

Generally,the law recognizes a partnership as an independent entity.

To gain an advantage in a business deal,Masonry LLC engages in fraud.Nicol,a member of Masonry,significantly contributes to the firm's misconduct.For any resulting damages,a court is most likely to hold Nicol

Olav starts Power Cells to make and sell batteries.Later,Olav contracts with Quinn to invest additional capital in the firm in exchange for 25 percent of the profits.Olav and Quinn are not partners in Power Cells because

A limited liability company that wants to distribute profits to its members could avoid "double taxation" by electing to be taxed as

To prevent deception,all representations by a franchisor to a prospective franchisee must have a reasonable basis at the time they are made.

If the members of a limited liability company want to reinvest profits in the business,they may opt for the firm to be taxed as a corporation.

Vern is one of three partners in Waffles Food Truck.Concerning all aspects of the partnership business,Vern is entitled to information

Ang enters into an agreement with Burgers Inc.to operate a franchise.Their contract does not grant Ang exclusive territorial rights.Later,Burgers allows a competing franchise to be established nearby,causing Ang to suffer a significant loss in profits.In Ang's suit against Burgers,his best argument is that the franchisor

Choosing a business organizational form that limits its owners' liability may lead to greater profits for the firm.

A partner can be held liable for a partnership obligation only if he or she participated in,or knew about,whatever it was that gave rise to the obligation.

Owen plans to open Owen's Pets,a pet sales and supplies outlet,and to hire Quimby and Ruth.Owen will invest only his own money.He does not expect to make much profit for the first three years,but he hopes to expand eventually.Which form of business organization would be most appropriate? What are the chief characteristics,advantages,and disadvantages of this form of business organization? If Owen wants to obtain additional capital to expand the business,but does not want to lose control of the firm,what is his best option?