Deck 3: Business Organizations and Contracts

Question 1

Filing requirements for partnerships are generally less onerous than for corporations.

Answer 1

True

Question 2

If you are setting up a business and are not concerned about liability, but expect to be very successful, what disadvantage is there to operating as a sole proprietor?

Answer 2

Sole proprietors pay tax on the profits of the business as personal income. For large incomes, the personal tax rate may be higher than the corporate tax rates, and so a sole proprietorship would not be efficient from a tax perspective.

Question 3

Which is the odd one out?

A) articles of incorporation
B) memoranda of association
C) letters patent
D) partnership agreement

Answer 3

partnership agreement

Question 4

A director is considering buying a car for the corporation from a car dealership that is owned by his brother. To be absolutely safe, what should the director do before making the purchase?

A) nothing, the corporation will be paying full price for the car, and the brother is not making any concession for the director
B) disclose the director's relationship with the seller, and have the purchase approved by the shareholders
C) disclose the director's relationship with the seller, and have the purchase approved by the independent directors on the board
D) have his brother make a statutory declaration that the car was sold at fair market value

Question 5

When a contract is voidable, the non-breaching party has the option to continue with the contract.

Question 6

Why is it advisable to record contracts in writing?

Question 7

When can a party revoke an offer?

A) only after a counter-offer is made
B) only when a new offer is made as a substitution
C) after it has been accepted
D) any time before it is accepted

Question 8

Which of the following would be acceptable consideration in exchange for a contractor building a house?

A) $1
B) $60,000
C) the free market value of the house
D) all of the above

Question 9

Explain why, in construction contracts, it is important for owners to ensure that the formalities specified for approving extras to the contract are complied with.