Question 1

Twisted Dipsy Pretzels Inc.offers entrepreneurs the opportunity to operate a franchise under the Twisted Dipsy trade name as a member of a select group of dealers that engage in the retail pretzel-concession business.To potential investors,Twisted Dipsy makes earnings claims.For those claims,the franchisor must have

A)a hypothetical basis.
B)a reasonable basis.
C)an actual basis.
D)no basis.

B

Accepted Answer

The franchisor must have a reasonable basis for the earnings claims they make to potential investors. This means they must have evidence or data to support their claims, and not just hypothetical or unreal projections.

Question 2

Logan is a director for Metal Masters Company.Ordinarily,Logan owes fi?duciary duties only to&#10;A)himself.&#10;B)Metal Masters's creditors.&#10;C)Metal Masters's personnel.&#10;D)Metal Masters's shareholders.

Accepted Answer

Logan owes fiduciary duties to Metal Masters's shareholders, who have entrusted him with managing the company in their best interests. This includes the duty of care, loyalty, and good faith, which require him to act with reasonable diligence, avoid conflicts of interest, and make decisions that benefit the company and its shareholders. He does not owe fiduciary duties to himself, Metal Masters's creditors or personnel, although he may have other legal or ethical obligations towards them.

Question 3

Home & Hearth,Inc. ,is a close corporation owned by Iona,Jamon,and Kleo,who are siblings.Each shareholder is also a director and officer.When the family disagrees over how to operate Home & Hearth,Jamon and Kleo vote to oust Iona from her position as Home & Hearth's president.Iona files a suit against the others,al?leging a breach of fiduciary duty.The court may order Jamon and Kleo to

A)buy Iona's shares.
B)sell Iona's shares publicly.
C)sell Jamon and Kleo's shares publicly.
D)sell Jamon and Kleo's shares to Iona.

A

Accepted Answer

The court may order Jamon and Kleo to buy Iona's shares as a remedy for the breach of fiduciary duty, allowing Iona to exit the corporation while receiving fair value for her shares.

Question 4

Kirby is a manager of Jumpstart Fitness LLC,a limited liability company.Jumpstart is formed in a state that imposes fiduciary duties on LLC man?agers.Kirby owes these duties to&#10;A)Jumpstart's members.&#10;B)Jumpstart's suppliers.&#10;C)Jumpstart's customers.&#10;D)none of the choices.

Accepted Answer

Kirby, as a manager of Jumpstart Fitness LLC, owes fiduciary duties to the company's members (owners). This includes duties of loyalty, care, and disclosure. Kirby does not owe fiduciary duties to suppliers or customers of the company.

Question 5

Beyond Gamez,Inc. ,a video game retailer based in California,does busi?ness in all fifty states exclusively online.According to New York state tax law,an out-of-state online retailer must collect and remit state taxes to New York if the retailer

A)plans to establish a substantial physical presence in New York.
B)targets a potential marketing base in New York.
C)maintains a Web site accessible in New York.
D)pays a party within New York to solicit business for its products.

Accepted Answer

The New York state tax law requires out-of-state online retailers to collect and remit state taxes to New York if they pay a party within New York to solicit business for its products. Since Beyond Gamez, Inc. does not have a physical presence in New York and its website is accessible in all fifty states, options A, B, and C do not apply. Option D is the only applicable factor according to New York state tax law.

Deck 33: Part IV: The Business Environment