Deck 17: Sole Proprietorships,franchises, Partnerships

Question 1

Good faith and fair dealing are important in terminating a franchise relationship.

Answer 1

True

Question 2

Most franchise agreements provide that notice of termination of a franchise is not necessary.

Answer 2

False

Question 3

The majority rule controls decisions on ordinary matters connected with partnership business.

Answer 3

True

Question 4

A sole proprietor owns the entire business but doe not receive all of the profit.

Question 5

Franchisors are not required to disclose certain material facts to prospective franchisees.

Question 6

In choosing a form of business organization for a new enterprise,important factors include the liability of the owner.

Question 7

A partner is entitled to make secret profits or put self-interest before his or her duty to the interest of the partnership.

Question 8

A partnership agreement can include almost any terms that the partners wish.

Question 9

Joint ownership of property does not in and of itself create a partnership.

Question 10

The parties to a franchise arrangement may be two corporations.

Question 11

In a general partnership,the acts of one partner in the ordinary course of business subjects the other partners to personal liability.

Question 12

A partnership ends if one partner dissociates from the firm.

Question 13

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

Question 14

In raising capital,a sole proprietor is limited to his or her personal funds-a personal loan is not possible.

Question 15

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

Question 16

If a partnership's liabilities are greater than its assets,the partners bear the losses.

Question 17

A franchisor may retain stringent control over the training of personnel involved the operation of a franchise.

Question 18

For most purposes,most states treat a partnership as an aggregate of its members.

Question 19

Property acquired by the partnership is the property of the partners individually.

Question 20

A franchisor can set the retail prices for the goods that a franchisee sells.

Question 21

Parker and Oscar sign a partnership agreement to do business as "Parker's Plumbing" without specifying a duration.This partnership is terminable

A)at any time by either partner.
B)only after a reasonable term.
C)only if Parker dissociates from the firm.
D)only if Oscar dissociates from the firm.

Question 22

Ryder and Sergei are partners in Timberline Gear,which sells mountain- and rock-climbing equipment.Ryder manages the business.Unless the partnership agreement states otherwise,Ryder is

A)entitled to compensation in proportion to his effect on the business.
B)entitled to compensation in proportion to his effort.
C)entitled to compensation in proportion to his capital contribution.
D)not entitled to compensation.

Question 23

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.

Question 24

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.

Question 25

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.

Question 26

Tawny buys a Super Grill franchise.Super Grill requires that its franchisees buy its products for every phase of their operations.Because Tawny wishes to buy less expensive products,she challenges the requirement.Her best argument is probably that the requirement violates

A)the implied covenant of good faith and fair dealing.
B)the Federal Trade Commission's Franchise Rule.
C)the federal antitrust laws.
D)the Uniform Commercial Code.

Question 27

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.

Question 28

Dingo Bangles Company wants to present information in "disclosure documents" via the Internet to prospective franchisees.Among other legal requirements with which Dingo must comply,prospective franchisees must

A)agree to settle any lawsuits that may arise over the documents.
B)be able to download or save all electronic documents.
C)provide e-mail addresses for Dingo to verify users' authenticity.
D)register with the Federal Trade Commission via Dingo's Web site.

Question 29

Trina and Uri do business as Value Gems.In acting on the firm's behalf in a deal with World Diamond Exchange,Trina recklessly exceeds what Value Gems can afford to pay,causing damage to the firm.Trina is

A)liable for breach of the duty of care.
B)liable for breach of the duty of economic sense.
C)liable for breach of the duty of loyalty.
D)not liable.

Question 30

Mead,Nero,and Olen do business as Pipe & Plumbing Services,a partnership.After Mead's relationship to the firm ends,Nero and Olen agree to discontinue the business.This is

A)dissociation.
B)dissolution.
C)gross negligence.
D)simple misconduct.

Question 31

Cody is a partner in Derivative Investment Service (DIS).Cody can inspect

A)all of DIS's books and records.
B)DIS's books and records only as the firm's management permits.
C)DIS's books and records only for a reasonable purpose.
D)DIS's books and records relating to Cody's capital contribution only.

Question 32

Vim+Vigor Fitness Corporation 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)no law.
B)the Uniform Commercial Code.
C)the Federal Trade Commission's Franchise Rule.
D)the state Franchise Disclosure Document,or FDD.

Question 33

Sylvester buys a franchise from Resistance 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 Uniform Commercial Code.

Question 34

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.

Question 35

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.

Question 36

Mello Coffee Shops,Inc. ,sells a franchise to Noah's Arch,a café.Mello is

A)a franchisee.
B)a franchisor.
C)a partner.
D)a sole proprietor.

Question 37

Hometown Realtors,Inc. ,sells a franchise to Group Sales Company.Group Sales is

A)a franchisee.
B)a franchisor.
C)a partner.
D)a sole proprietor.

Question 38

A franchise agreement between Software² Company and Games³,Inc. ,is silent on a time for termination of the franchise.Software² may

A)never terminate.
B)terminate at any time.
C)terminate on reasonable notice.
D)terminate on three days notice.

Question 39

Nicole is interested in buying a franchise from Oz Oysters Inc.For Nicole to make an informed decision concerning this purchase,Oz must disclose in writing or online

A)general estimates of costs and sales,but not the basis for them.
B)material facts such as the basis of projected earnings figures.
C)no information.
D)start-up requirements,but not renewal conditions.

Question 40

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.

Question 41

Irwin was the manager of Highlights Grill,a sports bar and restaurant.Irwin opened a bank account in Highlights's name,signing the account signature card as "owner." Jody,who was often at Highlights and had free access to its office,told others that she was "an owner" and "a partner." She also opened a bank account in Highlights's name,and signed the account signature card as "owner." Irwin told Kelton,the owner of Natural Cheeses,Inc. ,that Jody was a member of a partnership that owned Highlights.On this basis,Natural Cheeses delivered its goods to Highlights on credit.In fact,Highlights was owned by a corporation.When the unpaid account totaled more than $10,000,Natural Cheeses filed a suit against Jody to collect.On what basis might Jody be liable for the debt?

Question 42

Ewa,the owner of First-Rate Bild-It,is a sole proprietor.What are the chief characteristics,advantages,and disadvantages of this form of business organization Ewa wants to obtain additional capital to expand First-Rate,but she does not want to lose control of the firm.As a sole proprietor,what is her best option to attain these goals?