Question 1

The fact that a corporation is a separate legal entity allows it to be fully shielded from compliance requirements with laws of general application.

Accepted Answer

Even though a corporation is a separate legal entity, it is not completely shielded from compliance requirements with laws of general application. Corporations still need to comply with laws and regulations like any other legal entity.

Question 2

Which of the following is a distinguishing characteristic of a product licensing arrangement?

Accepted Answer

A distinguishing characteristic of a product licensing arrangement is that it licenses proprietary rights within a specified territory. Option A is common in a partnership agreement, while option C represents an agency relationship, which is not necessarily a defining feature of a licensing arrangement. Option D is also not true since licensing agreements may involve an agency relationship.

Question 3

A capital contribution clause in a partnership agreement would describe how profits are to be shared,how and when they are to be distributed,and rights of withdrawal.

Accepted Answer

A capital contribution clause in a partnership agreement specifically outlines the amount of capital each partner is contributing to the partnership, the form of the contribution (cash, property, services, etc.), and any terms related to these contributions. It does not describe how profits are to be shared, how and when they are to be distributed, or rights of withdrawal, as these aspects are covered in other sections of the agreement.

Question 4

An arrangement whereby a manufacturer has agreed to provide products and a dealer has agreed to carry those products or perform services for the manufacturer would most likely be described as which of the following?

Accepted Answer

The arrangement described in the question is most likely a distributorship, which is a type of agreement where a manufacturer provides products to a dealer who agrees to sell those products or perform related services. Strategic alliances typically involve larger-scale partnerships between two companies, while a sales agency agreement involves a third-party agent selling the manufacturer's products on their behalf. A franchise agreement is a type of business model that involves a franchisee operating a business using the brand and products of a franchisor.

Question 5

The law restricts a partner from making a personal profit from partnership property because that would be putting that partner's interests ahead of the other partners.

Accepted Answer

This is known as the duty of loyalty and is a fundamental principle of partnership law. Partners must act in the best interest of the partnership as a whole, not seek personal gain at the expense of the other partners.

Question 6

Which of the following is a characteristic of a franchisor-franchisee relationship?

Accepted Answer

A franchisor-franchisee relationship is a contractual arrangement in which the franchisor grants the franchisee the right to use its trademark, products, and business model in exchange for a fee and ongoing royalties. The franchisor provides support and guidelines to the franchisee, but they do not form a joint venture or a partnership. The relationship does not necessarily involve limited liability partnerships or limited partnerships.

Question 7

The freedom from the restrictions of personal legal responsibility for the obligations of the business is a tremendous advantage to the sole proprietor.

Accepted Answer

The answer of The freedom from the restrictions of personal...

Question 8

A partnership is a simple form of legal relationship that automatically arises when two or more people do business together with the objective of making a profit.

Accepted Answer

A partnership is a legal relationship that automatically arises when two or more people come together to do business with the objective of making a profit.

Question 9

In the context of a business failure,a bankrupt sole proprietor's diminished credit rating will likely be enduring.

Accepted Answer

When a sole proprietor files for bankruptcy, their personal and business finances become intertwined, and this can lead to a long-lasting negative impact on their personal credit rating. Even after the business has closed and the bankruptcy has been discharged, the sole proprietor may find it difficult to obtain credit or loans in the future.

Question 10

Emily,Harry,and Ron are partners in a business partnership called Trinkets.Emily contributed $15 000 to the business,Harry $10 000,and Ron $5000.The partners agreed among themselves that they will share partnership profits and losses in proportion to their contributions.In addition,the partnership borrowed $30 000 from the bank.The business didn't work out,and Trinkets is unable to repay the loan.The bank sued Emily personally.She repaid the full $30 000 and then sued Harry and Ron.Which of the following are the amounts Emily may legally be entitled to recover from her partners?

Accepted Answer

Emily is entitled to recover $10,000 from Harry and $5,000 from Ron because the partners agreed to share profits and losses in proportion to their contributions.

Question 11

Choosing how to own a business is of little consequence to the ultimate determination of who is financially liable for the business.

Accepted Answer

The way in which a business is owned (sole proprietorship, partnership, corporation, etc.) can have a significant impact on the financial liability of the owners. For example, in a sole proprietorship or partnership, the owners are personally liable for the debts and obligations of the business, while in a corporation, the owners (shareholders) typically have limited liability.

Question 12

An unincorporated business organization with a sole owner is legally known as a sole proprietorship.

Accepted Answer

A sole proprietorship is defined as an unincorporated business organization with a single owner who is personally responsible for the business's debts and obligations.

Question 13

Roy's partners,Safael and Matrim,equally share his unlimited liability for partnership debts and other obligations.

Accepted Answer

Roy's partners, Safael and Matrim, have unlimited liability for partnership debts and other obligations, which means they are equally responsible for paying off any debts or fulfilling obligations of the partnership.

Question 14

Voyageur Enterprises Inc.will continue in existence perpetually unless it is dissolved through voluntary surrender of its legal status or by court order for failing to comply with statutory regulations.

Accepted Answer

This statement is true. A corporation typically exists perpetually unless it is voluntarily dissolved or ordered to dissolve by a court.

Question 15

A creation of partnership clause in a partnership agreement would set out a description of the contributions of each of the partners,how shortfalls are to be handled,and how the accounts are managed.

Accepted Answer

The answer of A creation of partnership clause in a...

Question 16

Sole proprietorships are limited to having to comply with provincial regulations with respect to registration or licensing requirements.

Accepted Answer

Sole proprietorships are not limited to only complying with provincial regulations. They must also comply with federal, municipal and industry-specific regulations, which may include registration or licensing requirements.

Question 17

The vehicle most commonly used as an investment device is a limited liability partnership,in which at least one partner has unlimited liability and the rest have limited liability.

Accepted Answer

A limited liability partnership (LLP) typically means that all partners have limited liability, protecting each partner's personal assets from the debts and liabilities of the business. It differs from other partnerships where at least one partner must have unlimited liability.

Question 18

What is a strategic alliance between commercial parties?

Accepted Answer

A strategic alliance between commercial parties is an arrangement where two or more companies collaborate to achieve a mutually beneficial outcome. This alliance may involve joint research, technology sharing, or joint use of production facilities, among other things.

Options A, C, and D describe different types of partnerships or contracts but do not necessarily involve a strategic alliance between commercial parties.

Question 19

All of Canada's common law provinces have a Partnership Act modelled on the British act of the same name.

Accepted Answer

All of Canada's common law provinces have enacted Partnership Acts based on the British Partnership Act 1890.

Question 20

The president of EcoAgents must affix the company's corporate seal to the bank's lending agreement he signed because this form of business entity lacks legal capacity to borrow capital.

Accepted Answer

The statement is incorrect. A corporation, even though it is a legal entity separate from its owners, has the legal capacity to borrow capital and sign agreements without the need for affixing a corporate seal.

Quiz 14: Business Forms and Arrangements