Question 1

[Heart surgery invention] Winston and Noe patented a mechanism that will change open heart surgery forever.They are setting up a business to produce and sell their invention to hospitals and will take advantage of Noe's non-U.S.citizenship to help with sales in international markets.They hire Lenita,a corporate lawyer,to assist in setting up their business.Winston's largest concern is taxes.Noe,on the other hand,doesn't want to bother keeping corporate minutes and having board meetings as he is too busy.Both are concerned about being sued personally for products liability.
-Which of the following business organizations would best address Winston and Noe's concerns?

Accepted Answer

A)Unlike corporations,LLCs are not required to hold annual meetings and draft meeting minutes.LLCs are not double taxed,like corporations.Also,LLCs offer limited liability,but partnerships do not.
B)Unlike corporations,LLCs are not required to hold annual meetings and draft meeting minutes.LLCs are not double taxed,like corporations.Also,LLCs offer limited liability,but partnerships do not.
C)Unlike corporations,LLCs are not required to hold annual meetings and draft meeting minutes.LLCs are not double taxed,like corporations.Also,LLCs offer limited liability,but partnerships do not.
D)Unlike corporations,LLCs are not required to hold annual meetings and draft meeting minutes.LLCs are not double taxed,like corporations.Also,LLCs offer limited liability,but partnerships do not.
E)Unlike corporations,LLCs are not required to hold annual meetings and draft meeting minutes.LLCs are not double taxed,like corporations.Also,LLCs offer limited liability,but partnerships do not.

Question 2

Winston tells Lenita that he prefers to form an S corporation because he does not want to attach "LLC" to the name of the company.Lenita responds that the option of an S corporation is not available for their situation.Is she correct?

Accepted Answer

A)LLC members need not be citizens or permanent residents of the United States.
Other organizational forms,such as the subchapter S corporation,are available only when all the owners are U.S.citizens.
B)LLC members need not be citizens or permanent residents of the United States.Other organizational forms,such as the subchapter S corporation,are available only when all the owners are U.S.citizens.
C)LLC members need not be citizens or permanent residents of the United States.Other organizational forms,such as the subchapter S corporation,are available only when all the owners are U.S.citizens.
D)LLC members need not be citizens or permanent residents of the United States.Other organizational forms,such as the subchapter S corporation,are available only when all the owners are U.S.citizens.
E)LLC members need not be citizens or permanent residents of the United States.Other organizational forms,such as the subchapter S corporation,are available only when all the owners are U.S.citizens.

Question 3

[R&R Landscaping,LLC] R&R Landscaping,LLC,is registered as a limited liability company in Illinois.R&R provides corporate landscape design and maintenance.During a large corporate project near Chicago,the driver of R&R's bulldozer lost control,went into oncoming traffic,and caused injuries to Viktor.Viktor wants to file a lawsuit and,after research,learns that R&R is owned by Rohan,an Illinois resident,and Roland,an Indiana resident,and that R&R filed articles of organization in Illinois and a certificate of authority in Indiana.
-In which states)can Viktor file suit against R&R?

Accepted Answer

A)For purposes of jurisdiction,an LLC is considered a citizen of every state in
which its members reside.
B)For purposes of jurisdiction,an LLC is considered a citizen of every state in which its members reside.
C)For purposes of jurisdiction,an LLC is considered a citizen of every state in which its members reside.
D)For purposes of jurisdiction,an LLC is considered a citizen of every state in which its members reside.
E)For purposes of jurisdiction,an LLC is considered a citizen of every state in which its members reside.

Question 4

Which of the following statements is true about cooperatives?

Accepted Answer

A)Members of incorporated cooperatives enjoy limited liability just as do the
shareholders of a corporation.
B)Members of incorporated cooperatives enjoy limited liability just as do the shareholders of a corporation.
C)Members of incorporated cooperatives enjoy limited liability just as do the shareholders of a corporation.
D)Members of incorporated cooperatives enjoy limited liability just as do the shareholders of a corporation.
E)Members of incorporated cooperatives enjoy limited liability just as do the shareholders of a corporation.

Question 5

Under which of the following types of business organization is the ownership transferable to another person?

Accepted Answer

A)Ownership in corporations and limited liability companies is transferable,but
ownership in sole proprietorships and general partnerships is non-transferable.
B)Ownership in corporations and limited liability companies is transferable,but ownership in sole proprietorships and general partnerships is non-transferable.
C)Ownership in corporations and limited liability companies is transferable,but ownership in sole proprietorships and general partnerships is non-transferable.
D)Ownership in corporations and limited liability companies is transferable,but ownership in sole proprietorships and general partnerships is non-transferable.
E)Ownership in corporations and limited liability companies is transferable,but ownership in sole proprietorships and general partnerships is non-transferable.

Question 6

Which types of business organizations are terminated upon death of the owners?

Accepted Answer

A)Sole proprietorships and partnerships are terminated or dissolved at death of the
owners.
B)Sole proprietorships and partnerships are terminated or dissolved at death of the owners.
C)Sole proprietorships and partnerships are terminated or dissolved at death of the owners.
D)Sole proprietorships and partnerships are terminated or dissolved at death of the owners.
E)Sole proprietorships and partnerships are terminated or dissolved at death of the owners.

Question 7

Which of the following is true regarding André's and Sasha's quest to find the best form of business organization?

Accepted Answer

A)A limited liability company combines the tax advantages and management flexibility of a partnership with the limited liability of a corporation.
B)A limited liability company combines the tax advantages and management flexibility of a partnership with the limited liability of a corporation.
C)A limited liability company combines the tax advantages and management flexibility of a partnership with the limited liability of a corporation.
D)A limited liability company combines the tax advantages and management flexibility of a partnership with the limited liability of a corporation.
E)A limited liability company combines the tax advantages and management flexibility of a partnership with the limited liability of a corporation.

Question 8

Which of the following statements is true about a joint venture?

Accepted Answer

A)Courts frequently apply partnership law to joint ventures.
B)Courts frequently apply partnership law to joint ventures.
C)Courts frequently apply partnership law to joint ventures.
D)Courts frequently apply partnership law to joint ventures.
E)Courts frequently apply partnership law to joint ventures.

Question 9

Elias and his rich friends want to purchase a professional baseball team and need to raise a large amount of money in a short time.Which of the following forms of business organization is often used in Elias' situation?

Accepted Answer

A)Syndicates are often used to purchase professional sports teams and are quite
useful for their ability to raise large amounts of money in a short time.
B)Syndicates are often used to purchase professional sports teams and are quite useful for their ability to raise large amounts of money in a short time.
C)Syndicates are often used to purchase professional sports teams and are quite useful for their ability to raise large amounts of money in a short time.
D)Syndicates are often used to purchase professional sports teams and are quite useful for their ability to raise large amounts of money in a short time.
E)Syndicates are often used to purchase professional sports teams and are quite useful for their ability to raise large amounts of money in a short time.

Question 10

Which of the following statements is true regarding Rashi's inspections of franchisees' kitchens?

Accepted Answer

A)The franchisor has the legal authority to ensure that the franchisee maintains the
quality of goods and services associated with the franchise,and may include contract terms such as the right to inspect franchise premises.
B)The franchisor has the legal authority to ensure that the franchisee maintains the quality of goods and services associated with the franchise,and may include contract terms such as the right to inspect franchise premises.
C)The franchisor has the legal authority to ensure that the franchisee maintains the quality of goods and services associated with the franchise,and may include contract terms such as the right to inspect franchise premises.
D)The franchisor has the legal authority to ensure that the franchisee maintains the quality of goods and services associated with the franchise,and may include contract terms such as the right to inspect franchise premises.
E)The franchisor has the legal authority to ensure that the franchisee maintains the quality of goods and services associated with the franchise,and may include contract terms such as the right to inspect franchise premises.

Question 11

Which of the following statements is correct about the requirements to form a limited liability company?

Accepted Answer

A)As a general rule,an LLC is formed by filing articles of organization in the state in which members want to establish their LLC.Precise requirements for formation vary by state.Moreover,an LLC needs to register in every additional state in which it will do business.
B)As a general rule,an LLC is formed by filing articles of organization in the state in which members want to establish their LLC.Precise requirements for formation vary by state.Moreover,an LLC needs to register in every additional state in which it will do business.
C)As a general rule,an LLC is formed by filing articles of organization in the state in which members want to establish their LLC.Precise requirements for formation vary by state.Moreover,an LLC needs to register in every additional state in which it will do business.
D)As a general rule,an LLC is formed by filing articles of organization in the state in which members want to establish their LLC.Precise requirements for formation vary by state.Moreover,an LLC needs to register in every additional state in which it will do business.
E)As a general rule,an LLC is formed by filing articles of organization in the state in which members want to establish their LLC.Precise requirements for formation vary by state.Moreover,an LLC needs to register in every additional state in which it will do business.

Question 12

Which of the following statements is true about taxes in a limited partnership?

Accepted Answer

A)As limited partners,they pay taxes on their share of the profit.
B)As limited partners,they pay taxes on their share of the profit.
C)As limited partners,they pay taxes on their share of the profit.
D)As limited partners,they pay taxes on their share of the profit.
E)As limited partners,they pay taxes on their share of the profit.

Question 13

What type of agreement do owners of a limited liability company usually create when establishing their organization?

Accepted Answer

A)When members form an LLC,they typically draft an operating agreement,which
is the foundational contract among the entity's owners.
B)When members form an LLC,they typically draft an operating agreement,which is the foundational contract among the entity's owners.
C)When members form an LLC,they typically draft an operating agreement,which is the foundational contract among the entity's owners.
D)When members form an LLC,they typically draft an operating agreement,which is the foundational contract among the entity's owners.
E)When members form an LLC,they typically draft an operating agreement,which is the foundational contract among the entity's owners.

Question 14

Will Rashi likely be held liable to Jonah?

Accepted Answer

A)If the franchisor exercises too much authority in the day-to-day affairs of the business,the franchisor could be held liable for the torts of the franchisee's employees.
B)If the franchisor exercises too much authority in the day-to-day affairs of the business,the franchisor could be held liable for the torts of the franchisee's employees.
C)If the franchisor exercises too much authority in the day-to-day affairs of the business,the franchisor could be held liable for the torts of the franchisee's employees.
D)If the franchisor exercises too much authority in the day-to-day affairs of the business,the franchisor could be held liable for the torts of the franchisee's employees.
E)If the franchisor exercises too much authority in the day-to-day affairs of the business,the franchisor could be held liable for the torts of the franchisee's employees.

Question 15

Winston wants to have an office in California and one in Atlanta.Lenita tells Winston that,if they form an LLC,they only need to file paperwork in one of those states.Is she correct?

Accepted Answer

A)LLCs usually need to register in every additional state in which they intend to operate,a process referred to as qualification.Qualification simply entails filing a certificate of authority or some similar document,and getting a business license,in each additional state in which the business plans to operate.
B)LLCs usually need to register in every additional state in which they intend to operate,a process referred to as qualification.Qualification simply entails filing a certificate of authority or some similar document,and getting a business license,in each additional state in which the business plans to operate.
C)LLCs usually need to register in every additional state in which they intend to operate,a process referred to as qualification.Qualification simply entails filing a certificate of authority or some similar document,and getting a business license,in each additional state in which the business plans to operate.
D)LLCs usually need to register in every additional state in which they intend to operate,a process referred to as qualification.Qualification simply entails filing a certificate of authority or some similar document,and getting a business license,in each additional state in which the business plans to operate.
E)LLCs usually need to register in every additional state in which they intend to operate,a process referred to as qualification.Qualification simply entails filing a certificate of authority or some similar document,and getting a business license,in each additional state in which the business plans to operate.

Question 16

Which of the following statements is correct about the requirements of an LLP?

Accepted Answer

A)The LLP has several special requirements.First,the business name must include
the phrase Limited Liability Partnership or an abbreviation of the phrase.Second,the parties must file a form with the secretary of the state to create the LLP.
B)The LLP has several special requirements.First,the business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase.Second,the parties must file a form with the secretary of the state to create the LLP.
C)The LLP has several special requirements.First,the business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase.Second,the parties must file a form with the secretary of the state to create the LLP.
D)The LLP has several special requirements.First,the business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase.Second,the parties must file a form with the secretary of the state to create the LLP.
E)The LLP has several special requirements.First,the business name must include the phrase Limited Liability Partnership or an abbreviation of the phrase.Second,the parties must file a form with the secretary of the state to create the LLP.

Question 17

Kendra and Amelia operate an art gallery,owned as a partnership.Kendra disappeared.A few days later,Amelia learned that Kendra embezzled $75,000 of government grant money through the company.Is Amelia responsible for the $75,000?

Accepted Answer

A)The major disadvantage of partnerships is that partners are personally liable for
the firm's debts.If you are in a partnership with your best friend,who embezzles
$50,000 through the business,you will likely be held personally liable for that
$50,000.
B)The major disadvantage of partnerships is that partners are personally liable for the firm's debts.If you are in a partnership with your best friend,who embezzles
$50,000 through the business,you will likely be held personally liable for that
$50,000.

Question 18

[Cookie Problems] Rashi makes great chocolate chip cookies and sells them in her café called Rashi's Famous Cookies.Some of her friends have expressed interest in selling her cookies.They want to use her name and identify the cookies as Rashi's Famous Cookies.Seeing a business opportunity,Rashi agrees to bake the cookies and provide them frozen to her friends who will open other cafés under her café's name.Rashi strictly controls all packaging and sales.She also frequently inspects kitchens used by the sellers,pursuant to her agreements with them.Lola,one of Rashi's friends who entered into an agreement with Rashi to open a café and sell the cookies,was not being careful and negligently put a harmful ingredient into the cookie dough resulting in a customer,Jonah,becoming ill.Jonah threatens to sue both Lola and Rashi.Rashi is so exasperated that she cancels all the franchise contracts.Although the franchise agreements provide that,as long as requirements are met,the franchise agreements will continue for a period of two years,Rashi takes the position that the cookies involve a personal service using a trade secret,and that she cannot be held liable to her franchisees for discontinuation of the franchises.
-What type of arrangement did Rashi make with her friends?

Accepted Answer

A)In a chain-style business operation,such as McDonald's and Burger King,the
franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.
B)In a chain-style business operation,such as McDonald's and Burger King,the franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.
C)In a chain-style business operation,such as McDonald's and Burger King,the franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.
D)In a chain-style business operation,such as McDonald's and Burger King,the franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.
E)In a chain-style business operation,such as McDonald's and Burger King,the franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.

Question 19

What is the term used for the process under which an LLC must register in every additional state in which it intends to operate?

Accepted Answer

A)LLCs typically want to do business in more states than just the state where they
are formed,and they usually need to register in every additional state in which they intend to operate,a process referred to as qualification.
B)LLCs typically want to do business in more states than just the state where they are formed,and they usually need to register in every additional state in which they intend to operate,a process referred to as qualification.
C)LLCs typically want to do business in more states than just the state where they are formed,and they usually need to register in every additional state in which they intend to operate,a process referred to as qualification.
D)LLCs typically want to do business in more states than just the state where they are formed,and they usually need to register in every additional state in which they intend to operate,a process referred to as qualification.
E)LLCs typically want to do business in more states than just the state where they are formed,and they usually need to register in every additional state in which they intend to operate,a process referred to as qualification.

Question 20

Is Rashi correct that she was entitled to cancel all franchise agreements?

Accepted Answer

A)If the franchisee does not meet the requirements in the agreement,the franchisor can terminate it,but must give sufficient notice.
B)If the franchisee does not meet the requirements in the agreement,the franchisor can terminate it,but must give sufficient notice.
C)If the franchisee does not meet the requirements in the agreement,the franchisor can terminate it,but must give sufficient notice.
D)If the franchisee does not meet the requirements in the agreement,the franchisor can terminate it,but must give sufficient notice.
E)If the franchisee does not meet the requirements in the agreement,the franchisor can terminate it,but must give sufficient notice.

Quiz 35: Forms of Business Organization