Question 1

Which of the following methods is the only formal way of dealing with problems of contract or tort law?

Accepted Answer

Litigation in the regular courts is the only formal and binding method of resolving disputes related to contract or tort law. Arbitration and mediation are alternative dispute resolution methods, while small claims court is limited in its jurisdiction and may not be able to handle all types of cases.

Question 2

Arbitration differs from mediation in that arbitration:

Accepted Answer

Arbitration differs from mediation primarily because the arbitrator's decision is binding and has limited appeal possibilities, unlike mediation, where the mediator helps the parties find a mutual agreement without imposing a decision.

Question 3

Which of the following is a formal dispute resolution method that operates using the court system,typically with a lawyer representing each party?

Accepted Answer

Litigation is the formal process of resolving disputes through the court system, where each party is typically represented by a lawyer. Arbitration and mediation are alternative dispute resolution methods that do not operate through the court system in the traditional sense, and possession is not a dispute resolution method.

Question 4

_____ is a dispute resolution process held instead of court cases in which both sides present their case to a legal professional.

Accepted Answer

The process described is arbitration, where the dispute is brought before an arbitrator instead of a court. Litigation refers to a case being heard in court. Mediation is a process where a neutral third party helps the disputing parties come to a mutually agreeable solution. Piercing the veil is a legal concept that refers to disregarding the corporate structure of a company and holding individuals personally liable for the actions of the company in certain circumstances.

Question 5

Responsibility for the actions of another is referred to as:

Accepted Answer

Vicarious liability is a legal concept that holds one party responsible for the actions of another party, usually an employee or agent. This can occur in situations where the employee/agent was acting within the scope of their employment and the action caused harm to a third party.

Question 6

Walter Bradham,the owner of Bradham Corporation muddled his personal finances with his business accounts.Following a suit into the financial irregularities at Bradham Corporation,a court subjected the Corporation to the decision of piercing the veil.Which of the following course is the court most likely to take in this case?

Accepted Answer

Piercing the corporate veil means the court disregards the corporation's separate legal entity status to hold the owner personally liable for the business's debts and obligations. This is likely when the owner has not maintained a clear separation between personal and business finances.

Question 7

_____ is a choice LLCs can make on their tax returns to be taxed as a corporation or a partnership.

Accepted Answer

"Check the box taxation" allows LLCs to choose how they want to be taxed, either as a corporation or using pass-through taxation like a partnership, providing flexibility in tax planning.

Question 8

What makes all negotiations work is honesty.The optimal strategy is called _________.

Accepted Answer

The answer of What makes all negotiations work is honesty.The...

Question 9

Which federal law describes the steps publicly traded businesses must take to protect and provide their key financial information?

Accepted Answer

The Sarbanes-Oxley Act (SOX) strictly outlines the steps publicly traded businesses must take to protect and provide their critical financial information. The law deters fraudulent financial activities by imposing severe civil and criminal penalties on businesses and their executives for failing to adhere to prescribed accounting procedures and standards.

Question 10

In _____,the earnings of the business are distributed to the business owners and those owners pay individual tax on the earnings.

Accepted Answer

In pass-through taxation, the earnings of the business are passed directly to the owners or investors, and they pay individual income tax on those earnings, avoiding the business itself being taxed separately.

Question 11

The dissolution of a corporate form,making it back into a sole proprietorship or general partnership,if the court finds that the owner carelessly mixed up personal and business assets or finances is known as:

Accepted Answer

The dissolution of a corporate form and reverting it back to a sole proprietorship or general partnership due to the owner carelessly mixing personal and business assets or finances is known as piercing the veil. This refers to a legal concept where a court may disregard the legal entity of a corporation and hold the shareholders personally liable for the actions of the corporation. It is done to prevent individuals from using the corporate structure to avoid personal liability.

Question 12

A(n)_____ refers to a part of a contract in which a party to the contract states that he or she will not be responsible for certain actions.

Accepted Answer

An exculpatory clause is a provision in a contract that relieves one party from liability for damages caused by their actions or negligence. It is also known as a release of liability or waiver of liability clause. Noncompete clauses restrict one party from competing against the other, hold harmless clauses require one party to assume liability for another, and power of sale clauses allow the lender to sell collateral if the borrower defaults on a loan.

Question 13

According to the IRS,to be an independent contractor the person must:

Accepted Answer

An independent contractor is defined as someone who is self-employed and provides a service to a company or individual. They must perform a service that is not central to the operation of the business. This means that the work they are doing is not something that is fundamental to the core of the business, but rather an add-on service. Independent contractors are responsible for their own expenses and are not employed for a distinct term or project. While they may work in consultation with an employer, ultimately they decide how the work must be done.

Question 14

The best negotiation strategy is to use four steps to structure a negotiation to achieve a winning solution for you and the other party.Which of the following is not one of those four negotiation steps?

Accepted Answer

The answer of The best negotiation strategy is to use...

Question 15

Which among the following steps in a negotiation process is considered to be the most difficult?

Accepted Answer

Proposing a solution or agreement can be the most difficult step in a negotiation process because it requires both parties to come to an agreement that satisfies their interests and needs. It involves identifying the common ground between the parties and finding a mutually acceptable solution. It may require compromise and creative problem-solving, which can be challenging. The previous steps of preparing and positioning oneself can help make proposing a solution easier, but it still requires careful consideration and negotiation skills.

Question 16

A(n)_____ refers to a contract among LLC members outlining how the LLC will conduct itself.

Accepted Answer

An operating agreement is a legal document that outlines how an LLC will operate, including the rights and responsibilities of its members, as well as rules for decision-making, financial management, and other important aspects of the business.

Question 17

Which of the following refers to a part of a contract in which a person agrees not to open a certain type of business or seek employment doing certain things in a particular area for a period of time?

Accepted Answer

A noncompete clause is a part of a contract in which a person agrees not to open a certain type of business or seek employment doing certain things in a particular area for a period of time. Other options - Exculpatory clause relates to waiving responsibility in case of injury or damage, Hold harmless clause refers to holding a party harmless from liability, and Interstate clause relates to laws or regulations related to activities between different states.

Question 18

Considering all the ways a firm can face legal threats,which of the following is not one of the ways to think about your business and avoid being sued?

Accepted Answer

Reacting solely to make a profit increases the likelihood of engaging in unethical or illegal behavior, which can lead to legal threats. The other options all involve proactive measures to avoid legal trouble: seeking legal advice early, planning to operate ethically, and managing risks.

Question 19

Which of the following dispute resolution methods is the least expensive and much faster to complete?

Accepted Answer

Mediation is usually the least expensive dispute resolution method and also much faster to complete as compared to the other options like litigation and arbitration. Piercing the veil is not a dispute resolution method but rather a legal concept related to corporate law.

Question 20

Which of these arguments would be helpful in deflecting vicarious liability?

Accepted Answer

The independent contractor argument can be used to deflect vicarious liability by establishing that the person who committed the wrongful act was not an employee but an independent contractor, over whom the employer does not have the same control or right to control as they would over an employee. This distinction is crucial because vicarious liability typically applies in the context of an employer-employee relationship, where the employer can be held liable for the actions of the employee if those actions were performed in the course of employment.

Quiz 17: Legal Issues: Recognizing Your Small Business Needs