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Exam 40: Types of Business Organizations

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Question 1

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A corporation must have at least two shareholders.

A) True
B) False

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False

Question 2

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A major disadvantage of the sole proprietorship is: ______.

A) no organizational fees.
B) the sole proprietor obtains all of the profits.
C) the sole proprietor is personally liable for the debts of the sole proprietorship.
D) the sole proprietor is free to make all business decisions concerning operation of the sole proprietorship.

E) None of the above
F) C) and D)

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Question 3

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Holders of automobile dealership franchises are protected from bad faith termination of their dealerships by the: ______.

A partnership is not dissolved by the death of a partner.

Business corporations exist to make a profit.

Louise Feldspar obtained the exclusive right to sell TastyCrunchy Chicken in a specified area.Under the agreement,Feldspar was permitted to use the TastyCrunchy name and logo for her restaurant and she agreed to comply with TastyCrunchy's restaurant requirements.She purchased her equipment,as well as the chicken she served,from the firm.She agreed to devote a certain percentage of her revenues to promoting the TastyCrunchy operation in local media.The operation was successful from the start,and Feldspar has had no problem meeting the sales quotas imposed by TastyCrunchy.The past year TastyCrunchy informed Feldspar that it intended to open a new restaurant on an interstate highway that had just been completed in her exclusive area of trade.Because her operation would be competition for the new store,Feldspar's right to sell TastyCrunchy products and use the name TastyCrunchy was revoked.What can Louise do?

The process of incorporation involves the expenditure of funds for organizational expenses.

A corporation has perpetual life,until one of its shareholder dies.

Corporations are subject to a form of double taxation.

A joint venture typically relates to the carrying out of a single enterprise or transaction.

The owner of a sole proprietorship pays federal income taxes at the corporate income tax rate,based on the net earnings of the sole proprietorship.

To protect themselves against liability,franchisors often require individual franchisees to: ______.

The death of a majority shareholder terminates a corporate enterprise.

Theoretically,the relationship between a franchisor and a franchisee is one of: ______.

A business that complies with FTC franchise requirements meets all of the following criteria except: ______.

To meet the requirements of the FTC,the franchisee must make a minimum payment of at least $540 during the first six months of operations.

The people in a corporation responsible for the management of the business are the: ______.

Who serve as agents of the corporation and run the "day-to-day" operations of the business?

The FRC has adopted a franchise disclosure rule that requires franchisors to give prospective franchisees a full disclosure statement thirty (30)days before a franchisee signs a contract or pays any money for a franchise.

An arrangement in which the owner of a trademark licenses others,under specified conditions or limitations,to use the trademark in purveying goods or services is a(n) : ______.